“I want to list REO* homes.” I hear it all the time. And, I am pretty sure those asking don’t realize what they’re actually asking for. If they did, they’d say something like; “I really want to work much harder than ever before for a lot less money”. That would, at least be, realistic.
Getting Listings, much less a sales-funnel full of them, can be very difficult. And, if you don’t like cold calling and continually selling yourself, it very well may be impossible. This is why REO Listings “seem” so attractive.
When you list REO properties, there is never a call to make. The Listings come to the agent via email. Sounds too good to be true. It is! Sadly, there are a lot of folks out there selling the REO dream. And, for a mere $XXX, you too can learn all the tricks.
Don’t get me wrong. Listing REO properties can be profitable. But, it takes a certain type of agent utilizing a certain type of approach to be successful. For one thing, it’s a volume business model. Nobody dips their toe into the REO market. You are either all in, or all out. REO expenses, price points and general property conditions make the math almost impossible for the individual agent.
When an agent agrees to list an REO property, they also agree to take over the expenses of that property. Many agents don’t learn this “detail”, until after they have coughed-up their $XXX. But agents, out of their own pockets, must pay for expenses like; rekeying, winterization, on-going utilities, and landscaping. If repairs are needed, the agent must also front the cost of repair. The banks do have a repair reimbursement policy. But, it’s not unusual for an REO agent to have $10K or more in outstanding invoices.
HGTV makes home repair look fun. Tool belts—cool! REO repair and maintenance, not cool at all. Every repair must have 2 and sometimes 3 bids. Every step must be photographed and documented ad nausea. And, unless the agent is professionally licensed in a trade, they can’t touch a thing. About the only thing an agent can do is cut the grass. And, if you’re an individual agent with an REO listing, plan on doing just that every 10 days or so. Will the fun ever end?
The ad read; “I sold 170 properties last year without a single cold call”. While this sentence may be factually correct, it’s implication that you too can achieve this result is wildly misleading. For one thing, it’s hardly an, “I sold” anything. It’s more a; “WE SOLD”.
Want to list REO properties; first step, assemble a team. If you don’t have a couple tradesmen on your roster, you will be eaten alive by contractors! Remember, in addition to their trades, these professionals are all experts in extracting money from the innocent. And, not to go all Mayberry here, but the days when contractors are forthcoming and honest has long gone.
REO work is paperwork and “process” intensive. Successful REO operations have staff to do nothing more than making sure paperwork is correct and done in a timely manner. And while this may offer a break from mowing the lawn, REO teams also require access to reliable labor. Banks, as property owners, make very time sensitive demands and an REO team must be able to react on a moment’s notice.
Which brings us to the final aspect when considering REO listings. Banks are not humans! This may seem obvious, but its meaning is subtle. Agents are used to dealing on a personal level with home sellers. As a matter of fact, their ability to interact on a human level is probably the reason for their success. But when you deal with a bank as a customer, you are dealing with a type of human form robot who is looking at a spreadsheet and couldn’t care less. Seriously, they don’t give a shit. And, honestly, even they will admit to that, so don’t fuss with them.
Over the years, agents have complained, “can they do that”, “is that legal”, “is there anything I can do”. Short answers: yes, probably not, and no. Never forget, the Banks call the shots and set the rules; it’s their game, not yours. You’re along for the ride.
So, if you are looking at REO’s as an easy way to get listings, you’re pretty far off-tract.
But, if you’re looking at REO’s as the challenge they are; building a team and managing the process can be both rewarding and profitable. Fun, even. But, under no circumstances should it be ever be considered easy!
*REO stands for “real estate owned” and it’s the term banks use to describe a foreclosed property.