Guest Post – an REO Agent Perspective

I had many inquiries and comments in response to the post Foreclosures, More Profitable than Loan Modifications?

Unfortunately, they came to my email instead of being posted here on the blog where everyone could read them.  Please comment here on the post if you can!

Rick Godbee, Foreclosure Broker and Team Leader for ReMax Realty Consultants wrote an excellent email response.  I asked his permission to put it here as a “guest post” and he, fortunately, agreed.

Thank you, Rick.  Here is his letter:

I’ll try to explain some things that may help your column and your clients better understand a different perspective.

The bank doesn’t necessarily make money (on a foreclosure) because of the huge expense of managing the foreclosure.   I’ll mention a few:  Eviction attorney, Asset Manager salary, Real Estate Broker Commissions, yard maintenance, winterization and de-winterization, repairs necessary to make the home qualify for a future loan, utilities while marketing, seller Closing Attorney, Title Company and it goes on and on.  Don’t get me wrong, I’m not a bank advocate, but I also don’t believe they are the big monsters most paint them out to be.  I believe it is a rare case the bank makes any profit on the resale, especially since the properties are generally over financed, which is the bank’s fault in the first place.  But, they do get the write-off!!!

Also, since the primary lender gets the mortgage insurance, if there is a second or third mortgage on the property, these lenders stand to get nothing.  Consequently, they generally make a monetary deal with the primary lender to pay them a minimal amount and they take over the actual foreclosing and re-sell process.  The large lender would normally rather take the insurance money and whatever else they can get and not have to deal with the expense and headache of the foreclosure.

Now, from my perspective as the one that actually does the grunt work to re-sell the asset, I actually enjoy most of the job.   I feel that I am compassionate for the situation of the occupants of these homes and I try to make the process as painless as possible.   Most of the REO agents are the same, but some are ruthless and give us a bad name, as with any career.   We normally can get them relocation assistance and our property management division at ReMax helps find them somewhere to relocate.  The relocation assistance is normally around $1500.

However; dealing with the bank is a nightmare.  Most do everything online and assign “tasks” for each step in the process.   Very strict time limits are associated with these tasks.   If they are not done on time, it will affect future listings.   You are constantly being graded on your performance.  The expenses are terrible.  We must pay for all utilities, repairs, relocation assistance, maintenance, etc. from our pocket and seek reimbursement.   The reimbursement procedures are designed to be so difficult that you would rather take the loss than spend the time to submit.

Once submitted, they will deny a claim for any small reason, such as you put the loan number first in the submission email subject line and the address second.   Yes, it can be that silly.   Then, they do not inform you your request has been denied.   You must track it.   If you push too hard to get your money back, you stand to lose the entire account.   Small amounts are usually repaid within 90 days, but larger amounts (over $500) sometimes take 9 or 10 months.   During this time, you are maintaining this balance on a line of credit, which, for most agents, is a home equity line on their own homes.  This year alone, I have written off a little over $6000 in debt I have been trying to recover for almost 2 years!

Then there is the actual management of the property.   You are the bank’s representative in the field.  They have never seen the property.   You have to paint the picture for them.   You have to oversee all repairs, secure the property, stage it for marketing and put the utilities in your name.   In a normal Real Estate transaction, the seller does all these things from your suggestions.   You always have reduced listing agent commissions.   Most banks pay the selling agent 1% more than the listing agent who usually works for 2%.   The banks are very strict on their closing dates.  The asset managers work on monthly quotas and the bank wants to lose the minimum amount of marketing time possible should the deal go south.   No matter what the circumstances, if the deal goes south, the asset manager blames you.

Sometimes I wonder why I continue to do this.   Then I remember the fairly steady volume of listings.   However; since the banking meltdown and Congress intervention, the steady flow of listings has dried up.   I can feel you asking, “what in the world is he talking about, the media says foreclosures are everywhere and rising?”   You would think so logically, BUT, the forced loan modification programs, eviction moratoriums, etc that are happening now is holding up the release of the foreclosures and they are piling up.   I personally don’t believe this is helping most people.

For example, when I arrive at a new listing, many times the occupant has been living rent or mortgage payment free for over a year while the bank is jumping over all the new hurdles in their path.   Well, whom do you think eventually pays for this?   I think you know the answer, the taxpayer.   I recently had one owner/occupant that had managed to live totally free in a $650,000 home for 3 and a half years!!!   Basically, his monthly salary just increased by $3300 and the only thing he will suffer is bad credit for 7 years!   The home is now on the market for $354,900 because he left it in such terrible condition.   If you are a good hard-working American citizen, you are paying for this behavior.   Something is very wrong with this picture.  2 years ago, the longest anyone could live free without paying their mortgage was 4 months.

Karen, I hope this info and opinions help you introduce this situation from a different perspective.