Nov. 21, 2008 - Forclosure story 1

Recently, my eyes were opened, not only to the shift in the real estate market, but also to the shift in the real estate as a business.  Always striving to be ahead of the curve, I decided to invest time and money in educating myself in the future of real estate and the wave that is hitting my market.  Actually, it's not really a wave, it's more like a tsunami.  With the unscrupulous banking practices, the recent escalating prices of homes, and the crash in our economy, we find that much of our inventory are "distressed properties".  My opinion is that almost 100% of the homes on the market in my area are distressed properties.  What do I mean by that?  Common, you have to be desperate these days to put your house on the market to compete with short sales and foreclosures! 

So that is how my saga began.  I decided to learn about Short sale and Foreclosure property transactions.  I received two designations in the last several months, CDPE and LMC.  I found both informative but in different ways.  Loss Mitigation Certification is a great starter course to give you a general idea of what it means to deal with foreclosures.  Certified Distressed Property Education is a "how to" manual in dealing with short sale.  I was glad to take them, as it "whetted my whistle".  But the two coursed combined did little to prepare me for the ins and outs of distressed property business.

I dove in head first.  I googled everything I could find on doing BPO's and handling REO's.  My goal was to sign up with as many companies as I could to do Broker Opinion of Value.  Getting paid a few bucks here and there was better sitting in my office waiting for the phone to ring.  I also figured that if I got a lot of this business, I could stream line my system to be efficient at it.  What I found was the reports were long and tedious and the pay was lousy.  When I spoke to a friend of mine who was already doing BPO's, she was surprised that I was not "winging" it like her.  She called me to detailed.  I like to think that I just have integrity.  This story would probably be better left for another time as it's a side line to my blog.

So I digress.  Getting back on track, I inadvertently started getting requests for REO property listings.  I say inadvertently because after going through the LMC course, I realized that these distressed properties might be over my head and wallet.  I felt uncomfortable with evicting people, putting bills in my name, being responsible for the homes' condition, billing and getting reimbursed, and having multiple hands in my pocket at the closing table, leaving me with little if anything to show for the work I've done.

But I did get listings!  Whether I wanted to or not, the wave of the market was taking me for a ride.  All I have to do was to hold on for dear life and hope that I get washed up on the beach.  I was lucky in many respects.  The first proposed listing was a 2 year old house in a nice area.  Although, condition of the home was not showing signs of the actual age, I am confident that at the right price, I can sell it.  Also, the REO company hires a management company to change the locks and maintain the home.  Boy, was I glad that this will be my fist experience.  Well, I got a second property listing request a few weeks later. 

And this is where my story really begins. 

Foreclosure Story 1.

 I received an email request to list a property in a nearby town.  The paperwork I received had a request for a BPO with interior pictures, a request for MLS insertion and a "listing agreement".  I researched the property and found that it was still listed with a local agent.  I found out that the property has been on the market for 154 days, originally listed for 189,900 and now for 131,500.00.  My paperwork stated that I would be listing the property at $124,500.00.  It also went over how the commission was going to be broken down. 

Where do I begin?  First order of business was to go see the property.  On my first visit, I found that I was given the wrong combination to the lock box and once I managed to open the lock box, the key was missing.  I had to go back to the property for the second time.  My initial impression was that the neighborhood was of a mixed use.  The street was busy, the houses were too close.  The drive way was a dug pit, the stairs were a tripping hazard, the Porch could have structural issues and the roof looked tired.  I was concerned that the price I was supposed to put the property on the market, was too high.  My initial conversation with the rep who assigned me the listing, concluded in one resounding synopses.  If I don't take this listing, I will not get any more from this company.

After my second visit, I was disheartened to find out that the basement was cluttered with junk, the attic had a pool of water and the roof showed signs of leaks.  There were cast iron pipes and other outdated utilities.  The house itself had potential, but my estimate was that it needed approximately $56K worth of work.  My comparative market analysis showed that as is, the property was worth about $45K and with repairs, it would be approximately $110K.  Taking a listing at $124,000 as is, would be foolish.  Also, the convoluted compensation required explanation.  I had my suspicion as to what all those numbers meant, but I could not imagine that this company wanted to take .65 of 3% they were offering and then charge me another 30% referral fee.  Not to mention that they dictated what I payed a cooperative agent, which was less what I typically offer.  When all is said and done, I figured I would be making approximately $1,000.00.  My second conversation with the REO representative, confirmed my suspicion.  And then something happened that even now shocks me.  I told the rep that I would take the listing.

When I take listings for a typical seller, my marketing cost approaches $1,000.00, how can I take this listing and offer the same service, I can not.  I then looked at other bank owned properties on the MLS and noticed that the agent typically put one picture up and that's it.  No virtual tour, no multiple photos, no Internet marketing, not even a descriptive paragraph extolling the positives of the property.  Wow!  Can I really do so little?  I decided that I have to change my mindset.  My initial business plan dictated that I treat all of my clients and listings the same.  Whether I am listing a starter condo or a luxury home, my clients demand and deserve the same attention to detail and care.  Now I am faced with a property that even the banks care very little about. 

Despite my many reservations, I decided to give it a go.  Late Friday evening, I did the paperwork on the BPO and by the time I emailed my forty or so photos with captions to the new rep at the REO company, I have estimated I spent 7 hours.  I decided to hold off on signing the agreement, because I wanted to confirm the new price.  I also did not put the house in the MLS because of the price uncertainty.  On Tuesday, when I did not get any acknowledgment back from the new rep, I called and left a message asking for a confirmation that she got my BPO.  On Wednesday, she sent me an email stating that she did, but still has not received the contract or the MLS listing.  I sent her an email back stating that I need to know at what price the client (the bank) wanted me to start the marketing.  I received a phone call from this rep.  The conversation went something like this:

"Jane, I don't typically spend so much time on assigning REO's and I don't usually make calls to agents"  I explained that I need to know at what price to put the house on the market.  She was very surprised that I have not put the house on the market (it has been 4 days since it was listed last).  I asked if she had a chance to review the the BPO and forward it to the client.  She said yes.  I explained that if I were to put the house on the MLS for such an overpriced amount in its' condition, that no one would look at it, and I would get a reputation of being an unrealistic real estate agent.  She told me that she doesn't understand why she is wasting her time with me and that she should reassign this listing to someone else.    She told me that another agent gave her a BPO and said that the property was worth $200K.  I told her that I am sure that agent did not go into the property.  I know he/she didn't because I am the only one who had access to the keys.  I did not have a chance to tell her that the house was on the market for over 154 days at a lower price and did not sell.  The conversation ended quite quickly with the rep's decision to reassign the listing. 

Good riddance to bad garbage, I say!  So, this is my first experience into the realm of bank invested properties.  I thought that I would have many posts dedicated to this house as the listing progressed.  Instead, it's just a sad tale.  Stay tuned to hear how things go with house #2 and the consecutive adventures of distressed property business.