| With the housing slump, followed by the recent | | | | that we work very hard and sometimes in |
| subprime market meltdown leaving a flood of | | | | difficult situations for discounted commissions. |
| foreclosures in its wake, lenders, brokers and | | | | "For me, (the REO business) is a labor of love," he |
| agents have tried to rebound with real | | | | added. |
| estate-owned (REO) properties. But breaking into | | | | Di Mercurio recently offered a number of tips to |
| the distressed property or REO market is difficult | | | | agents and brokers trying to break into the REO |
| unless you know the ropes - and the competition | | | | market. |
| for foreclosures, today, is fierce. Just ask Steele | | | | First, understand the basics before deciding to |
| V. Propp, foreclosure specialist/loss mitigation | | | | focus on the REO segment, he said. Everything |
| consultant, for the Bank Owned Property Division | | | | about this business is time sensitive. The REO |
| of the Minneapolis-based Schatz Group, GMAC | | | | broker's responsibilities are more similar to that of |
| Real Estate. | | | | a relocation broker than a traditional residential |
| "Last year, the Minneapolis-St. Paul area had an | | | | brokerage. |
| inventory of 600 foreclosed homes at any given | | | | There are many uncompensated activities |
| time, and this year we will easily reach 900 | | | | required of an REO broker, and if a home does |
| homes," Propp said. | | | | not sell in the normal listing period, it may be |
| "The days of only inner city broken down | | | | reassigned, Di Mercurio said. |
| properties are over," he said. "Some foreclosures | | | | Volume pricing has resulted in an average five |
| are in gated and golf course communities. Anyone | | | | percent commissions, he said, adding there is a |
| can have financial problems and a lot of people | | | | host of services, responsibilities and liabilities |
| live close to the edge." | | | | assumed for the average two percent listing |
| "Being an REO agent seems to be the latest fad | | | | commission paid to the REO broker. |
| in real estate," said Propp, a 26-year industry | | | | Most of Di Mercurio's clients assign assets to him |
| veteran who knows the ropes. "Everyone and | | | | the day of the foreclosure sale, and these require |
| their Dad have been asking about it. | | | | a 24-hour occupancy check and weekly checks, |
| "And recently a number of the guru real estate | | | | thereafter, he said. Most properties are still |
| agent trainers out there have jumped on the | | | | occupied at the end of redemption, thus requiring |
| bandwagon with so-called wonderful course | | | | extra work for the broker to negotiate with the |
| material for becoming a foreclosure agent | | | | tenant or former owner, attend lock-outs, obtain |
| specialist," he said. "I get e-mails everyday from | | | | bids for repairs and supervise rehab, regular yard |
| these gurus who hawk their books and seminars | | | | maintenance and winterizations. |
| about making a fortune in foreclosures. | | | | Many lenders require the broker to arrange for |
| "I am a bit leery of these 'specialists' since most | | | | pay and seek reimbursement within certain tight |
| seem more about you paying them money," he | | | | time frames, he said. The broker then becomes |
| added. | | | | the "de facto" guarantor of the goods and |
| Break in with BPOs | | | | services. Poor accounting will lead to losses in |
| "For the most part, the best way to get noticed | | | | un-reimbursed legitimate expenses. |
| is to offer to do the grunt work of the | | | | Brokers generally receive property assignment |
| foreclosure industry -- performing Broker Price | | | | directly from the seller/lender or from a third-part |
| Opinions or BPOs," Propp said. "Agents who do | | | | outsourcing company which provides aggregated |
| this on a regular basis tend to get noticed." | | | | accounting, tracking, reporting, advice and |
| Harry C. Richardson, an independent broker and | | | | evaluation to the actual lender or seller, Di |
| Realtor based in Albuquerque, said, "There is no | | | | Mercurio said. The actual owner of the property |
| substitute for experience." | | | | may have little or no say in how the REO |
| But prior to six years ago, Richardson had little | | | | properties are managed because of delegating |
| experience in the REO market. | | | | those responsibilities under a servicing agreement. |
| Although New Mexico has not experienced the | | | | Many REO properties are handled through |
| housing market lows and highs of the Florida, | | | | government agencies, he said. HUD administers |
| California, Michigan and Ohio markets, Richardson | | | | foreclosed homes under the FHA program; the |
