I get these questions daily from up and coming foreclosure brokers: “What is happening with bank owned properties?” “Why are the inventory levels fluctuating so much now?” “What can I do to keep from going under?” My explanation is this: The government and the banks are trying desperately to stop this huge flow of distressed properties from hitting the market. The government, of course, wishes to preserve home ownership and neighborhood values. The banks, of course, wish to SAVE MONEY and REDUCE LOSSES. As a result, we are seeing many new programs and strategies implemented, in an effort to keep foreclosures from taking place, and to offset losses, by disposing of bad debt though other means, like short sales. An interesting note that you may or may not know, is that banks are consistently seeing about a 15 point higher return on short sales vs. foreclosures-only makes sense that they look towards these alternatives, as additional methods of property disposition.
Does this mean an END to REO is coming? Does it mean that we are going to see the REO world shrink drastically-NO WAY FOLKS! Here’s the raw truth….Banks simply do not have the capacity to process “shorts” at the moment. Nor do they have any real evidence that shows them as a long term solution. Much like the big “loan mod” craze (HAMP) that proved to be an outright failure, short sales come with a myriad of circumstances and anomalies, that will NOT allow them to be some sort of “one shoe fits all” fix for today’s housing bust. Just not possible. Frankly, it’s a big mess out there and there just ain’t no easy way across the river of debt bubba!
But TRY they will. And their efforts will (and already have) disrupt the ebb and flow of REO inventories. All year, we’ve been riding the wave of inventory to new heights, then seeing it crash to record lows. Will they ultimately find a big, world changing solution?-doubtful. But they will find little patches and band-aids for their ailments. Most will peel off and expose the old wounds after a few months of wear and tear. But these little speed bumps will surely impact inventories along the way. We REO brokers simply must hike up our boot straps and do the best with what we’ve got. We must continue to build our relationships with asset mangers and banks. We must do SUPERIOR jobs, so that when levels get low, we are the brokers who get those REO listings. And we MUST strive to improve the overall climate of the REO world ourselves, within our own businesses. In my own personal REO business, our internal policy (which, incidentally is much like that of THE most reputable and respected REO clients) of putting occupants into good homes, without great expense after the sale, and selling at the highest reasonable prices, not only serves my community well, but it is good for the buyer and the client. THESE PRINCIPLES will always keep me in business, regardless of market shifts…No question about it.
Don’t stress about inventory fluctuation folks. Have an extra cup of coffee and carve out extra time each day to work on “momentum” strategies when things slow down. ALWAYS think about how you can build for tomorrow. DO NOT flip out about today’s lows. It kills your spirit. This is a 12-month business every year. Ride the waves and do a consistently excellent job. It all comes full circle in the end.
To your success!
Mike Costigan
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