Knowledge is Key in Brutal REO Market

Over-eager buyers, in their hunt for a bargain, believe it must be easier to sell a vacant home that is owned by a bank through a foreclosure.

Buyers figure it's the perfect time to make an offer that gives new meaning to "low-ball."

Wrong!

Instead, real estate brokers who specialize in bank-owned properties say the problems in marketing and maintaining foreclosed properties are endless, the days long, the expenses never ending and the rewards minimal.

And, did we mention that most neighbors hate anything and anyone related to a foreclosed property.

In fact, the general attitude among a panel of brokers was that foreclosed properties took longer to sell, were more complicated, and offered few if any protections for buyers compared to a traditional home purchase.

Yes, there are bargains out there, but there's a price or trade off for everything.

Speakers on a panel discussion at the 2008 Realtor Expo organized by the Southland Regional Association of Realtors talked about working seven days a week, long hours, surly occupants who refused to move and banks that wanted top dollar for foreclosed properties, but refused to pay for simple maintenance.

Speakers included Garo Papazian, Sunny Yi, Howard Graham, Doug Puetz, John LaRocca and Erik Sellfors.

In some instances, they said real estate brokers must front anywhere from $20,000 to $50,000 per property just to keep it in marketable condition.

Banks eventually reimburse for most expenses, but sometimes they refuse to pay even when presented with before and after photos of repairs, documentation and copies of bills.

Because lenders are so demanding and unrelenting, Realtors must assemble a team of experts to handle each aspect of holding, maintaining and marketing a foreclosed property.

Realtors will not even get a listing from a bank unless they can prove that they are trustworthy and have the essential experience and knowledge needed in this highly specialized market segment.

Most agents said they start their work day as the sun peaks over the horizon and return home long after it sets.

Every property must be visited at least weekly, with some requiring ongoing attention to solve problems ranging from angry owners, trash collection, and a pool guy who didn't show up, to a break in and theft or malicious destruction of appliances or plumbing.

€œEach home offers a very different scenario, one speaker said. "€œIt can get very messy. You have to have a tough skin."€

Yet, out-of-control buyers pose the biggest problem, they said. "€œRealtors must know what buyers need to qualify for a loan and then set realistic price expectations."