RISMEDIA, March 9, 2009-I’m often asked by brokers and agents where we see foreclosures heading, and what it takes to be successful in a market seemingly dominated by distressed properties. I’ll try to address five of the most popular questions I receive in this column. First of all, we’re not nearly at the end of this foreclosure cycle. While the number of new foreclosures might peak this year (if everything goes right), we’re still going to be dealing with near-record numbers of foreclosures being processed and then with a massive inventory of bank-owned properties throughout 2010 and into 2011. So any Realtor not playing in this space is going to miss numerous sales opportunities.
Second, in the harder-hit areas (California, Nevada, Florida, Arizona, Michigan, Ohio, etc.) most of the sales for 2009 and possibly 2010 are going to be distressed properties. So Realtors not in this part of the market may wind up with virtually no opportunity to succeed until after the market has turned around.
Third, to fully maximize this opportunity, Realtors are going to need to develop new sets of skills. For listing leads from distressed homeowners, they’ll need to understand the foreclosure process in their state, and find out what options might be available for homeowners looking to avoid foreclosure.
They’ll need to learn how to successfully conduct a short sale-which will include learning about the loss mitigation processes deployed by the lenders and loan servicers. They may need to rethink their compensation strategies. We know agents, for example, who forgo the standard commission-based compensation, and instead use the RealtyTrac website to find and present buying opportunities to their clients who are investors. They get paid based on the deals themselves (and often get the listing contract for the subsequent resale).
Fourth, Realtors wanting to get into the REO business need to learn (or rent) other skills. They have to become experts at creating BPOs (broker’s price opinions). They need to become experts at property management and cash management (on average, it takes about $1,500 out-of-pocket per property to get an REO ready for sale). And, of course, they’ll have to be good at marketing these types of properties.
Finally, this market presents a once-in-a-lifetime opportunity to do well by doing good. Executing a successful short sale spares a homeowner from going through a foreclosure, saves banks tens of thousands of dollars in processing charges, gets a buyer into a home below market value and earns the agent a commission.
No one loses. Getting a family into a vacant REO helps the bank, the buyer and the neighborhood-there’s nothing that drives down property values or is more of a safety risk than a vacant, boarded-up home in the neighborhood. Realtors today have a unique opportunity to begin to heal neighborhoods and communities, and get the economy back on its feet one household at a time.
What questions do you have about foreclosures? E-mail email@example.com and we’ll address them in future columns.
Rick Sharga is senior vice president at RealtyTrac.
For more information, please visit www.realtytrac.com.