The REO Agent is the player on the front line – the one who comes in direct contact with the public and other real estate agents representing buyers of the REO properties that the listing agent has listed in the MLS and is marketing for sale.
The question is who does this agent work for?
The REO Agent is just that – an agent which means he or she works for a principal. So who is the principal and what role does the REO Agent actually play in the disposition of the property.
THE OWNER
First, the reader needs to understand that the actual REO home for sale is owned by an Investor who originally funded the loan to the borrower who lot the home for non-payment of the home loan (or mortgage as it is often referred to – even though we do not have ‘mortgages’ in California). As the owner of the property, the lender has the final word on whatever happens.
Foreclosure homes are on a very tight schedule to liquidate and cut their losses. From the moment the gavel drops and ownership is transferred to the original investor, there is a tight schedule in the life of an REO property. Every activity is on a tight time schedule as one often determines what will take place next. You must realize that not only has the lender/investor taken the loss of months of non-payment of monthly loan payments, legal costs, delinquent property taxes and HOA fees (if applicable) but now they have to pay all of the costs associated with selling the property that may include but not be limited to Title, Escrow, Commissions and the other ‘normal’ closing costs in addition to any rehab and concessions negotiated by the buyer. Remember, no one is making any monthly payments on this REO property!
As the owner of the property, the Investor is the one who sets the guidelines that are enforced by the Asset Managers and carried out by the Real Estate Agents. These guidelines are established to minimize additional losses through the sale process of selling REO real estate, after the significant losses that have already been incurred through the time consuming process of obtaining the REO.
THE SERVICER
The Servicer is is the entity that often appears to have control over the REO real estate. In many cases the Servicer is one of the large banks, such as Countrywide, Wells Fargo, Bank of America, Wachovia, Washington Mutual or any one of a number of financial institutions that may or may not be familiar to you.
The Servicer is typically tasked with the day-today operations of managing a loan portfolio for the investor which is often an anonymous entity from a private individual to a large pension fund.
In REO transactions, it is often the Servicer who is calling all of the shots, within the guidelines established by the Owner of the property. As the Five Star Institute teaches in their “REO From A to Z” course, the Servicer “arranges for servicing of the REO. A ‘loss and turn’ Servicer must rid the REO while minimizing losses to lessen loss severity.”
With rare exceptions, the Servicer will not directly handle the disposition of a REO Asset but will refer, or assign it to an Asset Manager.
ASSET MANAGER
The Asset Manager will manage the portfolio of defaulted properties for the Servicer. Many times, a Servicer will divide the portfolio among several Asset Management firms so as to not “put all their eggs in one basket”.
The Asset Manager is given direction and responsibilities with the authority to carry out the instructions and guidelines of the Servicer as provided by the Owner / Investor. The Asset Manager provides a variety of services that would include (but never limited to) valuation services that will include Broker Price Opinions (BPO’s), appraisals and limited reconciliation reports.
With the level of technology available today, most Asset Managers work on one of several industry recognized platforms that allow the Asset Managers to communicate in real time in both directions – up to the Servicer’s and down to the REO Agents as well as vendors along the lines of escrow and tile companies, attorneys, property preservation vendors and others involved in the default asset disposition process.
REO AGENTS
The REO Agent is the ‘eyes and ears’ in the entire operation. They are the font line troops that are responsible for ALL of the activity that takes place where the ‘rubber meets the road’.
I have already discussed in this series of articles that the REO REALTOR has a dual responsibility to not only sell the REO Property for it’s highest possible price but just as important to minimize any additional losses to the seller.
As I continue with this series, the focus of my article will be on those responsibilities that I am charged with and how to best perform my responsibilities, on behalf of my client.
THIRD PARTY VENDORS
Perhaps the final level of participant in the disposition of REO properties are the third party vendors who physically tend to the needs of the property charged to the REO Agent..
There are two types of Third Party Vendors. One are the national firms that are required by certain Servicers. These vendors typically contract with local contractors to perform a variety of tasks and report back to the national company who then reports back to the Asset Manager.
Personally I am not a large fan of these national property preservation companies. I prefer the control of hiring and managing my own team of property preservation specialists. Although it is more time consuming on my part, I have more control over when the jobs are done and to what standards they are carried out. By maintaining this control, I am able to market my REO assignments with pride and can typically sell them much quicker than my competition – averaging less than 7 days on market!
So, you can see there are a lot of moving parts in the sale of REO properties – parts that when coordinated make for a smooth running machine and allow for the quick disposition of these foreclosed assets that we are charged with.
Blessings to all who read,
John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 BILLION in Closed REO's
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473
Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.
This article is part of a series based on my own experience and the lessons taught by the prestigious Five Star Institute in their “REO from A To Z” class that is necessary in order to obtain the coveted Five Star Designation, by far the most respected professional designation a REALTOR can earn in the specialty niche of listing and selling REO properties.
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