I know the banks are holding off on trustee sales in CA. My own experience tells me that. Personally I think that the banks are in negotiations with hedge funds, private equity firms, and other investors and are trying to do bulk portfolio sales. Wells Fargo just announced a deal to sell $600,000,000 in sub prime loans to Irvine CA based Arch Capital Group. I think that these types of deals are being worked out as we speak.
I don’t know what is happening for sure but something is shifting in the REO world. Spidey senses are tingling.
When I decided to make the leap into the REO business model I studied it before I made the jump. The first thing I noticed was that my local market was dominated by a handful of big players. It seemed like 6 agents had about 80% of the bank foreclosure listings. My first reaction was pure jealousy but I immediately put the kibosh on that unproductive emotion and focused on what they were doing.
Success Leaves Tracks.
I like this guy. He seems like a cool wealthy uncle who is always good for some “walking around money” and some fatherly advice.
The concept is if you study what a hugely successful person did and just do what they did, your success is all but assured. I decided to look at what these local REO Kings and Queens were doing and figure out how I could duplicate their success. I asked myself questions like “How did they form relationships with the banks?” Why did the banks prefer to send the bulk of listings to just a few players when there are literally thousands of agents screaming for the business?” “How do I find out the information?”
The last question was the hardest one of all. Finding the information was the biggest obstacle. Call up your local REO King and ask him what you need to know in order to duplicate his success. Go ahead. Give it a whirl. Yea they’ll spill their guts to you no problem. The wall of secrecy around how to get REO listings is practically impenetrable.
The first thing I noticed was that the successful agents used leverage to their benefit. One of the problems with traditional real estate is that people only move about every 5 years. You work hard to develop a relationship and then you only get one deal from each relationship. When you cultivate relationships with the banks and in particular the asset managers you are able to leverage each relationship into multiple deals.
This heavy volume is both a blessing but also the curse that kills the careers of most new REO agents. You MUST leverage BPO’s, systems and people to deal with the heavier volume of work in order to manage the workflow. If you don’t use the leverage of others you will shoot yourself in the foot by dropping balls. This is why the asset managers prefer to work with a handful of agents. Your local REO king uses leverage to make sure that the work gets done with little or no dropped balls.
The REO business model is the most efficient business model in real estate. It lends itself to systems. While the relationships are important, they are nurtured by different criteria than traditional real estate. Asset managers don’t care about what kind of car you drive, where you live, how you look, or how smooth talking you are. Asset managers want predictable results. Results that can only be duplicated on each listing if you are leveraging systems and people. By giving predictable reliable results you leverage your relationships with the asset managers.
Asset managers know competence when they see it. They reward it. They chase after it. They are loyal to it. The competence of systems will make your asset managers look good to their superiors. Making your asset manager look good is your only goal. Take care of that and everything else will fall into place.
Reading over my first post I noticed something. I noticed that I am not wearing a mask like I usually do in the business world. The cool thing about the blogosphere is the freedom to just be yourself. Traditional real estate marketing is not working anymore so screw it. It feels very freeing to be able to drop the traditional real estate agent persona. The strange thing is that the blogoshere is a very public place yet it feels like the local hangout. Of course at this point of my blogging journey I’m hanging out all alone.
I tell you what. I’m going to give a copy of my book “The Code Of An REO Warrior” to the first 10 people that send me an email with the following subject line.
“I saw your crappy blog so give me a damn book”
Send me your name and mailing address to jay@homesmaxdotcom and I’ll mail the book the first or second week of August when it gets back from the printer. I wrote my email address with the dot spelled out to prevent my email address from being captured by automatic spam email harvesters. Put the dot in there if you want the email to go through. US address only please.
I am doing it as an experiment to see how long it takes before 10 people care enough to respond.
My decision to become an REO agent (listing and selling bank foreclosure properties) was easy. My choice was to either sell bank owned homes or lose my own home in a trustee sale. I was relatively new to real estate when the market crashed. I didn’t have any responsibility for the housing boom and didn’t profit from it. I was the one telling people about the hysteria around the Dutch Tulip Craze back in the 1600’s . (Click on the link to read about it. It’s amazing how little humans have changed since then.)
It’s hard to be successful when you’re telling your clients that the sky is falling. My clients were uncomfortable hearing the truth. Clients used to tell me about the wonderful loans they were getting. They would tell me about super low interest rates, 103% loan to values, and no need to prove anything to the lender but the ability to fog a mirror. I would tell clients about teaser rates, negative amortization and housing cycles but they didn’t want to hear it.
I would literally beg my clients to read the loan docs before they signed the papers. They never did read the damn thing and the banks knew they wouldn’t. The banks figured out that the spoken word was more powerful than the written document. They could tell home buyers one thing and have them sign something else. The spoken word had impact but left no lasting evidence. I would explain the “Greater Fool” theory and that someone was going to be that greater fool and was going to be left holding the bag. Little did I realize that we all were the greater fools and the US economy would be the one left holding the bag.
When the market started to shift in 2005 I realized what we were up against. I was out of money and knew that if I didn’t jump on the REO tsunami and ride the wave I was going to lose my own house. In December of 2007 I was assigned 6 REO listings in one week. 4 of those 6 homes were owned by real estate agents or loan officers. Thats the day I realized how lucky I was to be the agent selling homes and not an agent losing their home. While I always feel bad about someone losing their home I would feel even worse if I lost my own home because I failed to develop the relationships with the asset management companies. My family was too important to me to let that happen.
Looking back I know I made the right decision. It’s been a good ride so far. If I decided to stay out of the REO market I wouldn’t have saved anyone’s home including mine. Working foreclosures also gave me an opportunity to do a gut check of my own value system. I’ll talk later about selling foreclosures with integrity and honesty. I know some segments of the world would say that’s impossible but not only is it possible, it’s always the best way for everyone involved.
(Please, if you are one of those people who want to criticize what I do and not contribute to my growth then just walk away from this blog now and no one will get hurt)
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