SAN FRANCISCO — It may be too late in the game for real estate agents and brokers who haven’t established relationships with asset managers and lenders that clear foreclosed properties from their books to get listings that way, says one California broker who’s doing booming business in "REO" (real estate-owned) properties.
"I believe the time has come and passed," said Barry Mathis, broker-owner of Roseville, Calif.-based Intero Real Estate Services. "The (lenders) are consolidating now into agents that have done a good job and know how to work their system."
Foreclosures now represent 75 percent of his business volumewise, Mathis said, working with buyers that often start out as Internet leads from RealtyTrac.
"I like to get them off the Internet, into my car, and into a house," Mathis said. "I’ve got to get those leads into a car, writing a contract."
RealtyTrac Vice President Rick Sharga told agents and brokers attending a "Working the Foreclosure Market" panel discussion at the Real Estate Connect conference that it’s not too late to get their foot in the door.
"There are still ways to get into the business," Sharga said. Agents and brokers can try contacting REO outsourcing companies that manage properties for lenders, such as Keystone Asset Management in Lansdale, Pa.
Or try going to regional events put on by mortgage default trade associations like REOMAC, which is holding its fall conference in October in Hollywood, Fla., or the Five Star Default Servicing Conference and Expo, an event being held in Dallas from Sept. 17-20, Sharga said.
Also watch for announcements of investors buying notes from lenders — a percentage of the homes backing the notes won’t be able to refinance and will have to be sold, Sharga said.
"If you’re willing to work like that, you can become the president," Mathis said. "You have to understand that the average real estate agent with the average commitment level is not going to be able to achieve that at this point."
Mathis thinks banks will be able to clear excess inventory from their books within 18 months, and that they want to work with agents and brokers who are familiar with their system.
"Remember, (the lender’s asset manager) is a $20-an-hour employee with a spreadsheet in front of them, and that’s how they want to be talked to," Mathis warned, saying lenders will sometimes take listings from other agents and give them to his firm "because we are efficient."
Sharga said he thinks the process will take much longer. And some of the best opportunities for agents and buyers are in distressed properties that haven’t yet been repossessed by the bank, said Alexis McGee, president of ForeclosureS.com. Like RealtyTrac, ForeclosureS.com provides subscribers with details on properties it is tracking through the foreclosure process.
The process begins when lenders file a notice of default, and borrowers who can’t get current on their payments may have their homes auctioned off or repossessed by their lender.
McGee said that she’s personally purchased many "preforeclosure" homes as investments, looking for properties in which owners still have equity and sellers don’t require bank approval to sign off on a short sale because the proceeds won’t cover the loan balance.
"What I’m very surprised about is how many people don’t realize the average person bought their home seven years ago, and if they have just lost their job, they have equity" but may not be able to refinance. These properties "are never on the MLS," McGee claimed — "You have to reach out and find them."
Homes in preforeclosures are likely to be well maintained, McGee said, and unlike some properties purchased at auction, there’s no need to evict the current occupants. Homes that have been repossessed by banks often have been stripped of fixtures and appliances, she said.
But Mathis said that, in his market at least, buyers are going to find the best deals on homes that have already been repossessed by the bank.
Buyers have the mistaken impression that "the last person I want to negotiate with is a bank. I have the statistics to prove the REOs are actually less than the short sales," Mathis said.
When banks are willing to approve short sales, homes are selling for about $150 per square foot, he said, compared with $199 a square foot for nondistressed homes. With banks working to clear property off of their books, REOs are going for $130 a square foot, Mathis said.
"I think we have to change our mindset," Mathis said. "People coming to you looking for preforeclosures aren’t necessarily looking for preforeclosures — what they are looking for is a house. They want a deal … and they understand foreclosures are where the deals are."
But Chris Matty, chief marketing officer for Depot Point, agreed with McGee that there are plenty of opportunities for buyers and agents who get involved before banks repossess a home.
"The preforeclosure is really the prime time," Matty said. "Lenders are having a difficult (time) handling those."
Depot Point’s ForeclosurePoint.com is a service that offers investors and Realtors tools for tracking properties through the foreclosure process in real time. It’s important to have the latest information on a property, Matty said, because about 80 percent of scheduled auctions are postponed and bids often come in lower than expected.
Sharga said RealtyTrac has its own team of field abstractors gathering information at the county level, and that data is checked against title company records nightly.
Properties that are sold at some stage in the default process are now priced at 31 percent less than what an automated valuation model would predict, compared with a 27 percent discount last year. That suggests that if the asking price of a property is 40 percent less than it last sold for, "That may not be a deep enough discount."
Many agents have been frustrated in their attempts to get banks to see the light when it comes to falling property values. Stories of banks refusing to sign off on short sales, only to sell the homes for less after they are repossessed, have become commonplace.
Reno-based Chase International Real Estate Realtor Leslie Henderson said that while they can be a hassle, short sales can create the relationships you need with lenders to get REO listings.
"I have a lot of bank-owned listings because I do a lot of short sales," she said.
One troubling development she’s seen in short sales is lien holders of second notes demanding payments from sellers. The amount may be only $1,000 or $2,000, she said, but she wondered if there was some law barring second-note holders from making such demands.
As long as the first-note holder agrees to such payments, they are not illegal, Mathis and others said.
"My advice if you want to close the deal is pay it," Mathis said. "It’s called grease."
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