Join me, Scott Hudspeth, as we talk about REO’s and more on Scotthudspeth.com. Head over to 5moreloans.com or agentmastermind.com to sign up for your consultation with me, Scotty, today. Let’s make 2023 an unforgettable year!
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How to get REO Listings in 2022 and Beyond:
Featured on today’s episode is Frank Patrick, master of REO’s. Frank will be sharing with you how to take advantage of REO’s and more.
To start, let’s talk about the foreclosure market.
According to Attom Data, there are around 53,000,000 homeowners who have mortgages in the US. On average, 1% of mortgaged homes are foreclosed each year, equaling to approximately 530,000 foreclosures. When the Federal Moratorium went into effect, there were 250,000 mortgages in foreclosure. Combined with the additional 530,000 foreclosed homes, this totals to approximately 780,000 foreclosed homes.
Most foreclosures are listed with an REO Agent.
REO’s + Foreclosures:
REO listings are usually the most motivated sellers. With close to 800,000 foreclosures, lenders are buried under paperwork. New guidelines were put in place that required lenders to attempt to contact the 780,000 homeowners as well as give them 90 days to respond and 6 months to come to an agreement. The rate of foreclosures has increased more than 1% due to the economy. This has, undoubtedly, increased the number of REO listings.
Furthermore, with prices and inventory dropping as well as home sales decreasing by 50%, borrowers that have adjustable rate mortgages are at a significant risk for foreclosure. Following these trends, it is plausible that we could see double the normal yearly foreclosures, putting the total at 1,060,000 foreclosures or more.
In addition, the Federal Reserve has increased the total amount of currency in circulation by 38%. This effectively reduces the amount of goods and services you can buy with your dollar.
How does this affect REO’s?
This will more than likely have a snowball effect where inflation will continue to push foreclosures higher and higher.
House sales are a lagging effect. Thus, a lagging indicator is a financial sign that becomes apparent only after a large shift has taken place. Therefore, lagging indicators confirm long-term trends, but they do not predict them. If you are trying to get into REOs but wait until house sales start to decrease, then you may be too late.
How do you get started?
Get ahead of it and stay on top of trends. Home lenders are already bracing for up to 15 million mortgage defaults, and REO Asset Management companies are starting to prepare as well. Hence why now is the time to get started.
If you’re starting to feel like you’re too late to get into the game, let me stop you right there.
Frank Patrick is living proof that within adversity, there is opportunity.
How Frank overcame adversity and turned it into an opportunity:
Frank was licensed in 2000, and within the next year there was a tragic terrorist attack which brought forth uncertainty across the world and economy. Nevertheless, he continued on and sold his first REO in late 2000. By 2005, he decided to focus on REO sales. As we all know, the economy was about to take a massive downturn. Despite the odds, his business exploded from 2006-2012. His personal best was in 2010, with 237 closed transactions.
While everyone else’s business was floundering, his was flourishing.
Shortly thereafter, Frank started REO Renegades in 2007 as an REO training company. From 2007-2013 he helped 10,400 agents adapt and meet the REO demands.
How does this apply to today?
We are currently experiencing the calm before the storm. This is the time to prepare and be ready. It you wait until you see REO’s pop up on your MLS, it will be too late.
Undeniably, it is a relatively simple and inexpensive process to get started. We will delve into how to get started and what to know, below.
What you need to know:
Identify the sources of REO listings.
The sources of REO listings:
- Banks and mortgage lenders
- Asset Management Companies
- Secondary Management Companies
- Mortgage insurance companies
- Government entities
- Wall Street investment firm
- REO Transaction Management Platforms
You are most likely to have success through Asset Management Companies and REO Transaction Management Platforms.
Now that we’ve covered where to find your source, let’s talk about the steps to receiving REO listings:
- Register with evaluation companies to complete BPO’s and Visual Inspections
- Complete BPO’s for “now income”
- Register with REO sellers as an approved REO agent
- Register with REO transaction management platforms
What is a BPO:
A BPO is an acronym for Broker’s Price Opinion. This is a report prepared by a Real Estate Broker or an Agent acting on behalf of their supervising broker and is used to estimate the selling price of a residential Real Estate property. The estimate of price is submitted on the customer’s propriety BPO report and is typically 2-3 pages. The document should entail property details, pictures, neighborhood, local, and regional real estate market information, neighborhood analysis, and sales analysis of comparable properties. A BPO is more detailed than a CMA, also known as Comparative Market Analysis.
A BPO combines the relevant information from an appraisal with the market knowledge of a local licensed real estate expert.
BPO’s are being used to determine the current collateral value, usually after a mortgage is 60 days delinquent. Lastly, mortgage servicer’s use BPO’s to determine a strategy to take with the defaulting loan. The BPO helps the lender decide to foreclose, modify, short sale, etc.
Why complete BPO’s:
You can earn $1200 a week completing four BPO’s a day if you work only 5 days a week.
It’s a great way to start filling your time between regular real estate activities with a new, income producing activity.
After all, it will help you become an expert on local trends and values, as well as be in the know about properties before they are listed. This is valuable information to share with buyers and sellers.
2 types of BPO’s:
- The Drive By or Exterior BPO: The report combines info from a drive by exterior report
- Full interior BPO
Many BPO evaluation companies also pay agents to complete short forms about property conditions
Top 10 reasons why REO listings are better than homeowner listings:
- They have no payoff and are never “upside down”
- They can’t “just keep it”
- They didn’t over improve it, no emotional attachment
- They are losing $150 a day each DOM
- They will not list it high and “wait until someone who loves it as much as we do” comes along
- They can’t sell FSBO or rent it out
- They won’t request more flyers or a virtual tour
- They don’t care what kind of car you drive
- The bank won’t try to negotiate your commissions
- Legally, they are required to sell
The services that you may be required to provide and/or verify:
- Occupancy inspections
- Cash for keys
- Eviction
- Lock changes
- Board ups
- Winterization
- Trash outs
- Repair bids
- BPO
- Coordinate repairs
- Monthly status reports
- Utilities
- Expense reimbursement
- Payment of fines/HOA dues
Top ways to get started:
- Gather your credentials
- Obtain your REO license
- Obtain your Broker or Office license
- Declarations Page of your E&O insurance
- List of zip codes that you are willing to service; HUD requires a NAID number
- Start by preparing BPO’s for fees for a month or two
- Register with REO sellers
The time is now! Get started today by heading to 5moreloans.com or agentmasteminds.com and schedule a consultation with me, Scott Hudspeth. Let’s make 2023 an unforgettable year!