Last Updated on December 17, 2019 by Mark Ferguson
Deciding to become an REO and HUD listing agent was not easy for me, but it was one of the best decisions I ever made. Before I was an REO agent, I struggled to find my niche in real estate. I did not like showing houses and calling people I did not know. Selling REO properties for banks provided me with a way to make money selling houses without cold calling people or even showing houses to buyers. I created a steady stream of business listing services from banks, and I eventually began listing HUD homes as well.
I have sold over 500 houses over a three-year period thanks in most part to REO and HUD listings. I was able to hire an assistant, and then I hired another assistant, and my career took off. I now own a real estate brokerage (Blue Steel Real Estate), own 20 rental properties, and complete 15-30 fix and flips a year. There is no way I could do all of this without finding my niche in real estate through listing REO and HUD homes.
How hard is it to become an REO or HUD listing agent?
Becoming an REO listing agent takes time and hard work; it will not happen overnight…or in one month…or maybe even a within year. It took me about six months to start getting REO listings after I first decided to go after the business. It took me about two years to get enough listings to know I had found my niche and could focus my career on REO. Not only does it take time to become an REO agent, but it also takes work. You have to be willing to handle rejection because this is a very competitive field. You have to be persistent. and it will cost money to get started. The key to being successful as an REO agent is networking, going after the right companies, and not giving up.
Below is a video of me heading to a new REO assignment.
What is an REO property?
REO stands for real estate owned and is the term banks use to describe homes they have repossessed through foreclosure. A home goes through foreclosure when a homeowner stops making payments or gets behind on payments on the loan they have on their house. In some states, it can take a few months to foreclose, and in other states, it can take years. Once a home goes through the foreclosure process, the bank owns the home and can sell it. An REO agent is a listing agent who sells REO properties for banks and asset managers. The asset manager is the main contact between the listing agent and the seller.
HUD homes are foreclosures that the government owns. They went through foreclosure but they had FHA loans which the government insures. The government often, but not always, takes back FHA loan foreclosures.
How did I become an REO 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, yet 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.
I highly recommend Real Estate Express to get your license. Real Estate Express offers classes in most states and has some of the lowest prices for real estate classes. Mulitple agents in my office have used them and love it.
How does a real estate agent handle REO listings?
I used to sell a lot of REOs. When I receive an REO listing, I get an email that says “new REO assignment” or something to that effect. All the instructions are in emails, an attachment, and online. I rarely talked on the phone to the bank or asset management company who sent me the listing. Almost all of our communication was through email, and I got a steady stream of listings without having to cold call, hold open houses, send out mailers, or make sure I am available to answer every single incoming call.
I also completed many BPOs (broker price opinions) for banks and asset management companies that also require very little contact. I received the BPO order, complete the order, get paid $40 to $100, and move on to the next orders. It is not just me that prefers to complete work online with minimal distractions: most banks prefer email and quick communication as well. Once I got into the REO and BPO world, I knew I had found the perfect fit!
Over a three-year period, I sold over 400 REOs and HUD homes. I have been a Realtor since 2001, and I specialized in REO from 2008 to 2014. I survived as a traditional Realtor, but I excelled as an REO listing agent. Like most things that are rewarding, it is not easy to list REO properties. It takes time, persistence, money and hard work to become an REO broker. If you are able to put in the work needed to become a successful REO broker, the money is great and the freedom of being a real estate agent is hard to beat.
How much money do REO agents make?
The amount of money you can make when you list REO properties is highly dependent on experience and work ethic. I sold from 100 to 200 REO listings a year multiple years in a row. The average commission I received from banks on an REO property was around 2.5 percent, and HUD pays listing agents a 3 percent commission. My average sales price was about $120,000, which means I made more than $400,000.
Remember—that is not all profit. I have to pay staff, registration fees, marketing, office bills, insurance, and money to my broker. But even after expenses, REO listings offer an incredible income. That is just the money I made off the REO listings themselves, which does not include other houses I sold or BPO income. It is much easier to sell traditional houses and run a real estate team when you list that many properties. I earned hundreds of thousands of dollars a year in profit from my REO business, and REO listings also provide great leads for buyers.
