By Bubba Mills
In today’s real estate market, if you know what you’re doing in the real estate owned (REO) arena, times can be better than good, even excellent – and definitely profitable.
Here is a story of an agent who sold an REO property in Oxnard, Calif. last year. The original listing price was $923,000. The original broker price opinion was $756,000. The agent ended up getting a $200,000 price reduction on the house, which was 60 percent rehabbed (the third floor was nothing much more than studs), and it sold for $723,000 in 32 days.
The asset manager was ecstatic. And the agent? Well, he was euphoric beyond description, mainly because he knew what he was doing and the bank did not recognize his expertise. Agents need to realize that most of the asset management companies (AMCs) do not set the list price. Usually, the list price is dictated by the investor, and the AMCs follow direction. Agents need to give as much feedback as they can to the AMCs so they can approach the investors and negotiate a list price reduction. Performing an effective open house will allow you to give additional opinions back to the AMC, so now it’s not just your opinion.
And that’s my first point – knowledge is power, especially these days, and particularly in REO. I recommend obtaining certifications from a quality real estate institute, and learning about the tools that are available to consumers. Help teach your clients and homebuyers how they can turn a run-down REO property into a consumer custom-built house, which is usually cheaper than buying a new construction home.
The agent also met the neighbors and explained to them he was just as concerned about community stabilization as they were. That’s why he took the REO listing. He believes agents can rebuild neighborhoods one house at a time. He gave out flyers and invited neighbors within a three-block radius to attend an open house just for them. The flyers were “tickets” of admission to the open house.
That led to developing leads – a primary goal for the open house. He had all visitors fill out a registration card with the option of receiving additional listings in the area. He also made the open house interesting by placing description cards throughout the house that explained all the home’s amenities, so he did not have to follow all of the attendees around the entire time. And finally, he had visitors complete comment cards about the property he could share with the asset manager. He ended up getting 75 people to attend the open house, which led to 56 leads and 14 comments on the house. The comment cards were then submitted to the asset manager, who in turn, submitted them to the investor, showing the list price was too high. Within 30 days, the investor (Wells Fargo) gave the agent a $190,000 price reduction and the house sold within seven days of the list price reduction. If it were not for the comment cards, monthly status report and additional comps, this house would have just sat on the market, costing the investors thousands of dollars in holding costs.
The agent followed up on his leads and ended up selling three other properties and landed three other listings. His total take: $61,000. Not too shabby.
Now, this REO was a higher-end property, but today, even lower-end properties can bring you income. Marketing them is a completely different animal, but this is where virtual tours and open houses can spark a lot of interest, even in the worst
The bottom line: when you market an REO property effectively, you can have a 500 percent return on investment. But you have to know what you’re doing. Before the recession, there was enough business to go around. Now you have to set yourself apart from the competition through knowledge and innovation. The fact is, the industry is primed for innovative thinking, because there’s not a single economist or government agency that can tell us how to navigate the situation we’re in, because we’ve never been in this situation before.
Bubba Mills is a vice president with Corcoran Consulting Inc. (CorcoranCoaching.com, 800.957.8353), an international consulting and coaching company that specializes in performance coaching and the implementation of sound business systems into the residential or commercial broker or agent’s existing practice.