Foreclosures present a number of listing and sale opportunities for Realtors®, as well as being a source of information that helps differentiate them from competitors in their market.
A short sale is a property that is being sold for less than the amount owed to the lender. Many foreclosures are in this position, and it is often in the best interest of all parties to attempt to sell the property as a short sale, prior to completion of the foreclosure. This presents opportunities for Realtors® to both list and sell these properties. Short sales are typically more difficult than traditional sales, as they require both homeowner's approval and the lender's approval. This is further complicated by the fact that some lenders are difficult to work with, or have unrealistic expectations around price, commissions, or other purchase terms. Still, short sales represent an important alternative to foreclosure, and for those Realtors® that learn how to identify which short sales are likely to close, it is a lucrative opportunity.
REO stands for Real Estate Owned, and is another term for bank owned properties. The current foreclosure crisis has resulted in banks taking back tens of thousands of properties each month through foreclosure. These properties all must be resold, and are therefore typically listed with a Realtor®, which the banks refer to as REO Brokers. Note that, despite the name, a Realtor® does not have to personally have a broker’s license in order to represent a bank; though they do, of course, still have to be licensed under a broker, as with any other real estate transaction. Representing banks is different than working with traditional sellers, as the bank often requires that the REO Broker handle basic property management, do property evaluations known as BPO's, and even advance money for repairs or utilities on the lenders behalf.
Buyers want bargains. Buyers believe foreclosures are bargains. By becoming a foreclosure expert, and marketing that expertise, you will attract those buyers. This does not necessarily mean you have to sell them a foreclosure. Most buyers will come to the conclusion that they'd rather have a clean, listed, easy transaction—and they'll feel much better about that conclusion if they know they have worked with a Realtor® that is knowledgeable about the entire market, including foreclosures.
Foreclosure information can be used to help get non-foreclosure deals done as well. Specifically, foreclosure comps can help:
- Get sellers priced to sell. Knowledge of properties not yet listed in the MLS is as vital to successful pricing strategies, as lists of recently sold and pending sales. Foreclosure comps show you every possible REO listing that could compete with your seller in the next 6 to 9 months.
- Get buyers off the fence. Negative news about foreclosures keeps many buyers on the fence. Is it a good time to buy? Will I get a good deal? Should I wait for a foreclosure? Yet, the reality is that there are often very few upcoming foreclosures that meet your buyers’ criteria. Foreclosure comps can show them every foreclosure that may be listed as an REO for the next 6 to 9 months, giving them a crystal ball into the future that will remove all fear, uncertainty, and doubt.
- Get bank offers approved. Foreclosure comps can help you convince a lender that an offer on a short sale or REO is reasonable, and in their best interest. Pointing out to a lender the upcoming REOs (which are not yet listed), can sway an asset manager’s consideration of an offer.