I make money in many other ways besides the REO properties I list. I also complete 1,000 fee BPOs (broker price opinions) per year. Those BPOs average about $50 per BPO and add another source of income on top of the REO income. I don’t complete any fee BPOs myself, I have my staff handle them as I simply don’t have time to do everything. If you want to list REO properties, you will have to hire help at some point to handle the work and keep you from going crazy.
There is another source of income when you list REO properties. When you have a lot of listings that are priced well, like HUD and REOS usually are, you get a lot of buyer leads. We have buyers calling us all the time on the properties we have listed. I don’t handle buyers myself, but I do have agents on my team who I give those leads to. When they sell a house, I get a cut of their commission.
Investing in real estate and being an REO agent
A lot of people assumed I had a huge advantage as an investor when I was an REO agent. They thought I got first dibs at the houses I listed. The truth was the exact opposite. I was prohibited from buying any of my own listings and even prohibited from buying any properties from some companies I worked for. I was not allowed to buy any HUD homes, and neither was my family or even other agents in my office!
What does an REO broker do?
REO stands for Real Estate Owned and is the term banks use to describe properties that went through foreclosure and the banks own. Many traditional agents tend to think listing REO properties is a pretty easy job: get listings, put them in MLS, submit offers, and collect a check. The truth is when you list REO properties, it is a lot of work! Working with banks is much different than working with a traditional seller. REO brokers are working with out-of-state sellers who never see the property. We have to be the eyes, ears, and nose for the seller. Here are some of the items you have to do when you list REO properties.
1. Drive a lot to inspect the properties
An REO agent has to constantly inspect properties. Most likely, the properties are vacant and have a better chance of being vandalized than an occupied property. Most banks and HUD (department of housing and urban development) require weekly inspections on properties. They also require an initial inspection to be completed on the property with 24 hours of the property being assigned.
2. Handle maintenance and repairs
When you list REO properties, the banks will expect you to hire contractors to maintain properties and complete any repairs. This includes re-keys, winterization, yard maintenance, and in some cases, full rehabs. When doing certain repairs, we have to get at least two bids, and sometimes three, before the work can be done. If the work is going to cost more than the bid, we have to get prior approval before any additions can be made. We are not allowed to use any friends or family for the work being done.
3. Front a lot of money
Many banks also expect the REO agent to pay the contractors for any work done. The REO broker then has to submit invoices with proof the work was done (before and after pictures) to the bank and wait for the bank to reimburse them. An REO agent can have $10,000 or more in outstanding invoices per property! Many REO brokers have problems with banks not paying back reimbursements in a timely manner or at all. We have to keep very good track of invoices and make sure we are getting paid back. Some banks even charge us processing fees for paying their bills for them.
4. Handle repairs and maintenance
Banks require an REO agent to be knowledgeable about the repairs needed on a property and the cost to repair. Whenever I receive a new assignment, I have to walk through a house, note any items that need to be repaired, take pictures, and then calculate the cost of those repairs.
5. Take a lot of pictures!
I have to take pictures of everything! I have to take pictures of every room, each exterior side, the yard, address, street scenes, and sometimes, neighboring properties. Most pictures have to be date stamped, but listing pictures should not be date stamped. I literally have thousands and thousands of pictures on my computer.
6. Know how to complete BPOs
A BPO, is a broker price opinion and is like an appraisal but performed by an agent. A BPO consists of sold comps, active comps, subject details and commentary explaining all about the subject, comps, and values. The banks require comparable properties to be within a certain age, square footage, and distance from the subject. They also prefer similar bedroom count, style, and condition. Many forms will also require adjustments to be made for any differences between the subject and the comps. Whenever I list REO properties, I also have to complete a BPO on the property.
7. Know how to handle cash for keys and evictions
One of the most difficult jobs when you list REO properties is completing cash for keys and evictions. Cash for keys occurs when a bank forecloses on a property but the previous owners or tenants still live in the property. The bank will usually offer the occupants a certain amount of money to move out in a certain amount of time. Many times they will offer twice the market rent for a property to move out in 30 days.
When the occupants move out, they have to take all personal belongings and clean the home. If they do not clean or remove everything, the REO agent is not supposed to pay the occupants. If the REO agent does pay the occupants and the home is not clean, then it is possible the bank will charge the agent for cleaning! If a cash for keys agreement can’t be worked out, the bank will evict. The REO broker has to coordinate the eviction with the sheriff and clean-out crew. The REO broker has to be there for the eviction and to oversee everything.
