Like all other clients, getting bank clients is a matter of relationship building. Many REO Brokers get their start and introductions to banks by doing BPOs (broker price opinions), or working with smaller local banks and lenders where it is possible to meet management in person. Getting REO listings is about building expertise and providing value to asset managers as a professional who can list, manage and sell these non-performing assets.
Often new agents break into REOs via BPOs while established agents miss out. How does this happen? A new agent sees a class that allows them to make a little money while learning to do valuations while they build their business and they jump on the opportunity. Established agents see this as a waste of their time, doing all that work for a hundred dollars or so.
But as a result of doing BPOs, the new agents built relationships with banks and when REO business increased, they had built the network to get the listings. Even now there are people who pay their monthly bills just by doing BPOs, but few agents enjoy the process.
Who are the players?
Trustee. In a non-judicial foreclosure state, the trustee has the power of sale, which means the trustee is responsible for the foreclosure process and making sure all documents are filed in accordance with the state-mandated foreclosure process. The trustee can also have an asset management department. As a result, you can work to become an approved agent for the asset management department of the trustee.
Lender/Servicer. The foreclosing lender may be the actual investor on the loan or they may just be servicing the loan (much like a property manager would not own a property but they would collect the rent). Once a property becomes bank owned, you can find the actual investing lender and owner of the property on the Trustees Deed. Some lenders handle their bank-owned portfolio through their own REO department, others use several different asset managers, and others use one large asset management company. Relationships can change between the lender and the asset manager, making it almost impossible to know who the asset manager is on any given foreclosure.
Asset Manager. Some asset managers, such as LPS, offer a la carte services and are known for their other services, but also do asset management. The assigned asset manager is not a matter of public record, so there is no way to find out who the asset manager is on a particular property without doing some serious detective work and having industry knowledge of the REO market.
It’s a Feature: Find the investor
Finding the right person to talk to about an REO can sometimes be like a game of Where’s Waldo? You can use ForeclosureRadar to simplify the process.
Originating Lender. In the Transaction History, look in the Loan line for the loan in question and note the Lender entry. This is the bank that originated the loan.
Servicing Lender. View the details for a notice of default or trustee sale. The lender section shows you who is servicing the loan. This could be the actual lender who currently owns the note, or it could be a servicer.
Investor. In the Transaction History, look at the Trustee Deed line for the Grantee entry. This is the actual investor who took possession of the property after the sale. This is who is in charge of the disposition of the property. They may handle it through their own REO department or they may assign that responsibility to an asset manager.
Lender Asset Managers
Agents often wonder why asset managers give hundreds of listings to one agent and ignore another, why they use inexperienced agents, or why they don’t respond to marketing pitches. The key is to see the world through the asset manager’s eyes.
Asset managers aren’t in the business of creating a quality buying experience for your clients. They are in the business of the preparation and disposition of large numbers of bank owned properties. They follow a strict protocol in selling properties so that they can report to their clients (lenders) that they did the best job possible in disposing of that asset. . They often have a limited idea of a market and are reliant on qualified, knowledgeable real estate professionals to sell REOs. They often trim down their ranks of approved agents, focusing on the ones that provide the best service to the asset manager. This means that the agent responds to tasks in a timely manner, completes reports and other documentation on time, and communicates well with the asset manager.
BPOs require local expertise. By performing regular BPOs you can establish yourself as the go-to expert for listings in the area.
BPOs require local expertise. By performing regular BPOs you can establish yourself as the go-to expert for listings in the area. An asset manager will require listing agents to prepare quality BPOs. Failure to provide reliable BPOs may cause an agent to lose future assignments.
Tales from the Trenches: Getting listings
I had one asset manager rave about an agent, we’ll call him Frank. “He’s so wonderful. We love him. He’s our top agent. We had one assignment in an area where we had no agent. Frank took it even though it was four hours from his home. We make sure we give him everything we can.”
Agents need to be wary of turning off the faucet by turning down listings. Frank wasn’t the most efficient agent to use for that property, but taking that listing paid off for him.
Before you jump on the bitter bus when you see an out-of-area agent taking a listing in your neighborhood consider that they really do not have an option to turn down an assignment. In the business of selling REOs you take everything.
Tales from the Trenches: Getting their attention
Gifts will get you nowhere with an asset manager because they can’t accept them. Big marketing packages are not effective. The simple things are what make the difference. Send them all the information they ask for, including license, insurance, experience, coverage area by zip code, county or city, because they may be in another state.
You have to know the game you are in. Asset managers do not care about your 500-page high gloss marketing packages. In fact, one top producing REO agent at a conference that was hand selected by asset manager made two simple suggestions for agents.
- Get out of the car to take the picture. If people see your mirror in the photo, they’ll assume it’s a dangerous neighborhood.
- If the sky is cloudy, Photoshop in a blue sky with white puffy clouds.
You must learn how to speak their language and understand the needs of the asset manager.
A servicing lender may or may not actually own the note. It may be simply managing the billing and delinquency issues and the loan may belong to a different investor. For example, Bank of America services loans for over 500 different investors.
Or, if the loan was originated by one lender and then sold on the secondary market, the new owner of that loan may also be the servicer. When that portfolio was sold or transferred as a larger pool of loans, it may have been a requirement of the lender that mortgage insurance was purchased on that pool of loans. This would have a larger impact on the negotiation of a short sale, as the insurer may object to a sale amount that causes them to pay a claim. Keep in mind that the sale price of an REO property may need to be approved by a mortgage insurance carrier since there will undoubtedly be a claim against the MI policy.
In real estate, and especially in short sales, it not as much about what you know but who you know. Networking with local competing REO agents may not be a great use of your time, attending the nationwide events and networking with agents outside of your area can be a great way to identify other asset management opportunities.
Two of the larger associations, Five Star Institute and REOMAC, are great places to start.
The National Association of REO Brokers – NRBA.com, Commercial REO Brokers Association and certainly DSNews.com can be great sources of information.
To learn the ropes, you can get education and even certification from several sources:
Area specialist. You don’t need to change your market area to work the REO market. Banks are taking properties back in every neighborhood and every city. Your local knowledge and expertise will prove invaluable to an asset manager, particularly those asset managers that aren’t regionalized and are managing properties all over the nation. There’s no substitute for local insight.
Anticipating REO listings. ForeclosureRadar allows you to track daily auction results, so you can see which properties a lender has taken back even before an asset manager has been assigned. Knowledge of a lender’s portfolio as well as a market area allows you to price aggressively.