If you’re already an REO agent or want to become one, there’s one important thing you have to do to receive a continuous stream of REO listing assignments and BPO orders. And that’s to strive to submit on time, every time, a 100% accurate and complete BPO (Broker Price Opinion).

For those of you unaware of what a BPO is, it’s a tool used by lenders and mortgage companies to value properties in situations where they believe the expense and delay of an appraisal is not necessary – BPO’s are used extensively on foreclosures. REO agents and brokers are assigned to do them by the lender or asset management company, and it’s also a common entryway to actually being awarded REO properties to sell.

Doing an accurate BPO can be tricky and difficult, however, when you adjust the price of the foreclosed property against active and sold comparable properties in the gross living area. This is one of the first things the asset manager or the quality control manager is going to review when they’re auditing your BPO.

If your adjustments aren’t consistent and on the money, then you’ll be asked to do it all over again – and your quality control score will suffer. There’s a way to avoid that unfortunate situation – by using the formula below to accurately calculate the adjustment.

Step # 1: Add the sales price of all three of your sold comparables:
For example, $900,000 + $870,000 + $800,000 = $2,570,000

Step #2: Add up the square feet (above ground – do not include the basement, if there is one) of all three sold comps.

Example: 4,000 sq. ft. + 4,500 sq. ft. + 4000 sq. ft. = 12,500 sq. ft.

Step #3: Now, divide the total combined sales price of all three by the total square footage of all three.

Example: 2,570,000 from Step #1 divided by 12,500 from Step #2 = 206.
This determines your average price per square foot in the area: $206.

Step # 4: Determine your adjustment value by multiplying that average price by .25.
Example: $206 x .25 = $51.

So $51 is the amount you would use to adjust for the variance in square feet between the subject property you’re doing the BPO on and your comps.
Here’s how you use that number. Let’s say the difference in square feet between the subject property and the comp is 500 sq. feet in this particular scenario. That means you multiply that 500 by $51 – which equals $25,500. That is your adjustment figure.

So if the comp is bigger, you would make a negative adjustment by subtracting the $25,500. If it’s smaller, then you make a positive adjustment and add $25,500.
Keep in mind that you are trying to “equalize” the indicated value. Let’s continue working with the $51 per square foot adjustment figure we calculated above. Let’s say your comp is 3,800 sq. ft. and, again, your subject property is 4000 sq. ft. The difference is 200 sq. ft. We multiply that by the $51 and raise the indicated value of it by $10,200.

By making this adjustment, we are saying that if the comp were 200 sq. ft. larger (equal in size to our subject), that it would have sold for $10,200 more than it actually did sell for.

You can get more tips like these from the national trade association ASREOS, the American Society of REO Specialists, which is an important resource for those wanting to work in the incredibly lucrative REO industry. Find out more by visiting www.ASREOS.com.

The foreclosure crisis is incredible enough – already offering amazing opportunities for REO agents and brokers. But now there is finally some sunshine lighting up the so-called “shadow inventory” of foreclosure properties that have yet to be officially recorded or to become part of the massive amount of REO listings currently for sale all across America.

Real estate data and records company First American CoreLogic estimates this shadow inventory at 1.7 million homes as of the end of September 2009 – that’s 1.7 million more homes that should eventually find their way to become REO homes for sale (this report can be accessed at http://www.facorelogic.com/uploadedFiles/Newsroom/RES_in_the_News/FACL_Shadow_Inventory_121809.pdf ).

With 3 million official foreclosures already estimated to hit the REO listings in 2009, that means an incredible amount of potential profit for anyone interested in how to become an REO agent. The other astounding aspect of these numbers? Most experts think they’re too low.

In a blog posted at “The Wall Street Journal” online site on December 18th, 2009, analyst James R. Hagerty makes the point that First American expects that 68% of mortgages that are over 90 days late in payments won’t go into foreclosure. With today’s economy, that’s a huge assumption to make. Especially when another company, Lender Processing Services, estimates that 30% of the properties that have been in foreclosure for 12 months haven’t even hit the market yet. 30%!

Basically, that means there could be as many as 7 million potential REO homes that are still in this “shadow inventory.” Those are 7 million REO homes that will need agents and brokers who possess the proper training in dealing with REO properties.