| read the signs and saw a bright future in the REO | | | | Veterans Administration handles loans made to |
| foreclosure business. | | | | veterans where the mortgage has been |
| To get a foot in the door, Richardson googled | | | | foreclosed. |
| asset management companies and e-mailed BPO | | | | HUD and VA have different disposition models and |
| hiring managers for a chance. After six months of | | | | strategies which offer equal access to licensed |
| performing BPOs, he struck out on his own. | | | | and certified real estate agents and brokers, Di |
| "It is important to accurately place a value on the | | | | Mercurio said. Fannie Mae and Freddie Mac handle |
| asset (property) because the person (or bank) | | | | their own foreclosed home inventory, both relying |
| holding the REO is relying on you," Richardson told | | | | on the listing broker to provide the delivery of |
| Real Law Central. | | | | many of the property management services. |
| Just like anything else, once you build a good | | | | Many properties are handled directly by the REO |
| reputation, word gets around. | | | | Department of the bank, mortgage company or |
| FNF steps up | | | | credit union and placed with the broker, he said. In |
| In August 2003, Fidelity National Financial launched | | | | this case, you need to be individually approved. |
| its Web site dedicated to marketing bank-owned | | | | To be considered for these assignments, you |
| properties. opened with 7,000 REO listings which | | | | must have either a sales agent or broker's license |
| has grown to more than 25,000 post-foreclosure | | | | in the state where you plan to sell these |
| properties, thanks to Fidelity subsidiary Fidelity | | | | properties; have a minimum of three years |
| National Asset Management Solutions' (FNAMS) | | | | experience representing one of more sellers, a |
| relationships with 22 lenders and thousands of | | | | minimum of $500,000 professional liability |
| REO brokers with relationships to other lenders. | | | | insurance and two to three client references, Di |
| recently featured more than 400,000 bankruptcy | | | | Mercurio said. |
| listings and nearly 230,000 post-foreclosure | | | | Find out how your asset manager contact is |
| properties. At the same time, RealtyTrac offered | | | | compensated, he advised. Many sellers or |
| multi-state searches for 550,000 foreclosure | | | | outsourcers skew the overall compensation |
| properties, and reported that one out of every | | | | package toward bonuses. A rollover closing from |
| 886 homes in the nation are in some phase of | | | | one month to the next may only seem like two |
| foreclosure. | | | | days to you, but it may be the difference |
| Last year, Tom Di Mercurio, a veteran specialist in | | | | between no bonus and an outstanding bonus. |
| defaulted properties, launched Mercury Alliance | | | | Corporate sellers generally require 48 to 96 hours |
| which works with lenders in 15 U.S. markets | | | | to execute and return closing documents. |
| dealing with homes, condos and other properties | | | | If the property doesn't sell while you are the |
| that go south. | | | | listing broker, you only get reimbursed your |
| Any significant increase in interest rates triggers a | | | | expenses - and some lenders remove unsold |
| rise in lender-owned properties for resale - and | | | | inventory to a different broker -- even if never |
| opens the doors to more foreclosed homes, Di | | | | priced accurately, Di Mercurio said. |
| Mercurio said. | | | | REO brokers need a network of service |
| A rose by any other name | | | | providers from locksmiths, to yard and snow |
| "There are no special legal requirements except to | | | | removal vendors, contractors and engineers, he |
| be licensed in the state jurisdiction in which you | | | | said. |
| operate," DiMercurio told Real Law Central. "A | | | | "On average, expect to advance approximately |
| broker is a broker is a broker. It's the same with | | | | $600 per property depending on what specific |
| a buyer's agent." | | | | services you provide," Di Mercurio said. "Advances |
| Be an aggressive, hard-working agent, he advised, | | | | of $3,000 on a specific property, is not |
| adding that by law, all listings are the property of | | | | uncommon." |
| the 'broker.' | | | | A good, conservative, realistic estimate is to |
| "The documentation in typical residential | | | | average your sales at a two percent listing |
| mortgages and foreclosures/REOs should be | | | | commission, he said. If the typical REO asset sells |
| similar, but since we are involved with the | | | | for $50,000, can you make it worth your time to |
| removal and elimination of property rights, there is | | | | be on call 24/7 ... to get a $1,000 check at the |
| a formidable body of civil law to protect owners | | | | closing - if it closes. |
