REO listings – not always a good thing

Miniature house with lock and key

Most agents have a goal of obtaining REO listings – this is the main reason why agents perform BPOs, trash-outs, cash-for-keys, and all those “pesky” tasks which pay very little money. The big money is in the REO listing – RIGHT?

Not so fast…

Sometimes, the REO listing can be more of a hassle than it’s worth. If you are eager to just accept any ol’ REO listing, you might find yourself disappointed. Let’s take a look at an example:

Let’s say your market is like mine, houses routinely sell for under $100,000. Now let’s say an asset manager calls you up and says, “Ok Mr./Mrs. agent, I have a new listing for you.” You instantly perk up and see dollar signs (commission). “Tell me more,” you say. Then you get the details: “This house will not qualify for traditional financing, it needs too much work. We need all cash offers only.”

Ok, you perform your initial BPO you determine that the property is worth $60,000 in it’s “as-is” condition. There are some repairs (about $15,000) and the “repaired” value is $90,000. Now you immediately have a potential problem: cash buyers are much easier to find for a really cheap property in the $10-20k range, but now we’re talking $60,000. That’s a decent chunk of change in this economy.

You go through your established list of potential buyers in that area, you show the property to several prospects and nobody makes an offer. You submit a Listing Price Reduction to your Asset Manager, asking for a price reduction to $55,000. That oughta sell it, you think. Get that listing “refreshed” in your MLS system. Listing price reductions get attention.

More months go by. More buyers go through the property, but still you receive no offers. You’re struggling to keep any sort of activity going with this property. Worse yet, your expenses are piling up:

  • Gas money driving to & from the property
  • Advertising/marketing the property
  • Maintaining the property

9 months in, you have the listing price now reduced to $45,000. You finally find a buyer at a price of $40,000. You submit the offer to the bank and they accept!

What did you earn?

NOW – What is your commission on this sale? Normally the bank or REO Asset Management Company will pay about a 6% commission. If your broker listed and sold the property, they would receive a $2,400 commission on this $40,000 sale. If you are an agent under your broker, your pay would depend on your commission structure but for argument’s sake, let’s say you get a 50/50 split on commissions. So your broker makes $1,200 and you make $1,200 out of the $2,400 commission earned by your broker.

If it took you 9 months to sell, it’s reasonable to say that you put in at least 2 full work weeks (80 hours) trying to sell the property – whether through evicting tenants, cleaning up the place, marketing, networking, inspecting, showing, or any other phase. The actual amount of hours is probably more than this, but for the sake of this example we will use that figure. That means you made $15 per hour for those 80 hours. Or, broken down into months, you made about $133.33 a month for the 9 months it took to sell the property.

In many cases, however, you made HALF of all these numbers because there was another agent/broker involved. If you had to split the commissions with another broker, your broker would only receive a 3% commission and you (as an agent) would receive only 1.5% of that. So in this example, you would make $600. Hardly anything to get excited about, for a 9-month grind.

Factoring in the fact that some brokers have a huge monthly advertising budget, it’s quite possible that the broker actually LOST money on such a small commission.

So although most agents are clamoring for REO listings, and rightfully so, it’s not always going to work out well. There’s going to be some “stinkers” thrown in along with your “home runs”. If you’re new to REO listings, you would be wise to team up with a veteran who can show you the ropes. You’ll have to network to find the right person but once you do, they will be invaluable to your career.

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categories How-To/Instructional | November 9, 2010

42 Comments to “REO listings – not always a good thing”

  1. By Erik Weisskopf, November 9, 2010 @ 10:11 am

    Great article Rob. This is soooo true. You of course could list a host of other activities that can go along with that “stinker” like the myriad of phone calls and e-mails you take on that listing..just from other agents..then the low-ball poorly written contracts that you have to review and amend prior to submission. THEN..the biggie can be the “rating” you get at the end of the day for poor LP-SP ratio, Days on Market etc. It’s like having perfect credit..then having it screwed up by someone who stole your identity! BUT you can’t fix it because it’s already in the system.

    However, my experience fortunately has been that the “home runs” and “average” properties still outweigh “the stinkers” in my marketplace..SO bring on the new listings!! Have a great day!!!

  2. By RobH, November 9, 2010 @ 10:09 pm

    Great followup comments Erik, I think you are exactly right – normally the good outweighs the bad…it’s not always a rosy picture but it does work out in the big picture normally. What’s that phrase, “the juice is worth the squeeze” !!!

  3. By Oswin Grant, November 13, 2010 @ 6:55 pm

    I like the way you explained how the REO property sales program works starting with the phone call. The whole REO from start to finish is interesting and can have a lot of bumps along the way. I blog on mortgage crisis and ways to help borrowers and other in the current mortgage crisis on my site.

  4. By Tanya Kelley, December 16, 2010 @ 5:06 pm

    Could you please send me your list of REO/BPO Companies where I can register?
    Thank You, Tanya

  5. By RobH, December 27, 2010 @ 7:39 pm

    Thanks Oswin !

