THE REO BOOM: IT’S NOT JUST ABOUT LISTINGS
With a record number of REO home sales expected in 2009 – and after over twelve billion dollars recorded in REO closings in 2008 – it’s clear that REOs continue to be the most attractive and thriving segment of the real estate market.
Whether you’re already an REO vendor or just someone who wants to start getting a piece of the REO pie, keep in mind that handling REO listings is only one way to generate income from the incredible number of foreclosures on the market. It’s true it’s the most lucrative, but there are a lot of other ancillary services needed by the lenders and asset managers who now find themselves having to manage an overload of abandoned homes.
First of all, the lenders need Broker Price Opinions (BPO’s) to be done. BPOs are different than appraisals, as they’re cheaper and not as time-consuming – which makes banks stuck with REO properties very happy. In some cases, the lenders will only request a drive-by BPO – meaning the BPO provider won’t even enter the home to offer a price opinion.
You won’t become a millionaire just by doing BPOs, but once you’re in the loop, it’s a good steady stream of income, especially for the REO beginner. And keep in mind, BPOs can lead to having actual REO listings assigned to you – lenders often test REO newbies by having them perform BPOs, to see how professionally they handle them.
The other major money-making category for REO homes is “property preservation,” a great category of business for builders and contractors suffering from the economic pinch.
You have to understand that REO Sellers are absentee owners – often located thousands of miles away – but still responsible for the maintenance and upkeep of hundreds of thousands of properties. They MUST outsource all work on the property to local providers.
Working against that is the fact that REO homes are often not in good shape when the lenders end up with ownership. Frequently, the former owners haven’t bothered to maintain the place during their final weeks of residency – and may even trash the place on the way out the door because of their anger and frustration. Not only that, the house, because it usually has been uninhabited for an extended period of time, is vulnerable to break-ins and vandalism.
The banks need to have REO homes “ready for market” – which means they need someone to do the minimal repairs and upgrades necessary to put the house in a reasonable condition for sale.
Think this is not an income-generating business? Think again. The average property preservation fee paid to a contractor is roughly $1,350 per property – and it’s not uncommon for a two man crew to complete two jobs per day! $2,700 a day for two guys, a truck, a trailer and some common tools? Not a bad paycheck for one day!
At my REO website, www.ASREOS.com , we have lots of REO information as well as a members-only forum where you can find out more about REO money-making opportunities. We also have an exclusive database of over 600 REO sellers and 32 companies that pay contractors for property preservation services.
This is the time to get in on the action – because it’s hard to imagine a better time to be in the REO business.