| borrowers from the elimination of their property | | | | "I personally know several REO brokers who |
| rights," he said. | | | | professionally handle upwards of 300 REO sales a |
| "Most residential brokers/agents seldom deal with | | | | year for a net pay-out of $80,000," Di Mercurio |
| eviction and cash-for-keys or the problems | | | | said. |
| associated with a 'botched' foreclosure - where all | | | | Breaking in, hard to do |
| the regulations have not been scrupulously | | | | "Notwithstanding the foregoing "reality" checks, |
| followed," Di Mercurio said. "Otherwise, not much | | | | understand that prior to you opening your doors |
| is different." | | | | to declare your specialty, sellers/lenders had been |
| Rather switch than fight | | | | receiving your service from some other brokers," |
| The switch from traditional residential properties | | | | he said. "If just one of several brokers delivered |
| to REO's does demand a different mindset, and | | | | competent service, it may be difficult to get an |
| you must cater to the schedule of the lender or | | | | opportunity to show what you can do." |
| client, he said. | | | | It is one thing to read and understand a list of |
| "Doing REO's is a 24/7 job including property | | | | "deliverables", another to organize a work flow |
| management which gives rise to custodial liability," | | | | which meets or exceeds the client timelines and |
| Di Mercurio said. "After two years of operating, I | | | | other performance metrics, he said. |
| am just now opening a 'regular' side to my REO | | | | Make a complete and thorough application with |
| brokerage with buyer's agents and non-REO | | | | whatever outsources or lender/seller has an open |
| sellers' agents. | | | | application process, Di Mercurio said. Think about |
| "Understanding the deliverables of lender clients is | | | | how you can stand out in the crowd, what you |
| a must - and while 90 percent of it is the same, | | | | can offer that no one has. |
| managing the 10 percent difference can be | | | | "If you are an experienced agent or broker, two |
| difficult," he said. | | | | or three well-written client testimonials that attest |
| Wanted: Superhero | | | | to your extraordinary handling of a difficult |
| "What asset managers want is a cross between | | | | transaction adds credibility," he said. |
| Superman, Wonder Woman and Spider Man," Di | | | | "If you serve one or more specific communities |
| Mercurio said. "REO agents become the eyes and | | | | or an emerging market and speak a foreign |
| ears of their clients. | | | | language with sufficient competency to explain a |
| "Too often, asset managers settle for easy | | | | real estate transaction, you bring additional value," |
| things like inspections and BPOs on time rather | | | | Di Mercurio said. "Highlight that value; market |
| than a thoughtful analysis of what the broker's | | | | yourself." |
| market intelligence and experience tells us about a | | | | Then send a follow-up letter to the vendor |
| property or a market," he said. | | | | manager in English and the other language you |
| "Asset managers should encourage a healthy | | | | speak and add historic perspective and accuracy |
| dialogue of marketing ideas and be open to | | | | to a foreclosure and understand the client's |
| criticism," Di Mercurio said. "If appraisers were | | | | requirements, showing you will work to get the |
| always correct - or even often correct on REO's, | | | | property sold, he said. If you can sell a well-priced |
| then formulating a listing price could be a | | | | conforming home in a demand market, the client |
| computer program. Setting a list price is more art | | | | will remember you for the substandard or |
| than science. | | | | condemned property. |
| "What REO brokers want is a seller treated as a | | | | "Ask to accept leftovers or the assets that didn't |
| partner," he said. "We want to know that | | | | sell with other agents - for whatever reason," Di |
| someone is listening to us and that we are at the | | | | Mercurio said. "Ask for the problems and think and |
| end of a long continuum that ultimately results in | | | | work toward a creative solution. The harder you |
| the liquidation of the non-performing asset." | | | | work, the luckier you get. |
| Waiting for payday | | | | "And don't forget to own up to your own |
| Unfortunately, "compensation is often only a | | | | shortcomings," he said. "Bad news travels best |
| possibility," Di Mercurio said. "If listed too high and | | | | ahead of the catastrophe. If you could have |
| then re-listed with another broker, our efforts are | | | | handled something better, tell your client you blew |
| all in vain. Brokers want some acknowledgement | | | | it. |