There is of course a huge difference between the traditional sale of a home compared to the sale of a home that has gone through the foreclosure process and is now owned by a bank / investor.
EMOTION
To sum it up in one word it would have to be emotion. That’s right the traditional homeowner who wants to sell their home is emotionally attached to it. They know of the blood, sweat and tears that went into making it the home it is today and they want to be compensated for their efforts.
The traditional real estate transaction is all about the personality of the seller, which has been invested into the home being offered for sale. It is the most prized possession of the homeowner. Many times, the homeowner will want more for their home than what the market says it is worth – because of all the “little things” that add up to a lot and make it “the best home in the neighborhood”.
Of course, the homeowner has the flexibility to change their mind at any time, for any reason. They have been known to raise the price, lower the price and even pull it from the market if they feel they are not getting any respect.
In addition to the whims of the traditional home seller, situations can change. Job transfers may not happen. Marriages may not happen. There may be a death, divorce or even a bankruptcy that can change the motivation of a seller in a traditional transaction. There are so many different scenarios that can take place that changes a traditional home seller’s motivation to either sell quicker or to stay put.
REO LISTING
The REO home for sale is the complete opposite. It is on the market for one reason – to sell and it will remain on the market until it does sell – Period.
The lender who owns the property has already lost a substantial amount of money and they need to cut their losses. The only way the new owner will recoup any of their investment is to sell the REO home. The owner / lender wants to minimize those losses that have already taken place. Where the traditional seller may spend money on beautifying a property for the prospective buyer the REO property is typically sold “AS-IS” and will only complete repairs that will be required for safety and code compliance. Ongoing monthly maintenance is typically minimal.
THE PROCESS
In a typical real estate listing, the property owner will interview multiple agents and select the one that best meets their needs and personality. The criteria that the seller may use can include factors pertaining to the marketing the real estate agent will use, the price the real estate agent believe they can sell the home for or perhaps the local real estate agents reputation in the community.
REO properties go through a completely different process. First the Owner tasks the Servicer to liquidate the REO property and then the processor will select one or more Asset Management companies. Once assigned to an Asset Manager, the portfolio will be divided between multiple real estate agents in each market place, so as to not put all of their “eggs in one basket”.
The process is started by finding a local real estate agent who presumably has expertise in the local neighborhood of the REO property for sale. Unfortunately, there are many agents who will just add as many zip codes as they can to their profiles and resumes in an effort to attract as much business as they possibly can – regardless of their knowledge of the local area. In my area of the Inland Empire of the Hemet – San Jacinto Valley in Riverside County it is not unusual to have REO agents from San Diego County, Orange County, Los Angeles count and San Bernardino County representing themselves as local experts. Many do not even have local MLS access. However, this is a pet peeve of mine and worthy of a rant all on it’s own. I addressed a very similar issue back in January 2007 – and it is very relevant today – just the players are different.
Back on topic… As the “eyes and ears” for the owner/ lender of the property the REO Agent is ‘tasked’ with multiple functions that must be addressed in a timely manner. By completing these task on a timely manner, the REO Agent keeps the Asset Manager informed who can now provide the necessary information to the Servicer, throughout the life span of the REO listing.
It is imperative that a successful REO Agent complete all tasks on time in an efficient manner. After all, it is the Seller who is out considerable money through the REO process and is counting on a streamlined sale without spending any unnecessary time or money on the transaction.
This is a simple overview of the differences between a traditional home for sale and an REO home for sale in any market.
Blessings to all who read,
John Occhi, REALTOR®
Century 21 Crest – CrestREO
Over $1 Billion in Closed REO Sales
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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