Webster’s Dictionary defines the word “Trust” as: Reliance on the integrity, strength, ability, surety of a person or thing; confidence. When dealing in the wonderful world of real estate-owned (REO) properties, I don’t think there is a more important word than trust. Let me explain what I mean …
As we begin 2012, many of the so called “experts” we see on television and in the print media are talking as though the industry has turned the corner with regards to REOs and foreclosures. Those of us who live and work in the mortgage and real estate industries know better. I’m not sure that anyone really knows the true scope of the problem, but we all know we have several more years of work to do. Having said that, let’s get to work!
Our hope with this article is to give everyone who works in the REO space a fresh and hopeful start to what is sure to be another challenging year. There are so many different angles to take when faced with this unique challenge.
Let’s look at our first option, hiring real estate agents to list and help sell our REOs. This has been one of the most common ways that REOs have been moved. Success is dependent upon a number of things; however, there are a few common mistakes when using this method.
The first mistake made is in how an agent is chosen to list a REO. Jon Traver, who is co-authoring this article, has a unique perspective on the REO business, as both a long-time member of the Mortgage Bankers Association (MBA) and a successful mortgage banker and loan originator, and as a member of the National Association of Realtors (NAR) and successful Realtor. It has always been amazing to us the caliber, or lack thereof, of Realtors who are chosen to handle this business. Don’t get us wrong, there are many great and knowledge Realtors working and succeeding in this space, but the vast majority of the time, the interview process is lacking and usually driven by the Realtors’ willingness to work for as cheap as possible. If the saying “You get what you pay for” doesn’t mean anything to you, it should.
The best and most successful Realtors are busy and have no need to work for next to nothing. If you choose a Realtor to handle your REO business by who is willing to discount their fees, you will find many takers. However, a closer look at that group will show you that many of the agents are simply not that good or they are only interested in getting a listing. Selling REOs is tough enough, but trying to do so with a Realtor who doesn’t have the ability or desire to help you determine the best price for your property is not very smart.
You must first find the real estate agents who are committed to doing the best job for you. Build a plan with that agent and TRUST them when they give you advice. If you are simply sending listings to the lowest bidder, do you really have the confidence in them and will you trust them to do the job you want and need? Will they work as hard for you if they are only making a small percentage of their usual commission? While we have worked with agents who have provided volume discounts for high volume and have done a great job, but if your primary decision revolves around getting a discount, you there’s a good chance you will be disappointed.
Now let’s move on and assume that you have chosen “the right” Realtor, you must trust them. If you are working on a long-term relationship, you should be able to trust their advice. If you don’t, you have to go back and examine whether or not you made the right choice. Whether the issue is that of determining the right listing price, or whether to accept or counter an offer, listening to the professional is important. We have seen so many poor decisions made because a decision to counter an offer was made by someone who either never worked in real estate or was very inexperienced. A good agent will earn their commission many times over and save you money with their professional advice. If you are not sure how to find these types of agents, here’s some real simple advice … ask around and ask for references. There are plenty of them out there who are ready, willing and able to help.
Mistake number two … we forget that a seller is a seller, whether it be a person or a bank. There is so much advice that real estate agents give to normal sellers, and yet banks almost never take the same advice from their agents. There is a reason these topics are consistent throughout the industry, they WORK!
When Mr. Traver worked as a listing agent, he gave the same advice on every listing appointment. Almost always, the client would take his advice and his success would come when he sold the home. It is amazing to us that banks almost never take the same advice when given.
It’s important to minimize the out of pocket expenses for any seller, bank or otherwise. However, sometimes there is work that needs to be done, and will provide a good return on investment (ROI) when the house sells. Whether we are talking about something as simple as painting the front door or something as major as replacing carpet, sometimes money needs to be spent. If you have followed our first tip, hire the best agent you can to help with your listings, and trust them when they recommend that work needs to be done. There are ways to keep costs down and even ways to delay the expense until you sell the property. But don’t be afraid to spend a little money to make that property a little more desirable. We can assure you that an “as-is” home in poor condition must be discounted much more than the cost of a little work.
Another big mistake made in the REO marketplace, and probably the one that costs banks the most money, is the length of time it takes to close a purchase. This is a lesson in Business 101. Most businesses work to make it as easy as possible to do business with them. Why do we make it so hard? Buyers’ agents are well aware of how long it usually takes to purchase an REO property. Due to this fact, the vast majority of buyers are instructed to not even consider one.
Even if a client is willing to wait, do you think the agent wants to wait for their commission? Of course not! We simply must make the process faster and simpler for the buyer. This brings more buyers into the market, which increases the prices we can expect. Trust is the issue here as well, since most delays seem to occur while waiting for a higher-level employee to approve a contract. If we trusted our plan and our team, this wouldn’t be necessary as often.
With so many challenges to overcome when selling REOs, many are looking into turning their properties into rentals. Even Fannie Mae is moving in this direction, and before long, we might have a whole new group of landlords. Choosing the right property management company to help you through this channel is going to be a very important process. In many markets, properties are so far underwater, that renting seems to be the only option. If you do decide to become a landlord, be very, very careful. Once you have picked your property management company, TRUST them. They are the experts and the ones with the experience, so listen to them.
When Jon used to meet with clients during a listing appointment, here is what he told them, “I cannot promise you what your home will sell for, but I can promise you that we will get the best price possible.” His clients trusted his expertise and his ability to help them get the best price. Would you trust your partner if they made the statement to you?
In summary, we leave you with this advice to help you work through your REOs in 2012 … surround yourself and your company with knowledgeable professionals and TRUST them! Whatever your position, the path to success is always the same … surrounding yourself with smartest people, and then listen and TRUST them and their advice. If you follow this simple advice, your 2012 will be better than your 2011.
Article was co-authored by Jon Traver.
David Lykken is president of mortgage strategies and managing partner with Mortgage Banking Solutions. He has more than 35 years of industry experience and has garnered a national reputation, and has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. He may be reached by phone at (512) 977-9900, ext. 10, or e-mail
[email protected] or
[email protected]. Jon Traver is production consultant—branching, recruiting and LO training for Mortgage Banking Solutions. Jon has spent 12 years forging referral relationships with builders and realtors for his own mortgage company. He has extensive experience working with branch companies to grow their businesses through branch and LO acquisition, as well as building long-term business development plans. Jon trains executives, branch managers, and loan officers how to redefine who they are and what they do. He then helps them build a game plan for taking that new knowledge to the streets, including the execution. He may be reached by phone at (512) 977-9900, ext. 112, (972) 467-3990 or e-mail
[email protected].
