By Roger Higle, Course Writer for Keller Williams University, Keller Williams Realty International in Austin, Texas
Want a quick peek under the tent at the large and very different world of short sales and REOs (bank owned foreclosures)?
Four top distressed property agents chatted with Gary this morning, sharing some views into a world that a relative few agents know well, and one that a growing number are learning.
Foreclosures have been growing across America in the past several years and nothing has changed about that reality. What's new is that more agents in places like Pennsylvania and Minnesota are learning what the most distressed markets like California, Arizona, and Florida have known for some time. Distressed property is here to stay, for years to come.
The panel was short sale specialists Brian Gubernick from Phoenix, AZ, Jeff Payne from Panama City, FL, as well as REO masters Kristian Peter of San Diego, CA, and Andrew Monaghan, from the Phoenix-area. Between them, these agents listed and sold more than 1500 short sale or bank owned properties in 2009, and their businesses are all growing!
Their focus was on key business realities that define what they do. Here's a short list of key messages they shared, and the huge crowd listening in:
- Short sale lead generation is much like traditional lead gen. Gubernick and Payne use the same techniques to prospect that work in traditional markets. They make themselves very visible in all their target markets as "the short sale expert." Said Gubernick, "The difference is we ask just one very direct question in our lead gen, "Are you behind in your mortgage payments? Are you underwater? If so, we can help you."
- Seller qualification is very important in short sales. "These homeowners are in serious financial pain, or headed that way fast," said Gubernick. "For the best chance of selling short, homeowners need to be motivated to cooperate with their agent all the way--fully disclosing their financial status and providing all the documents including tax records that banks want to see. Gubernick does a brief qualifying phone interview (less than 30 minutes) and then emails the necessary documents from him--and also a list of what the homeowner must provide. "If I don’t get a completed document set back in about 48 hours, chances are that party is not going to work with me successfully," Gubernick emphasized.
- The all important negotiation of offers with the lender is the part many agents dread. The best alternative? Refer a short sale lead to an expert in your area, and stay focused on your own lead generation. "When an offer is received, that's when the hard work really starts," said Payne. Both agents confirmed the key to success is negotiating the offer to an acceptance from the bank or asset manager is "not taking no for an answer" and "being willing to escalate quickly and forcefully to higher-ups in the bank when unreasonable no answers are given.”
- Homeowners are more likely to be forthcoming about their distress these days. "There's been so much written and broadcast about short selling now that people seem less afraid to move forward," Gubernick said. "And there are people who are planning to sell short even before they've missed a payment." Payne reported more than 20% of his closed sales there days are for homeowners who were not behind in payments when they made their decision to sell.
REO agent Monaghan and Peter emphasized they live in a process-driven foreclosed property world. Their institutional clients, also banks and asset managers, insist on fast turnaround and precision from the moment a listing is assigned to an agent--that includes property inspection, rekeying and security, accurate pricing, property cleanup, and efficient cash for keys exchanges to move out occupants (tenants or former homeowners).
- The institutions who hold foreclosures are expecting more from agents than ever before. "Were scored by either manual or automated systems on almost everything we do," said Monaghan. There’s a lot at risk. A well-regarded REO agent receives listing in batches--anywhere from several to ten or more at a time. "My inventory has gone from as high as 700 listings to less than 150 in the last year or so," said Peter. You have to be very cost conscious and have a great staffing game plan to manage it."
- REO agents make big financial commitment to have their business with lenders. "Ninety percent of expenses are reimbursable," said Monaghan, "but I estimate my out of picket on a typical listing runs almost $4,000." Top REO agents have full time accountants working for them.
- Lead generation for REO is not unlike ordinary lead generation. The difference is who the clients are. "These are institutions. People change jobs, and it’s a world of policy and process," Andrew said. "I spend almost all my time networking with my institutional contacts. I used to have as much as 80% of my business with one client. Now, that's changed a lot." Both Peter and Monaghan said they regularly work with more than 20 banks or asset managers at a time--and each one has their own systems and requirements.