In most areas of the country REO inventory is down and REO agents have very few properties to list and sell. I am a REO broker and I am still listing many REO and HUD homes, but my inventory is down as well. Many agents may think it is a waste of time to try to start listing REO properties in 2014, but now may actually be the perfect time to start listing REO homes.
I have been a REO agent for almost 7 years and I have sold over 400 REO and HUD homes the last three years. Being a REO agent has transformed my real estate business and I love it. If you want to become an REO broker or complete BPOs check out my REO and BPO starter kit.
What is a REO property and REO agent?
REO stands for real estate owned and is a common term banks use to describe properties that have been foreclosed on that the bank now owns. Banks typically use real estate agents to sell their REO properties. For more information on what a REO agent does check out my complete guide on how to list REO properties.
Why is REO inventory low?
REO inventory has been decreasing for the last few years. The main reasons REO inventory has been decreasing is the economy has gotten better and house prices have increased. When sellers get behind on their payments and have no equity there is little motivation to catch up on payments when they fall behind. When a person has equity in their home they have a reason to make payments or sell their home. With prices rising across the country it makes sense that REOs have decreased, because people have more motivation to keep their homes.
There are many other reasons REO has decreased:
- Banks are selling bulk packages of REO properties to investors
- Lending guidelines have gotten much stricter and there are less sub-prime loans
- Banks are more willing to complete short sales
- The government has promoted loan modifications to help homeowners avoid foreclosure
Why would it be a good time to become a REO agent when REO inventory is low?
When there were a lot of REO properties, there were a lot of real estate agents trying to get REO listings. There was an incredible amount of competition, and it was very difficult to become a REO agent even with a lot of REO inventory. Now that there is less REO inventory, there are much less agents trying to become REO agents and many REO agents have retail agents.
When there was a lot of REO inventory, the asset managers who handle the properties for the banks were swamped with work. They didn’t have time to hire new agents unless they had too. Now that there is less inventory, the asset managers have time to talk to agents and possibly add new agents to their network.
It takes time to become a REO agent
Listing REO properties does not happen overnight. It takes time to build up business and working with one bank is usually not going to give a real estate agent enough inventory to be successful. The best way to get into REO is for banks and asset managers to see your name and face at conferences over and over. The sooner you start marketing yourself as a REO agent, the sooner you will get REO listings.
Are banks hiring new REO agents?
If an agent calls a bank or asset management company and asks how to list REO properties, the bank will say our network is full and we aren’t hiring new agents. This is how the bank weeds out who is serious and who is trying to get some easy listings. I started listing REOs in 2007 and almost every company or bank told me they weren’t hiring REO agents. Yet, I have listed REOs for over 35 companies even after they said they weren’t hiring new agents, so don’t believe them! Banks are always looking for new agents because their current agents are retiring, changing professions or screwing up. Banks are also looking for agents to cover rural areas, because there are usually very few if any REO agents in rural areas. Many times REO agents from 30 miles or further are asked to cover rural areas. Banks are always hiring new REO agents no matter what they say.
Will REO inventory increase or decrease in the future?
The amount of foreclosures in the United States is constantly changing. REO inventory goes up, goes down, then back up again. Even though REO inventory is down now, there is a very good chance it will be increasing again. The big question is when will it increase? 6 months, a year, two years or longer? The sooner an REO agent starts pursuing business from banks, the better positioned they will be when REO inventory comes back. No one really knows what will happen; two years ago many REO experts predicted we would be hit with a tsunami of REO inventory and REO inventory actually went down.
When will REO inventory increase?
There are varying opinions on when REO inventory will come back. I go to many REO conferences a year, and some people say it will increase this year (2015), others say it will continue to decrease and some say it will not increase for years. There are signs that the REO inventory will be increasing.
- Sub-prime loans are making a comeback. Sub-prime loans are where most foreclosures come from, they disappeared for a while, but they are back!
- Housing prices have increased significantly. This has allowed many underwater owners to be able to sell their homes and decrease foreclosures. Higher prices also mean people are paying more for homes and if prices stop rising or decrease again, then we will have many underwater owners again. The last housing crisis was created by many people buying homes at very high prices.
- The foreclosure process is proceeding faster in many states. Many states have a foreclosure process that take years to complete. That slowed down foreclosures, but those processes are speeding up. This will actually increase foreclosures now in some states like Florida, New York and Massachusetts.
- Foreclosures are still going strong in many areas of the country. The Midwest is still seeing a high number of foreclosures even though they are down in many parts of the country.
- FHA wants to lower the FICO score requirements for borrowers.
There is still a great opportunity for REO agents
It takes time to become a successful REO agent. The sooner you start moving towards becoming a REO agent, the better place you will be in to benefit from selling REO properties. Take a look at my REO starter kit if you are thinking about listing REOs or doing BPOs. I have learned a lot about how to list REO properties and I share my techniques in the REO starter kit. If you are an investor we may start seeing more REOs in the future, the question is how long will it take.