8. List a lot of properties
Finally, we get to list REO properties! When we get a listing from the bank, they give us 24 hours to list it in MLS and send the MLS sheet back to the bank. Most banks have certain wording they want in MLS to convey to the public or other agents. We are supposed to write a detailed marketing description and treat the listing as if the bank were a traditional seller who wants the home portrayed positively. We have to upload multiple pictures, room measurements, and other pertinent information. Some banks will require the sign and marketing materials (flyers) to be at the property and pictures sent to the bank within 24 hours of the listing agreement being sent.
9. Submit a lot of offers
If a home is priced right, we usually get offers right away, and we sometimes receive multiple offers. The seller loves multiple offers because they can try to get people into a bidding war. The REO broker sees a lot of work ahead when there are multiple offers. With each offer, the agent has to submit either the entire offer or the terms of the offer to the bank depending on the system the bank uses. Once an offer is submitted, we wait for the bank to respond, and we convey that to the buyer’s Realtor. When we get multiple offers, we have to submit those to the bank then send out a multiple-offer form to all agents involved. We then wait for new offers to come in and resubmit all the offers again. Depending on the system the bank uses, it can take from 5 minutes to 20 minutes to submit an offer. It is really fun to submit 25 offers on a property!
10. Handle inspections and appraisals
With many banks, the REO broker is responsible to get the water and all utilities on for inspections and appraisals. We have to meet the city or utility company, get everything turned on, and then have the property re-winterized if it is during the winter months.
11. Know about closings, loans, etc.
During the under-contract phase, the listing agent has to update the bank on the buyer’s loan process, inspection, appraisal, and any other issues that come up. If there are appraisal requirements, inspection requirements, or lender problems, we have to communicate with the bank and buyer’s agent and come up with solutions. Many banks won’t make repairs, even for appraisal requirements. In those cases, the home goes back on the market, and the entire process starts over again.
12. May or may not be at the closing
We made it to closing! Some banks require the REO broker to be at closing, and some do not. I prefer not to be there due to the time it takes since my closings range from across the street to 50 miles away. I can also do more to solve a problem at my desk in the office than I can at closing. After closing, we have to get our lockbox, sign, take utilities out of our name, and get all invoices into the bank ASAP.
13. Have to work on strict timelines
The last thing to know and the most important when you list REO properties is the bank’s timelines. Each bank has different requirements for when tasks are due, but it is very important that the tasks are completed on time. I usually get 24 hours for the initial inspection, 48 hours for BPOS, 24 hours for MLS sheets, 72 hours for HOA info, and there are many, many more tasks. If you do not complete tasks on time, the bank will find someone who does. There are a lot of agents looking to get into REO, and the banks do not have to look far to find a replacement.
15. Have to teach other agents
Yes, I am also a teacher as well as a lister of REO properties. As a HUD listing broker, I am required to teach at least one class a month to agents, buyers, and the public. My classes for agents are actually approved for continuing education credits for real estate agents. One of my biggest jobs is teaching agents how to submit offers through the HUD system.
16. Have to communicate well
Communication is huge for an REO broker since we are on call 7 days a week. Asset managers will call or email us at all times of the day and on the weekends if they need something. It is expected that we get back to them within the same day if not within a couple of hours of when they contacted us. There are many weekends that I am working because I received a new assignment on Friday or Saturday night. I have 24 hours to complete tasks, not 24 business hours. I also have many buyers and agents contacting me all the time. I have to be good on the phone, even though I try to get people to email me as much as possible.
What are Broker Price Opinions?
It is important to know what a BPO is. BPO stands for broker price opinion, and all REO agents must know how to complete them. A BPO is like an appraisal but less detailed, and you do not have to be an appraiser to complete one (in most states). Completing a BPO is part of the job when listing REO properties for banks, and the better you are at BPOs, the more likely it is you will get more REO listings. A BPO helps a bank decide what a property is worth and what they should list it for. There are also companies that pay agents to complete BPOs, but these BPOs may or may not lead to REO assignments. These BPO companies will pay from $30 to $150 for each BPO.
I completed over 1,000 BPOs a year at one time, and it was a great secondary income source for me. To complete a BPO, you have to take exterior photos or interior and exterior photos of a house. You have to complete a report on the house, which takes me or one of my assistants about 30 minutes. When you first start doing BPOs, it may take much longer to complete a BPO. Not only can completing BPOs help you earn extra income, but they can also help you get REO listings.
