I found my niche as a real estate agent in the REO world. REO stands for real estate owned and is what banks call their foreclosures. As a young agent, I tried the traditional way of selling houses, but it was not a good fit for me. Part of the problem was me and being unwilling to get out of my comfort zone. When I found REO, I loved it! I was able to work with systems; there were very little emotions involved; and almost everything could be done over email. I went from selling 20 houses per year as an agent to selling over 200 per year. I was making great money, loved the business, and created a team around that business. I also love to flip houses and have been flipping for the last 15 years. When I was going strong in the REO business, flipping took a back seat. However, when I created my team and was able to take some of the workload from myself, I was able to focus on the flipping more. I built the flipping business up, and then the REO world changed dramatically. There were no more foreclosures and not more REOs. I was glad I had built up the flipping business, and now I can look back and see which business I enjoy more. From where I am sitting right now, I love flipping, and I would be happy if I never listed another REO property.
Why did I love listing REO properties for banks?
As a real estate agent, I started out working with traditional buyers and sellers. I would hold open houses; I searched for the best way to find leads online; and I worked with friends and family. I sold houses, and I made a decent living. However, I know I could have done much better if I would have put everything into the business. I grew up as an introvert, and it took me a long time to overcome my natural tendencies to not talk ever. Not talking does not work well if you are a real estate agent; however, I still forced myself to talk to people and sell houses. Looking back on my career now, I could have sold a lot more houses if I would have just followed those who had succeeded before me. Real estate sales is not rocket science. If you can do a few things, you can be a successful agent.
I accidentally found the world of REO when an asset manager called me up and randomly asked if I could do a BPO. I was not sure what a BPO was, but I looked into it and agreed. A BPO is a broker price opinion and is like an appraisal but is completed by a real estate agent, but it’s not as detailed as an appraisal. I completed the BPO and then looked into BPOS and REOs. When you complete BPOs, they are usually used to value foreclosures that banks get back when the owners can’t make the payments any longer. There was actually an REO agent in my office at the time, but I never paid much attention to what he did. After learning about REOs, I was really excited. I worked for my dad at the time, and I was telling him how great it would be if I could list REOs. I could even tell the banks we would buy the houses from them directly if they did not want to list them and wanted to sell them fast. I was wrong about that: it is a big no-no to buy your own listings as an REO agent.
I got out of my comfort zone big time to become an REO agent. I cold called every bank that I knew had foreclosures and asked them how to list their properties. Many of the banks did not give me any useful information, but a few did. I learned that I needed to sign up with the asset management companies, not the banks. I signed up with asset management companies, joined trade organizations, took REO training, and I went all in. The more I worked, the more BPOs I was getting, and eventually, I got my first REO listing. I could not believe it when I read the email subject line. It said something like: new REO assignment. I opened the email, and it was a new listing assigned to me. I had no idea what to do, but they gave me a ton of tasks to complete. I needed to:
- Set up yard maintenance.
- Get the house rekeyed.
- Complete a BPO.
- Set up a trash out.
- Get the house cleaned.
I was young and motivated, so I thought I should complete the trash out, mow the lawn, and do as much work as I could. Later, I learned that I was not supposed to do any of the work myself. In fact, I was prohibited from doing it. Oops. I sold that house, and I started to get more and more listings from different companies. It was a lot of work, but I loved the work. I did not have to hold open houses, show houses to buyers, call cold leads, or talk to strangers all day. I could do almost all of my work through email,.I got to drive around all day, and I had a steady income from all the BPOs I was doing, let alone the REOs. I built the business up more and more until I got the HUD account. Then I was selling 200 REOs per year, working for more than 30 different banks and asset management companies, and having a blast.
How did the REO business change?
Being an REO agent was not all fun and games. There were problems with the business as well:
- I had to drive a lot, sometimes hundreds of miles per day.
- There is a lot of busy work involved with the paperwork, BPOs, contracts, and listings.
- I had to front a lot of the costs for the repairs and maintenance on houses. Sometimes, I did not get paid back and even had to pay fees to get paid back!
- There are very strict timelines you have to complete work within. I could not take many breaks from work.
- You have to deal with some very large corporations and politics.
- Some of the asset management companies and banks kept reducing commissions and fees they paid on BPOs.
Even with these challenges, I still loved the business, especially HUD. I was an awesome HUD agent, did training for other agents, traveled to meet my asset managers, and did my best to promote HUD. One problem with HUD was they would re-bid the HUD contracts every few years. I was really tight with a couple of the HUD companies, but a few years ago, one company was given all the HUD listings. That company was Pemco, or Sage when they renamed themselves. I was the only agent approved by them within 30 miles of my market. They would not give me listings. They could not communicate with me, and they did a much worse job listing their houses than the other companies I had worked with.
Pemco/Sage had an agent that listed houses in my area who was 55 miles away. The rule with HUD was that agents needed to be within 30 miles if possible. This particular agent claimed his broker was 5 miles away from me, even though the office he hung his license with was 55 miles away and not associated with the other office. I have no idea how Pemco allowed this, but they did. I was hesitant to do so, but eventually, I mentioned this fact to them, and they never responded to any of my inquiries.
This all happened when REOs started to disappear from our area. I was disappointed in Pemco, but it was not the end of the world because I could see REOs were not going to be a huge part of my business. I stopped going after REO listings, stopped going after BPOs, and I focused on my own investing. I had control over what I bought, rented, and flipped. I did not have control over what REO listings I did and did not get.
How did I evolve out of the REO listing business?
When I was selling a lot of REO listings, I was doing other things as well. I was flipping houses and building my real estate team. While I was not the most amazing traditional real estate agent when I was younger, I knew how to sell houses. I knew how to teach people how to sell houses, and I became a better agent as I got older. I created a team of traditional real estate agents, and I focused on my own investing. I did not think foreclosures would almost completely disappear as they have in Colorado, but I guess it was smart of me to expand my business.
I can say that there is much less stress in my life when I have complete control over my business. I am not relying on a corporate company to determine what listings I do and do not get. If I make a mistake when I flip houses (which I do often), it is all my fault. I take complete responsibility, and I know I can fix it in the future. While I loved listing REO properties and HUD homes, I do not miss it. I love the way my business runs now, and I did not update my real estate information with the REO companies I had previously worked with for 2018. Every year, I had to update my E and O insurance, my license info, and my liability insurance with every company I worked with. I am still getting emails from companies telling me my information is not updated! I also renounced my HUD listing broker status, which allows me and my office to buy HUD homes now.
Another thing that being an REO agent was holding me back on was starting my own office. When you work for asset management companies, most of their agreements are with the managing broker of an office, not the agent that lists the houses. If I would have started my own office at the height of my REO business, I may have lost many of my clients. Now that I do not care about REO listings, I am free to start my own office, which I am doing.
In the height of the housing crisis, we were seeing from 30 to 50 houses going to the foreclosure sale every week in our county. Over the last couple of years, we have seen from 0 to 5 properties going to the foreclosure sale. Most of those houses are bought by investors and never become REOs. Even if I wanted to be an REO agent right now, there would not be much work at all. Luckily, I like my new job better, and even if foreclosures come back in force, I will be fine flipping houses and working on my office.