Years from now, when all of the real estate-owned (REO) agents, asset managers, vice presidents and directors are back to originating loans, will we have learned anything?
Ironically, many of the same leaders in the default industry had a hand in a lot of the originations that ultimately became foreclosures. I certainly applaud those individuals for evolving with the market. Heck, I am one of those individuals. But I didn't write this piece to scold bad mortgage bankers or real estate agents. Every industry has its good and bad apples. My question is simple … What can we, the people on the front lines, do to better our industry?
Servicers and banks have certainly at least appeared to do their share. Under the direction of the Obama Administration, the government-sponsored enterprises (GSEs) have been able to slow the bleeding and curb the drastic reduction in property values by slowly releasing their bank-owned inventory to the market. Servicers and banks around the world have increased their staff and have changed their policies to accommodate the wave of underwater borrowers in their portfolios.
Short sales are being conducted three times faster than they were just two years ago and 10 times faster than they were just four years ago. Laws have changed to give more relief and options to tenants who are victims of foreclosure. The regulations and requirements needed to originate loans have increased as well.
In other words, lots of things have been and are being done to improve the current process. But while progress has been made, our industry has never been seen in such a skeptical, negative light as it is viewed now. Considering the past reputation of the financial industry, that’s saying a lot.
Loan officers and real estate agents have often been generalized as “overpaid crooks.” To the general public, loan originators and agents just fill out some forms, make some calls and get paid thousands of dollars to do it. Well, 80 percent of the time they’re right. After all, we are all aware of the 80/20 rule. Whether you think that’s true or not is irrelevant. It’s clear we have a lot of work to do if we ever want to erase the negative stigma that our industry carries.
A home purchase is the single most important investment most people will make in their lives. As an industry, we owe it to the public to make that process as open and honest as possible. The local Broker is usually the only contact a borrower will have with an industry professional. It hasn’t helped that the agenda gap between servicer and agent continues to widen, even while real estate agents are the group that servicers depend upon the most to carry out their initiatives.
That’s why, if we are to change the perception of our industry, it must be on a local level. This is the key point that most financial institutions have missed. After all, it does no good to have lofty initiatives if the people you are asking to carry them out, simply don’t care.
So, how do servicers and banks get local agents to comply with their initiatives?
A good place to start would be the traditional stance of non-disclosure that is widely accepted as the norm in real estate markets across the country. I don’t know how or why someone convinced all real estate agents that non-disclosure was the only way to uphold their fiduciary duty to their clients. A closed door policy will never calm the nerves of the consumer.
This practice has made it more difficult for families to buy an REO property during what should have been one of the more satisfying half decades for first-time homebuyers. Non-disclosure has propped open the door and let agent fraud and deception stroll right in. It has eliminated the fairness and honesty in what should be a completely transparent process.
After all, we are selling someone’s dreams, not widgets. If I make a transaction involving a 30-year commitment and my life savings, I want it to be totally transparent.
I first fell in love with the idea of transparency as a rookie REO broker. I couldn’t understand why agents would fail to return calls, be courteous or disclose offers. When I finally got my first REO listing, I was determined to not be one of those agents. I listed the home on the local MLS and included the remarks “open negotiation and pro-active communication is encouraged, call agent anytime for the current highest offer.”
Not so stunningly, I received a call days later from my local MLS association. Apparently, a rival agent didn’t like my philosophy of total openness and had called her local association to complain.
It seems that the supposed standards of real estate negotiation had become so jaded, that even the association responsible for its policing thought the "radical" idea of full disclosure was illegal or against its rules. It was at that moment that I realized the industry needed a breath of fresh air.
Eventually, I got my way and I continued on with my transparent model. It was pretty clear that by being transparent, I was swimming against the current.
Never one to join the herd, I instructed my entire staff to conduct business in a transparent fashion. We created disclosures that outlined our written policy and philosophy of total transparency. We felt that while we couldn’t change an entire industry, we could certainly set an example. And truthfully, the multi-offer process became a lot more fun. The agents and buyers I worked with were grateful for a stress-free process, where they knew the stakes from start to finish and nothing was concealed or withheld. We felt good about the way we conducted business.
Since then, I have urged everyone I have come in contact with to do business this way, knowing that with each sale, we can slowly change the perception of an entire industry and gain the trust of a public that stopped believing anything we had to say years ago.
Even Fannie Mae has recently released an online portal where buyers and their agents submit offers directly to the seller, bypassing the listing agent all together. I can only assume that they felt it necessary to put this portal in place after years of struggling to get local listing agents to comply with their agenda.
It's time that we all challenge ourselves to be pro-active in finding ways to improve the process of buying and selling real estate on a local level. Ultimately, no matter what actions servicers take to improve performance and execution, it won’t matter if we don't gain the confidence of the common consumer.
Albert Einstein said, “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” I’m not about to pick a fight with Albert Einstein … I’ve already picked a fight with an entire industry.
Damien Chiodo is managing director and founder of KeyLink Asset Management. He may be reached by e-mail at
[email protected].