  6. By RobH, December 27, 2010 @ 11:10 pm

    Sure Tanya, I just sent you the list, stop back any time!

  7. By Scott Messing, December 30, 2010 @ 2:13 pm

    Hi Rob,

    Stumbled upon your site when I google searched for applying to sell REO properties. My broker is preaching for agents to apply and get on the REO lists. I’m not sure how to do this really. I’ve been in the business 5 years but only 7 months in my new home area of Merced, CA.

    I’d love a list and any advice/help you can provide. Enjoying reading your blog and thank you so much!

    Scott Messing

  8. By RobH, December 30, 2010 @ 10:08 pm

    Sure thing Scott, glad you’re enjoying my blog. I just sent you the list, let me know if you have questions any time.

  9. By Steven T, January 13, 2011 @ 1:39 pm

    Hello…
    We are the top producing team in our board and have a mix of residential, commercial, and reo properties. we sold 8 in 2009, 32 in 2010, and are looking to grow much more now that we feel that we can provide a high level of service to our sellers. You have some great resources and I wonder if you have some insight as to the next step. We are in contact with our local banks, we are set up with many AM companies directly, and set up with Equator and Res.net. One thing may be the list I see referenced above, so I can make sure that we are all signed up with the AMs you have. Any insight you may have will be greatly appreciated. Thanks in advance!

  10. By RobH, January 16, 2011 @ 12:12 am

    Steven, I just sent you a list – hopefully this helps. It looks like you have everything in place. I would say the more BPOs you do, the more chances you give yourself.

  11. By Cindy Macgray, January 16, 2011 @ 10:55 pm

    Interesting. Your experiences have mirrored mine. I would love your list as well. with more and more agents jumping into the “new” market it requires looking beyond the ones I have been working with.
    Thanks

  12. By Vern Callero, January 20, 2011 @ 1:19 pm

    Rob–

    Nice article -You are providing a great service for agents keep it up!

    Vern Callero
    Co-Founder
    Vision2Events.com

  13. By RobH, January 26, 2011 @ 11:20 pm

    Cindy, I just sent the list – thanks for reading. It’s always good to have multiple options, I agree!

  14. By RobH, January 26, 2011 @ 11:27 pm

    Thanks Vern – I appreciate the kind words :)

  15. By Gina Romano, February 10, 2011 @ 7:19 pm

    Rob,

    Great site. Lots of great information. I would really appreciate the REO list as well. Taking a different approach to real estate after 16 years in the business. So far, even in this bad economy I have managed to close many deals with my repeat and referral clients but feeling like I want a bit of the REO pie.

    Thanks so much!

    Gina Romano

  16. By RobH, February 12, 2011 @ 1:53 am

    Gina, glad you stopped by and glad you like the site. Check your email, I just sent your list.

  17. By John Scott, March 20, 2011 @ 11:11 am

    Thanks for all the great information Rob.I,too would like a copy of the BPO and REO companies,if possible.

  18. By Michael, March 22, 2011 @ 10:51 pm

    Hey Rob-

    Enjoyed the post. I’m a BPO agent in metro Atlanta and really enjoyed reading about the REO process here. I’ve been doing BPOs for about 6 months and really enjoy it. What are your opinions on national organizations like NABPOP?

    Could you pass along your list? I’d like to see if I can pick up some more business.

    Cheers-

  19. By AL VALENZUELA, April 15, 2011 @ 2:35 pm

    ROB GREAT SITE
    THANKS FOR ALL THE INFORMATION
    I HAVE BEEN TRYING TO GET THIS INFORMATION FOR MONTHS.
    COULD YOU PLEASE SEND ME YOUR LIST,ALSO WILL THIS WORK FOR CONTRACTORS/VENDORS
    LIST.
    THANK YOU -THANK YOU

    AL

  20. By Cheryl, April 16, 2011 @ 3:09 pm

    Enjoyed reading your article. I would like it if you would send me the list too.

  21. By RobH, May 5, 2011 @ 7:51 am

    John Scott, it’s on it’s way – thanks for reading!

  22. By RobH, May 5, 2011 @ 7:55 am

    Thank you Michael – Atlanta is a hopping market. I think NABPOP is a good organization as they educate you and it gives you a good background – many agents do not have this designation and it’s just one more “bullet” in your gun.

  23. By RobH, May 5, 2011 @ 8:00 am

    Al – your wait is over. Glad you found my blog. As far as contractors, there may be a few companies in this list that do multiple things so you’ll have to inquire with each company. But I’m not sure.

  24. By RobH, May 5, 2011 @ 8:01 am

    Cheryl, thanks for reading – I just sent you the list.

  25. By Teri Norton, May 8, 2011 @ 7:21 pm

    Hi Rob- I am getting started as a new agent and trying to pursue Short Sales and BPO’s along with my traditional real estate business. Will you send me the almighty BPO list ?

