This post was updated on February 10, 2022.
There were fewer foreclosures than ever in 2021 due in part to federal restrictions on mortgage servicers, and a booming housing market that enabled distressed homeowners to sell quickly, and for a big return.
But now that most of those restrictions have expired, foreclosure filings and repossessions are on the rise once again. As lenders race to get rid of more of these homes — fast — there may be more opportunities for agents to work with local or regional banks.
If you have the temperament for it and want high volume, you’ll likely wind up working with large nationwide asset management companies or special servicers like homepath.fanniemae.com or ocwen.com. Here’s what you should know before working with foreclosures.
1. Your client is an asset manager
REO asset managers wrangle a large number of properties over big territories. They are overworked and underpaid. They are all about moving large numbers of foreclosed properties and following their company’s established routines to the letter every time.
They want assignments completed on time and by their rules. And, they want you available when they’re at work, even if their office is on the East Coast, and you and their foreclosed property inventory are on the West Coast.
2. Your ‘marketing expertise and customer service orientation’ will mean zip
You represent a license, insurance, access to the MLS, established credit, reliable transport, feet, hands, photographic capability, computer skills, near 24/7 availability and accurate local valuation information.
Expect to buy your own gas, carry reimbursable expenses for at least six weeks and do extensive BPOs for nothing, just to get an eventual listing.
The “selling proposition” for every listing you finally land will be “the bargain” buyers think they’re getting. So, forget professional photography, staging and carefully crafted marketing campaigns. And learn to be incurious about underlying property conditions. Those are the buyers’ agent’s job, not yours.
3. You will have a steady source of listings
Actually, you’ll have a flow of listings. You may get six one week and none for the rest of the month. It averages out, but the weeks with multiple new pre-listings to process are not restful.
Notification of property availability is likely to be automated. So, you may get new pre-listing property notifications at any time of the day (or night). If you’re the asset management company’s “preferred agent” in a territory, you will get first crack at them. But, you better be quick.
If you don’t tag a new property as part of your portfolio promptly, someone who is watching for an opportunity will. You absolutely cannot take time to evaluate the property and decide if you want it. You take the good, the bad and the ugly — or you fall out of favor with lightning speed. Asset managers have no time to deal with tender sensibilities.
4. You’ll be using loan servicers’ chosen ‘platforms’
Forget your statewide association’s file management platform or your agency’s proprietary system. The REO manager will tell you which platform you must use. (If you want to explore, Res.net and Equator are two platforms used by a number of different banks and loan servicers.)
These REO platforms are likely to require that you be trained and certified in their use. Every piece of data related to pre-listings, listings and sales must be fed into these asset management platforms. You’ll learn a new vocabulary, too — terms like “trash out,” “winterize,” and “cash for keys.”
5. You will work like a dog for a cut-rate commission
From the moment you get a pre-listing property, you’re busy. You make initial visits at varying times to determine occupancy. If occupied, you must identify the occupants and start the process to get them out.
Once a property is vacant, you get locks changed, a combo lockbox installed, utilities switched into your name, exterior and interior photos taken, trash out and property preservation services launched.
You must visit the property regularly to ensure it isn’t vandalized or taken over by squatters. You are compensated for these efforts with a significantly reduced commission when you actually sell the property, perhaps months or even years later. That is, if everything goes right.
6. Your expenses will exceed reimbursements
Reimbursement requests must meet the specific company’s exacting guidelines for each property separately. So, for example, having six different house keys duplicated at the same time may optimize your time management.
But you need individual proofs of payment to win reimbursement for each home’s new keys. Sometimes you get that proof. Sometimes you don’t. When you don’t, you eat the expense.
7. You will come to appreciate mentholated rubs in a deeper way
People trying desperately to pay their mortgages economize in other areas. They may, for example, live with defective plumbing, leaking roofs and rat hole garbage.
After living that way for months, if the home is lost anyway, they will be forced to leave. And they won’t have the money for movers. So, they will leave a lot behind. You will soon learn to enter newly assigned properties with a can of Febreze in hand, a dab of Vicks on your upper lip and a bag of plug-in air fresheners on standby.
8. The people losing their homes will break your heart
Nothing, really, compares to the experience of informing a custodial parent that she has invalidated her little cash-for-keys settlement by failing to leave on schedule — just because her kid was horrendously sick, and she had nowhere to go.
Reasons don’t matter. The lender doesn’t care, and the asset manager has no discretion. You can make every effort to blunt the awfulness of what’s happening but, individually, the experience of foreclosure is awful. Nothing you do can change that.
9. When the going gets tough
In tough times, foreclosures build slowly, then gather momentum for a time, but eventually return to “normal” when better market conditions return.
Some agents work the REO market regardless of supply. They know from experience that neither the fat times nor the lean ones last. And they’ve developed the ability to gear up for high volume and pare down in leaner times.
Specializing in REOs requires a high tolerance for repetition, an ability to conform to specific asset management companies’ requirements and a fallback plan. The local people you interact with largely never want to see you again. So, you don’t build up a client roster on which to build future business with anyone other than asset managers.
However, if you make their lives easier, asset managers will keep your pipeline full, because REOs are in a market niche all their own. If that’s the niche for you, start doing your research and get busy.
Nicole Solari is owner and managing broker of The Solari Group in Solano and Napa Counties in Northern California. Nicole runs one of the highest producing brokerages in all of Northern California.