Most people have heard of homeowners just walking away from their properties rather than go through the foreclosure process. Just to underscore the magnitude of the REO explosion, some banks are doing the exact same thing to their lenders, believe it or not. In San Francisco, the financial institution Morgan Stanley is giving back five office buildings it purchased a few years earlier from The Blackstone Group. It’s estimated the five buildings are now worth approximately half the value Morgan Stanley bought them for at the time.

2010 is going to be another huge year for REO sales, no matter how you look at the picture – and probably another record-breaker. REO homes also continue to be the hot real estate category that buyers are interested in, due to the value they provide.
The national trade association ASREOS, the American Society of REO Specialists, is an important resource for those wanting to enter this lucrative field – or for those already working in the REO industry.

In addition to providing invaluable REO training advice and essential tips on how to get REO listings, ASREOS, run by nationally-known REO expert Frank Patrick, offers its members the ability to post their online profile, searchable by zip code, which can be accessed by REO Sellers. ASREOS also features an exclusive database of financial institutions that control REO listings.

One of ASREOS’ most useful features is a members-only forum that allows REO professionals to trade inside secrets and tips to each other. Find out more by visiting www.ASREOS.com.

REO (Real Estate Owned) properties are currently the biggest-selling home category in America. And that’s a situation that’s not about to change soon.

For those of you who don’t know what REOs are all about, when a property goes through a foreclosure process, usually the financial institution that backed the mortgage ends up owning the home. That REO Seller then has the property cleaned-up, secured, repaired and put back on the market as an REO listing.

Most REO Sellers don’t really want to be in the home-selling business. They rely on professional REO agents and brokers to take care of all the groundwork. REO homes, of course, are very attractive to buyers because they are traditionally priced much lower than comparable homes being sold by the actual owners. Banks and asset managers are anxious to get REO homes off their books and close out the unpaid mortgage.

That’s why there’s an amazing opportunity for those interested in making money in the REO industry. While job losses continue to mount in America and traditional occupations suffer, the REO business is still booming and is likely to be for some time.

At the moment, delinquencies on mortgages still outnumber the amount of home loans being approved. It’s estimated that one out of four Americans are behind on their mortgages. And it’s also a fact that most first-time home buyers are buying REO homes.

The key to how to become an REO agent is to understand how to work with these REO Sellers. It’s a very different dynamic than working with “normal” real estate transactions, as you’re not dealing with the actual home owners. Rather, you’re working with large companies, many of them not even located in the same state as the REO property in question.

The main challenge is building up a professional and reputable image with these companies. Generally, the best way to build that relationship is to perform what are called BPO’s (Broker Price Opinion) on REO homes – it’s basically deciding on a sales value for an REO property. It’s not an official appraisal, and the REO Seller will usually gather a few on the same property to get a consensus.

A great resource for getting inside the REO arena is ASREOS, the National Association of REO Specialists, which offers all kinds of benefits to its membership, consisting of both REO veterans and beginners to the business. In addition to providing invaluable REO training advice and essential tips on how to get REO listings, ASREOS, run by nationally-known REO expert Frank Patrick, offers its members the ability to post their online profile, searchable by zip code, which can be accessed by REO Sellers. ASREOS also features an exclusive database of financial institutions that control REO listings.

One of ASREOS’ most useful features is a members-only forum that allows REO professionals to trade inside secrets and tips to each other. Find out more by visiting www.ASREOS.com.

One in four mortgages in Florida is either past due or somewhere in the foreclosure process. California foreclosures grew 22% this past October from the previous month – and are up 21% from the previous year.

And the biggest danger sign that the REO boom is very far from over? A new survey from the Mortgage Banker’s Association shows that the mortgage delinquency rate across the country is just about 10% – a record high since they began tracking this figure in 1972.

One final alarming figure – if you put together all loans either in delinquency or foreclosure, it breaks the 14% mark – also a record for the MBA survey.
This demonstrates that the surging unemployment is fueling yet a third giant wave of foreclosures that might end up being the biggest one of them all. For the most part, the homeowners that are now in trouble are homeowners with good credit and solid mortgages who are unable to meet their house payments because of sudden unemployment or under-employment.

The smart way to move in this kind of economy is with it, not against it – and to join the ranks of other REO agents and brokers who are cashing in on the enormous amount of REO properties that REO banks are selling with great success. Another statistic points that out – over 25% of all Americans who are in the market to buy a home want an REO deal. They know the price will be lower and they’ll be able to afford a larger home or one in a more expensively-priced area.