    Thanks in advance- Teri Norton- Houston,TX

  26. By RobH, May 21, 2011 @ 1:16 am

    Spencer, Teri, Ed, John, Deanna, Bryan, Eric, and Matthew – sorry for the delay, somehow your comments went into a bulk comment queue – I just sent your lists, let me know if you didn’t get them and thank you for reading!

  27. By Paul Kuriatnyk, June 3, 2011 @ 12:47 pm

    Rob,
    Great blog! Tons of solid input. If you get a chance, would you please send me the Reo/BPO list. Thank you very much.

  28. By First Stop, June 4, 2011 @ 8:47 am

    Hi Rob,

    most informative blog..you are a super Star!

    Could I ask for a copy of the majic list, thank you.

    Also, could you give an indication of how much would be needed in start up capital to cover the costs of maintaining a number of REO properties/per property…what other typical costs are involved other than Grass cutting, Pool cleaning, interior cleaning……..is the agent required to take out any building/content insurances, pay for major repairs such as new A/C unit, pool pump etc.

    Thanking you in advance
    First Stop!

  29. By RobH, June 4, 2011 @ 4:19 pm

    No problem Paul, I just sent it out to you. Let me know if you have any questions.

  30. By RobH, June 4, 2011 @ 4:27 pm

    It all depends on the asset management company First Stop – some require you to pay expenses that others do not, so it’s really impossible to answer…but you definitely need a source of working capital to start because the asset managers might spring something unexpected on you and they expect that you can take care of it quickly. I did find this document online from the Mortgage Bankers Organization, they used this in a recent conference and it gives a good overall idea of the REO process. It’s saying the costs average $2441 per property nationwide (see page 7 of the pdf). I just sent you the “magic list”, let me know if you have any other questions.

  31. By Kevin, June 4, 2011 @ 4:59 pm

    Many Thanks Rob for the informative answer and the list….

    You can guess what I am doing Sunday, Yes going through the contacts!
    Once again many thanks.

  32. By Myriam E, June 9, 2011 @ 4:17 pm

    I know what u mean…I would like to get the list Please..
    Mahalo,

  33. By Thom, June 15, 2011 @ 1:09 pm

    Could you please send me the list too?

  34. By RobH, June 22, 2011 @ 7:51 pm

    Coming your way now Myriam, thanks for reading!

  35. By RobH, June 22, 2011 @ 8:01 pm

    You got it Thom, it’s coming over now.

  36. By Tonya A., July 11, 2011 @ 8:37 pm

    Hi Rob:

    I just found your blog today. It’s very interesting, and insightful! I would love a copy of your magic list as well! Have a great night.

  37. By RobH, July 11, 2011 @ 10:58 pm

    Thanks Tonya, glad you like it. I just sent out the list, let me know if you have any questions.

  38. By CESAR K, July 12, 2011 @ 6:17 pm

    Hello Rob,
    Great information, thank you for sharing. I follow your blogs, you sound like a very succesfull smart guy. Rob, could you share a copy of the so famous list as well?.
    Thank you in advance for all your help.

  39. By CESAR K, July 12, 2011 @ 6:26 pm

    Rob,
    you have lots of information, I need to ask you some advises. I have read in some of your other blogs, about doing the leg work such as BPO’s, have assets on the side to cover the REO’s, as well as registering with so many places.
    Rob,
    I have been completing over 300 bpos per year for the last 3 years, as well as I bellown and register to most of all the sites, such as old republi, utls, equator premiun, res-net etc to mentions some. I have been looked so many times on my profiles as well I was invited from Fannie Mae to register as vendor . I have several designations and certifications with FiveStar – Accredited- RDcPro etc but I am not getting any assigment.
    My have in the past gotten REO’s from SunTrust and other , but Im not getting any now. Rob, what am i doing wrong?.
    I have even proposed by sending emails to other brokers out of my area if they would like to partner with me, I will do and pay for everything and they just have to collect whatever split we agree.
    What will you advice me?

  40. By RobH, July 19, 2011 @ 9:20 pm

    Cesar K, I just sent you your list, check your email. As for your question, it looks like you are doing the right things, you just need to make some connections with the right people…when you’re at the five star conference and others like it, make sure you somehow make yourself memorable. Your name needs to be right at the top of the list for asset managers when they think of a REO agent in your area. If you know of other REO agents in your area, take note which banks are sending the business – then make it a goal to get to know the people you need to know within that company. When it comes down to actually assigning the listing, most asset managers are going to go with somebody they know & trust. Hope that is helpful.

  41. By Belora Bryant, August 18, 2011 @ 4:47 pm

    Hi Rob,
    You offer a lot of great information. I would be interested in your list.

  42. By MarkR, August 25, 2011 @ 12:05 pm

    Hi Rob,

    Good blog, just discovered it today. I’ve been doing BPO’s in my area for 3 years, lisitng for just about 1 year, have gotten about 5 listing assignments over the last year, closed 4 so far, but want to get more business! I’ve gotten some through res.net, GoodmanDean directly, and recently joined LAMCO as well. Can I get your asset mgr/co. list, I’m sure there are some I’ve missed. Thanks!

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