Some banks will have fee BPOs and REO listings. When they need a new agent to list REOs, they will look at who is doing BPOs for them first. When you complete BPOs for fee-based BPO companies that do not have REO listings (these are often called BPO mills), you still may get exposure to banks. Those BPOs are eventually seen by the banks and asset management companies, and they will see your name as the person who completed the BPO. When I started in REO, I signed up with every BPO company I could and completed every BPO that was sent to me.
How do you start listing REO or HUD properties?
The tricky part about listing REOs is most banks and asset management companies want experienced agents to list their properties. That means the bank want agents who have listed REO properties in the past. How do you start listing REO properties if the banks and asset management companies only want agents who have sold REOs?
Eventually, agents who have never listed REOs will have to be hired because experienced REO agents retire or quit the business. There are ways to get experience with REO and HUD properties without listing them. To get experience with REO properties, you have to sell REOs and HUD homes to buyers. The more REOs and HUD homes you sell, the more experience you will have working with banks. The more BPOs you do, the more experience you will have as well. A bank is much more likely to use an agent who has experience with BPOs than someone who does not. It is not easy to break into the REO business, but if you have experience with BPOs and selling HUD homes and REOs, it will be much easier.
Before you start trying to get REO listings, you have to be prepared
If you call up a bank or asset management company and ask for an REO listing, there is a good chance they may not talk to you, but if they do, you have to be prepared. They will want to know what experience you have, they will want a resume and they will want a copy of your E and O insurance, real estate license, W9, and other documents. You want to have all this information ready to go in an REO packet.
I have spent years perfecting my REO packet, and I have different configurations depending on what client I am targeting. When HUD asked me for an REO proposal a few years ago, my completed packet was about 50 pages long! Other banks may want a simple resume, and some will want much more. You have to be prepared with at least the basic documents and insurance requirements if you want REO listings. When you do get an REO listing, you also have to know what you are doing. Banks and asset management companies have strict deadlines and expect quality work and fast communication. The last thing you want to do is get an REO assignment, have no idea what to do, and lose the client.
Below is a video of me going to a HUD assignment.
How do you find banks, asset management companies, hedge funds, and other companies?
There are many websites, many REO organizations, many banks, many asset management companies, and many hedge funds in the REO industry. Most of the websites will claim to get you REO listings simply for signing up and paying them. These sites are mostly worthless, but a few are worth spending money on, and a few more are free.
I signed up with one site when I started that allowed me to work with three new clients in my first year just by being on that site. I also belong to multiple REO groups that do charge and some that do not. There are many asset management companies that have listings and many that do not or have gone bankrupt since the last crash.
There are some unscrupulous companies that claim to have listings that do not and will rip you off. There are many tricks I have learned over the years to find the companies that do have REO assets that will help you get listings and how to avoid the bad companies. Unfortunately, I cannot disclose that information on a public website because many of those companies do not want that information made public (the good and the bad). In my REO and BPO starter kit I include the 35 + companies I list REOs for and many other companies I know have REO assets. I also include a list of the BPO companies I work with that you can sign up with. I discuss how to put together an REO packet, how to contact asset managers, and how to get your name seen over and over in the industry.
Why would it be a good time to become an REO agent when REO inventory is low?
I was selling REOs when there were a lot of foreclosures. 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 an REO agent, even with a lot of REO inventory. Now that there is less REO inventory, there are much fewer agents trying to become REO 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 to. Now that there is less inventory, the asset managers have time to talk to agents and possibly add new agents to their network.
Listing REO properties does not happen overnight. It takes time to build up the 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 an 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. A few years ago, many REO experts predicted we would be hit with a tsunami of REO inventory, and REO inventory actually went down.
Why did I stop listing REO properties?
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 busywork 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.
While 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. Fair or not, this completely frustrated me an made me realize how little control I had over my business.
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 and 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 did
It is not easy to get into the REO business. It takes hard work and time to start getting listings. It takes even more hard work and time to get a lot of REO listings. It is true that REO is down in most parts of the country, but this may be the perfect time to start listing REO when there is not as much competition. REO always moves in cycles; it may be down now, but it will be back again. If you want some help breaking into the industry, I suggest you check out my REO and BPO starter kit.