That means REO Sellers need more REO pros than ever before to help service and market their homes for them. To help meet that need, ASREOS, the American Society for REO Specialists, was created by nationally-recognized REO expert Frank Patrick in 2008. Patrick saw that the huge amount of REO listings was going to dominate the real estate landscape and that REO sellers would need a whole new army of REO agents with the proper training to handle the incredible amount of properties.

“There’s never been a resource like this for both beginning REO vendors and experienced ones that’s been run by REO professionals,” Patrick says. “Fortunately, I began specializing in the foreclosure niche years ago, before it was such a substantial portion of the housing market – so I saw the challenges that were coming before most people in the general real estate profession. I specifically created a trade association that was designed to hopefully meet everyone’s needs in every conceivable way.”

ASREOS’ array of exclusive member benefits include a members-only forum at Patrick’s website, Asreos.com, where ASREOS members can swap tips on how to get REO listings and deal with REO banks, post an online profile searchable by zip code so REO Sellers can find qualified agents instantly and easily, access to free interviews with top national REO agents, and other comprehensive resources. ASREOS also features an exclusive database of financial institutions that control REO listings.

Find out more about this thriving trade association devoted to REO training and education by visiting their website at www.ASREOS.com.

If you’re interested in training to be an REO agent, now’s a good time to start. REO sales continue to dominate in many states – and even in Southern California, half of all home sales currently are REO homes. In Las Vegas, that percentage is an amazing 67%, according to MDA DataQuick.

Not only that, but foreclosures are beginning to spread into real estate markets that weren’t greatly affected at the beginning of the housing crash. Spikes in REO home listings from last year are reported in places like Boise, Idaho; Provo, Utah; and Salt Lake City, Utah. Foreclosures are up an incredible 98% year-to-year in Chico, California, according to RealtyTrac. Formerly stable areas such as these are now racked by unemployment, causing the skyrocketing of defaults and the increase in REO properties.

“You’re moving from Phoenix to Prescott, you’re moving from Las Vegas to Reno,” commented Rich Sharga, VP of marketing at RealtyTrac. “You are seeing that migration into secondary markets. You’re also seeing a migration into formerly stable areas and areas that have been wracked by unemployment.”

Another prime area REO agents and brokers are looking to get into is commercial property, which is set to become the next large REO stage. The total unpaid balance for delinquent commercial mortgages reached close to $32 billion in September – up an astonishing 583% in just one year. Analysts project commercial delinquencies will grow between 5 and 65 % before the end of the year – and to possibly shoot past 8% in the first half of 2010.

Foreclosures in general are up 23% from last year – indicating an increased supply of REO listings will continue to head towards the real estate marketplace. With REO properties expanding into the commercial area and into smaller, formerly stable communities, it’s clear that in months to come more REO professionals will be required, not fewer.

Helping that effort is ASREOS, the National Association of REO Specialists, which offers all kinds of benefits to its membership, consisting of both REO veterans and beginners to the business. In addition to providing invaluable REO training advice and essential tips on how to get REO listings, ASREOS, run by nationally-known REO expert Frank Patrick, offers its members the ability to post their online profile, searchable by zip code, which can be accessed by REO Sellers. ASREOS also features an exclusive database of financial institutions that control REO listings.

One of ASREOS’ most useful features is a members-only forum that allows REO professionals to trade inside secrets and tips to each other. Find out more by visiting www.ASREOS.com.

Foreclosure Filings Rise 32% Year-to-Year

REO properties will continue to make up a large part of the housing market for some time to come, judging by the latest foreclosure and mortgage data.

In July, foreclosures were up 7% from June – and 32% from July of 2008. 360,000 homes were in some stage of the repossession process and on their way to becoming REO listings. That’s one out of every 355 homes in America – and it marked the third month out of the last five that a new record was set.

While the usual states led the foreclosure numbers – California, Nevada, Florida and Arizona – there were also big jumps in states that hadn’t been experiencing big default rates – states like Oregon, Minnesota and Kansas. Experts say that’s because of the increasing effect of the jobless numbers.

