What is involved in selling foreclosure? I have been asked to speak on a panel at our December WCR brunch where we will be discussing selling foreclosure properties. I've been asked to turn in some thoughts before the meeting, so I am putting my thoughts together here.
When a property is assigned to a listing agent, the agent must first go to the house and see if the house is occupied. If the property is occupied then the agent must contact the occupants to try and work out the conditions under which the occupants will move out of the house. If the house is un-occupied the agent must secure the house personally or through a third party company (change the locks). If vacant, but with personal property a Personal Property Eviction must be posted. Sometime the listing agent is required to get bids and oversee the trash out & clean up of the property. Sometimes the listing agent is required to even get bids and oversee repairs. The listing agent is usually required to get the utilities turned on. The listing agent is responsible for paying the monthly bills on the property and sometimes the listing agent must also pay for repairs. Reimbursements are made to the listing agent. These reimbursements can take for 3 weeks to 8+ weeks. The listing agent needs to have a minimum of $10,000 available if they are going to have several properties listed at once.
The listing agent must do a detailed bpo (CMA) of the property using 3 actives and 3 solds. Usually the company also orders another bpo from another agent and/or an appraisal. The list price is set by the bank/asset company once they received this information. The bank/asset company also sets the commission and the commission split. You do not negotiate your commission. You get what they pay you. Sometimes in mid-listing they decide to auction it, ask you to do 6 hour open houses and then pay you half of the original commission for more work! If you won't do it someone else will, and it's all a part of the job, so you do as you are instructed.
The listing agent must do monthly activity reports and monthly updated bpos. I wish all my agents did that on all their listings. On REO properties it is required.
Here's on little side note to other agents:
Imagine having a 4000 s.f. historic house listed for $75,000? Then imagine the time it takes to answer the phone 20+ times to answer the same question:
Caller (another Agent): That house you have on Main St. for $75,000, is it in good condition? (or what's wrong with it?)
Of course, if it's 4000 s.f. for $75,000 it is not in great shape, and as the listing agent, you are not an inspector and you do not have the expertise to say what is wrong with the house. You live in a "buyer beware" state and are selling a property that you/nor the seller have ever lived in. You are selling the property "as-is." The MLS is clear that it is "as-is" and the selling agent should be aware that it is a buyer's responsibility to have the property inspected to determine the condition of the property.
Now take the one property, answer the above phone call 20+ times and then multiply it by every foreclosure listing you get. If you were helping someone it would be a different matter, but you are not. You are saying the same thing over and over, to Realtors that ought to know better. "I don't know, your buyer needs to get an inspection to determine the condition of the property." It's something you expect when talking to buyers. It is part of your job to explain to the buyers that they should get an inspection.
So please be courteous to your fellow agents who list REO properties and try not to call them to ask them the "what's wrong with it?" question. It's a real time killer for everyone!
Now, back to what is involved in selling foreclosures. The listing agent, of course, has a fiduciary duty, including obedience, to the banks/asset companies, as all listing agents do. The banks/asset companies are usually very precise in their instructions to the listing agent. Plus most of the time there are systems on the computer where offers must be submitted. Many times the banks/asset companies have specific forms that are required and very often they have a certain mortgage company they require buyers to be pre-approved through.
Listing agents are instructed to not submit any offers without proof of funds or a mortgage pre-approval letter from "xyz Mortgage company" and the system will not let you hit "submit" without these item being uploaded. If the selling agent submits an offer to the listing agent, without the required documents, then the listing agent has no way to upload the offer, because the system will not accept the offer without all the required documents. We always tell our asset managers when we have an offer. We also tell them the terms of the offer. But sometimes we are never able to submit an offer because the selling agent isn't able to get us the required documentation to upload the offer.
Then banks/asset companies take as long as they want to respond to offers and as long as they want to get paperwork to us. They put time frames on the listing agent and the selling agent that MUST be met. REO agents have no control over the seller. They have to meet the seller's requirements to sell their properties and everyone loses out on the sale if deadlines are not met.
Once there is an accepted contract, signed by all parties the listing agent must coordinate the closing. The banks/asset companies again have a very specific way of doing things. We recently had one where the property & the buyer are in Alabama. The title company was in South Carolina and the closer was in Georgia! It doesn't make sense to us either. And sometimes is cost the buyer more money than the buyer expected to pay. It is not something the listing agent has any control over, so the selling agent should really estimated closing cost higher on a REO property to prevent a funds shortage at closing.
Once the property is closed the selling agent has to get utilities out of their name, submit final bills and work on getting reimbursed for all the expenses related to the sale of the property.
So is selling foreclosures easy money? Absolutely not. Can it be good money? Certainly. I have agents do very well working with foreclosures. I have others who would not even consider it, because of the time and money you have to invest in each listing.
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