As foreclosures rise in the US, the demand for REO agents increases. However, becoming an REO agent is competitive, and success depends on building relationships with banks and lenders. REO agents must also be prepared for the unpleasant aspects of the job, such as evictions and dealing with leftover belongings. The key to profitability is navigating the ever-changing market and not acquiring more properties than can be managed.
As the rate of foreclosures increases in the US, so does the need – and opportunity – for REO (Real Estate Owned) agents. Anyone with a real estate license can become an REO agent, but that doesn’t mean doors will automatically open. The field is competitive and very much a “who do you know” branch of real estate.
REO agents deal with properties that banks have foreclosed on. In effect, they fulfill three functions for banks – helping to value foreclosed properties, holding those properties until they are sold, and selling them. However, this multitude of responsibilities means that banks tend to only work with REO agents they trust.
The question, then, is not so much how to become an REO agent, but how to function profitably as an agent in a volatile market. Generally, contact between banks and agents is made directly, or through a “standard list notice” designating all of that bank’s or lender’s properties facing foreclosure. Anyone wishing to become an REO agent must have the ability to establish a relationship with a bank or lender that will send business their way.
Obviously, some unpleasantness is built into the work. An REO agent usually participates in the sheriff’s evictions and is responsible for dealing with the things – trash and other things – that recent homeowners have left behind. Often, the agent is required to pay outstanding utility bills and wait up to 90 days for reimbursement. Until the home is sold, the REO agent must hold the property, complete a Broker Price Opinion (BPO) form to establish an asking price, list the property, and schedule showings.
Becoming an REO agent is learning how to function in an ever-changing terrain. If several homes in a neighborhood are in foreclosures, pricing one of them can be tricky. Unlike a traditional real estate transaction for a homeowner who will likely have a quieter time frame in mind, a bank or other commercial lender will be eager to get rid of a foreclosed property because it is consuming money rather than producing it. There is an REO property in limbo, for the bank and the agent.
Someone who demonstrates proficiency in this housing niche is likely to end up with as many deals as possible. However, REO agents must also be careful not to acquire more foreclosure properties than they can keep, lest they fall into a cash flow crunch. For this reason, many REO agents have the 90-day note as one of their main tools – for their own use.
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