This brings us to mortgage delinquencies, which hit an all-time high in the second quarter of this year. The number of mortgage holders who were behind 60 days or more on their payments was up 65% from the second quarter of 2008. Almost 6% of homeowners nationwide are having trouble – with Nevada having an astounding 13% delinquency rate.

The good news? As we reported last month, REO home sales are finally taking off – which means prices have hit the point where investors are actually anxious to get in on the available deals. That trend really caught fire in July – with California leading the way with REO sales, just as they led the way nationwide with the initial housing crash.

To cite one dramatic example, Stockton, the city with the highest foreclosure rate in the country, saw its home sales double in the second quarter – and about 40% of those sales were REO properties. In some cases, there were actually bidding wars on REO homes, according to DataQuick Information Systems.

This is great news for REO agents and brokers – house prices have finally fallen to a point where REO inventory is beginning to move in a big way. Ryan Ratcliff, an economist at UCLA, believes that discounts of as much as 50 percent will continue well into 2010.

The other good news is that there’s still plenty of REO inventory to come. Many foreclosure homes that haven’t been selling have actually been taken off the market and put up for rent. The result? A lot of vacant rental homes! Those will undoubtedly be put back on the block – and with buyers finally reentering the real estate market in search of deals, they will finally have a shot at selling.

ASREOS, the first national trade association for REO professionals founded by REO experts, offers its member agents, brokers and other REO vendors exclusive and high- value tools to help them gain the competitive edge in this burgeoning market with moneymaking advice and information, including a members-only forum, interviews with top-performing REO agents, access to an exclusive REO seller database and the ability to post a professional online profile that’s searchable by zip code. Find out more about this excellent REO resource at www.ASREOS.com.

Experts Predict Elevated Levels of Foreclosures for Next Three Years

Just when everyone thought the level of mortgage defaults couldn’t get any worse, it did in the second quarter of 2009.

It’s now clear the REO properties will continue to be a major factor in real estate listings for at least the next three years. Rising unemployment is now predicted to be the major factor rather than the shaky sub-prime mortgages which helped create our current economic crisis.

Now, as predicted, homeowners who had solid mortgages based on their good credit history are having trouble making payments, due to more job losses as well as cuts in the hours of employees who are keeping their jobs. Mortgage defaults are running at their highest levels since the Great Depression, with 4 percent of homeowners with a mortgage in foreclosure and another 8 percent who are at least a month behind on their payments.

The last time the housing market hit this big a low was in the early 80’s. During that recession, as is traditionally the case, it was a rebound in the housing market that helped the economy out of its tailspin. But leading authorities like Wells Fargo Securities senior economist Mark Vitner says this recession is different and doesn’t see that kind of real estate recovery on the horizon. As a matter of fact, he’s predicting this trend will continue for at least 3 more years.

Currently, refinancing is not an option for many troubled homeowners, because home values have fallen so far – which means they owe a great deal more to the bank that their property is currently worth. Even though many banks and lenders are beginning to offer loan modification programs, many homeowners can’t even afford lower payments because they’ve lost their jobs.

This year, one and a half million homeowners are facing foreclosure. And those numbers are expected to go up, not down – because many of the homes currently in foreclosure still haven’t hit the market as official REO listings. Paul Puryear and Buck Horne of the financial services company Raymond James state that, “Out of more than 4 million homes currently owned by lenders, actively in foreclosure, or seriously delinquent, roughly 1 million are captured in the NAR’s (National Association of Realtors) inventory data and listed as ‘distressed inventory’ in MLS.”

New home construction is certainly no better off. The National Association of Home Builders released their new report – and each aspect of their housing market index continues to track well below the worst levels ever seen in the over 20 years of the report’s existence – in others, it is firmly in uncharted territory.

All this suggests that the number of REO properties will hit even more historic highs in the months to come. More foreclosures than all the experts predicted will occur and the banks and lenders will have to find new and innovative ways to more efficiently get those properties “market-ready” and listed with REO agents to avoid an incredible glut.

To assist with this effort, Frank Patrick, REO expert and founder of ASREOS (the American Society of REO Specialists), is currently working with Rod Beever, President of Leading Edge Companies, to recruit new REO agents and Property Preservation Contractors. Patrick has been at the forefront of the surging REO industry, helping to train agents, brokers and contractors in order to help banks and lenders handle the enormous backlog of REO homes.

