Property soon to be REO and not sure what I should do next?

[Kevin Schaefer]

Hello, I just got my NJ license and have been working the withdrawn / expired lists. I'm talking to an owner who's house just expired and she's telling me she's moving out in two weeks because the bank wouldn't accept any offers the previous agent got for her. So, I'm assuming that was the "short sale" and it failed. 

My question is, what can I do now? She isn't talking to anyone else, so it seems that I have some opportunity here but what is that opportunity? Do I call the bank and ask to be the agent for the soon-to-be REO? They will most likely try and auction it first, right? Looking for some advice on how to handle. Thanks!

[Denise Evans]

The listings go to companies on the approved vendor list.  You can't just call up and ask to be the listing agent.  You can find out how to get on the approved vendor list, usually by looking on a lender's website.

Usually the larger real estate companies are approved vendors, because it provides the larger pool of foreclosed properties for which there is a single point of contact for the lender. If choosing between a company that can manage 100 REO properties, or a company that can manage 3, it is more efficient for the lender to go with the larger company. Also, many smaller companies and individuals cannot afford Fannie and other big lender listings. That is because such lenders require the listing agent to pay many expenses up front for repairs, utilities, etc., and then turn in vouchers for reimbursement on a quarterly basis. Invoices submitted quarterly are usually not paid for another 60 to 90 days. That drain on cash flow can sometimes be too expensive for the solo agent.

Don't give up on the short sale route. If the borrower remains in possession, they can get up to $3,000 of cash at closing for moving expenses. That is an incentive for them to sign a sales contract with you and let you pursue the short sale. Get an authorization letter from the owner, call the servicing company, and find out exactly why the short sale was denied. Often, a real estate agent will say the offer was too low, when they don't actually know. Or, it was denied because they didn't get their paperwork completed on time. Or, the paperwork was completed inaccurately and the borrower didn't seem to qualify for a short sale.  Even if it was denied on the basis of price, a new appraisal might come in lower and the same offer amount might be approved now. Appraisals are good for anywhere from 120 to 180 days, depending on lender. If not deal is approved within the time limits, a new appraisal must be ordered.

Bear in mind, also, that "offer amount" is not strictly accurate. More accurate question is:  "Will this offer amount result in the net proceeds at closing required by the lender?"  Some times, an offer that is too low based on appraisal can still be approved if real estate commissions can be shaved and result in more money at closing. If you are the selling agent, and agree to forego a commission split, then the 3% savings on real estate commissions might be enough to make the deal fly.  Or, the borrower might agree to take only $2,000 moving expense incentive, rather than the full $3,000. Yes, it's less than they are allowed, but insisting on the full $3,000 might result in no approval, and no cash at all. Or, you might forgo the commission, the borrower might give up $1,000 in incentives, and the buyer (you) might agree to increase your offer by $1,500, resulting in the net proceeds target being reached.

Good luck!