“The business opportunity is incredible right now for those choosing to specialize in REO sales and field services,” commented Frank Patrick, founder of ASREOS and co-founder of REO ResQ™, a nationwide franchise of property preservation companies. “Anyone who’s had their career derailed by the economic downturn should definitely consider the REO industry.”

ASREOS, the first national trade association for REO professionals founded by REO experts, offers its member vendors online profiles, an exclusive members-only forum, advice from top REO agents, and access to its exclusive database of REO sellers through their website at www.ASREOS.com.

Million-Plus “McMansions” To Be Next Big REO Listing Category

Up until now, the middle class has been hardest hit by plummeting home prices and a bad real estate market. This has resulted in massive mortgage defaults, the tidal wave of foreclosures and the historic high number of REO listings available.

The upper middle class and high-end homeowners who thought they would be able to dodge the foreclosure bullet now appear to next in line for foreclosures. Most of them who needed to sell have been counting on renting out their homes for a year or so “until the market comes back” – while burning through their own personal capital at an alarming rate.

The truth is, even with prices off an average of 30%, home prices are still too high. The recent good news about improved sales has everything to do with agents and sellers giving up and not much to do with buyer interest. REO properties are definitely a hot commodity now – because of their price, they’re seen as a deal and a great investment. The rest of the activity is mostly due to desperate homeowners willing to deal and short sales.

You can blame growing unemployment and economic stagnation for the real estate market (aside from REO homes) continuing to languish. There’s just not a lot of cash or credit around – and that means we have yet to see the bottom of the housing market. And that also means a lot of homeowners holding big mortgages on million-plus properties who are waiting for a big real estate rebound are only going to be on the receiving end of big, big disappointment.

Looking at the most recent housing data from Orange County, California, home to a huge number of “McMansions,” it’s clear that lower and mid-tier housing has stabilized to some extent, with inventories finally shrinking. But what’s also clear is that the higher end homeowners aren’t accepting the costly reality of the current real estate market.

Look at the numbers and judge for yourself:

· Homes priced at under a half million will take about 6 or 7 weeks to sell

· Homes from $500,000 to a million will take about 10 to 11 weeks

· Homes over a million – over 13 months

What that means is that, with the economic picture as it is, most million-plus properties simply won’t sell in the timeframe most owners require them to. Many experts agree that these larger properties are currently overpriced by as much as 50%. That foreshadows a price collapse in this market tier identical to that which hit lower end housing – where the huge REO property boom has been focused so far.

For REO agents, brokers and contractors, this means more desirable listings, higher profits and more work. ASREOS.com, the home of ASREOS, the American Society of REO Specialists, helps its membership of REO professionals keep on the cutting edge of the ever-growing, expanding and changing REO marketplace with valuable advice from top REO agents, access to an exclusive database of over 130 REO sellers and a members-only forum where valuable inside information can be obtained.

ASREOS members can also post online profiles, searchable by zip code, to make it easier for banks, lenders and asset managers to find qualified pros to handle their REO properties. Find out more about the first REO trade association founded by REO experts at www.ASREOS.com.

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Why the Housing Market Won’t Improve Soon

While most real estate agents and brokers are desperately searching for signs that the housing market is recovering, those signs are simply not there yet. The foreclosures keep flowing with no let up in sight. And there’s yet another set of statistics that show the current historic high of available REO properties isn’t going to be going down any time soon – as a matter of fact, more REO records could end up being set.

At the “Calculated Risk” blog (viewable at http://www.calculatedriskblog.com/2009/06/house-prices-and-unemployment-rate.html ), they make the case that, after a housing bubble bursts, there is a correlation between home price recovery and unemployment. According to their study of housing bubbles in the late 1970’s and 1980’s, real house prices continued to decline after these bubbles burst – basically until the unemployment rate peaked. Then prices remained fairly stagnant for a few years after that.

Since most economic experts agree that unemployment isn’t close to peaking yet – and since this particular housing bubble was much bigger than the other two cited – that suggests real estate prices aren’t about to start inching upward for months to come. That means more homeowners staying “underwater” (their houses worth less than they owe on them), as well as more mortgage holders struggling to make their monthly payments. Every housing expert expects many more REO properties to come through the pipeline.

Also, the boom in foreclosures in the residential market is now being joined by a spike in foreclosures in commercial sector. The number of commercial properties, including office and retail buildings, facing foreclosure in the coming months is said to be massive. Las Vegas is ranked #1 with commercial properties in default, with about $9.7 billion worth of properties in distress.

Michael Campbell, managing partner of Colliers International, said that banks have requested that his firm take over management of many different commercial properties – everything from completely undeveloped land to the 7000 yards-plus golf course in Las Vegas, Stallion Mountain.

Campbell also said he was hoping lenders would rewrite loans, but that may end up being impossible. “I would say we are headed in a downward direction, but I don’t see that it has ramped up yet,” Campbell said. “With all these loans coming due, there will be more defaults and foreclosures.”

Will anything stop these REO foreclosures? Not likely. The government and industry programs designed to ease foreclosures to date haven’t been very successful. Moratoriums have just put off the inevitable and a lot of mortgage holders just aren’t going to qualify for the bailout programs. Refinancing isn’t going to help with interest rates where they are.

The good news is that REO sellers are getting a lot of activity on their properties from cash-rich investors who know a great deal when they see it. But with many more REO listings coming down the road, REO agents and brokers will still find themselves keeping very busy.

ASREOS.com, the home of ASREOS, the American Society of REO Specialists, is growing in leaps and bounds to help REO professionals gain a competitive edge and get access to these lucrative listings. ASREOS is the first REO trade association founded by REO experts, and it features advice from top REO agents, access to an exclusive database of over 130 REO sellers, and profiles of its members in an online searchable directory of REO vendors that banks, lenders and asset managers can utilize when looking for local agents to list and sell their REO properties. Find out more at www.ASREOS.com.

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The Next Foreclosure Wave is Just Beginning

You probably already saw the news trumpeted at the end of May that said a record 12 percent of homeowners with a mortgage had fallen behind in their payments in the first quarter, according to the Mortgage Bankers Association. The Association also predicted that the trend would continue until the end of 2010, six months after unemployment figures are expected to finally begin heading downward. That means REO listings will continue to rise for at least another two years.

What’s behind the continuing growth of defaults and foreclosures? The fact that so-called “safe” homeowners are now beginning to feel the pinch of the recession.

The REO home boom began when subprime mortgage holders, who bought in the heat of the housing market run-up, couldn’t keep up payments on over-leveraged loans on ridiculously overpriced properties.

This new wave of record foreclosures comes as people being laid off and downsized are finding it hard to keep up with their bills. The number of people receiving unemployment benefits hit an all-time high in May with a record 6.78 million requesting financial assistance.

Credit counseling agencies are getting an increasing number of calls from homeowners with normal fixed-rate mortgages, who can’t keep up with payments because of business failures, loss of jobs or just loss of overtime pay.

Debbie Kohl, a housing coordinator trying to assist struggling homeowners in Henderson, Nevada, says, “We’re hearing this from all walks of life: plumbers, electricians, dentists. I talked with a dentist recently who said nobody’s coming in anymore unless it’s an emergency.”

A common alternative for someone not able to pay their mortgage is to sell the house and become a renter. Now, however, that’s not an option in many areas where homeowners can’t sell their properties at a price that would pay off the remaining mortgage balance.

Banks are also not motivated to negotiate mortgages with homeowners who don’t have a certain amount of cash flow coming in on a regular basis. As they see themselves being stuck permanently underwater with their home, these homeowners will often simply walk away from their properties – and there are services online that help them do just that. When you can rent a home that’s similar to the one you already own for $1000 less than your mortgage payment, why continue to put yourself in that kind of stressful situation?

This troubling second wave of mortgages just means more and more REO properties will be added to the already historic numbers that are being listed by REO sellers and agents. The good news is that, as the wider economy stabilizes, REO homes are more and more being seen as an amazing value and terrific investment – so sales are moving upward. That means more and more opportunity for all REO professionals.

Many of those REO pros are finding the resources at ASREOS.com, the home of ASREOS, the American Society of REO Specialists, invaluable in getting the edge on the growing REO competition. ASREOS, the first REO trade association founded by REO experts, enables their membership to swap contacts and tips in a special members-only forum. ASREOS members can also access an exclusive database of over 130 REO sellers, as well as have their profiles featured in an online directory of REO professionals that banks, lenders and asset managers can search when looking for local agents. Find out more at www.ASREOS.com.

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