How do get connected with an REO agent?

Question

Hello All, I've noticed for quite some time that REO properties rarely hit the local MLS and always thought that was odd considering the amount of REO properties that I am aware are out there in my community and the volume of foreclosure notices I see the the local newspapers. I have been asking around and doing my research and learned that REO agents are very difficult to connect with because they typically work with an exclusive group of investors. I spoke with one REO agent and he wanted me to meet with him at the cost of a $300 "consultation fee", he also said that he would want a "success fee" of a third to one half of the sale proceeds after the property had been repaired and flipped, and so on so forth. I thought it was bizarre that he requested a consult fee and wanted a piece of exit action. He also wanted the listing for the flip. He refused to commit any capital resources to the deals. He refused to meet with me unless I consented to paying his consult fee. He offered his contacts for contractors and to pay septic inspection fees and part of closing costs. Regardless of the fees and way he wanted to structure deals I will it be working with him because I found him to be skeevy with the sales pitch of a used car salesman. Anyhow, my question is; is it typical of REO agents to charge fees like this or to try to get in the deal in some way? It is my understanding that REO agents make very little 1-2% on sales commissions for selling the property which is why they try to work with an exclusive group of buyers. With that said, is it common practice for REO agents to make deals to get a piece of the action and is that the reason why they will only work with exclusive buyers? Lastly, what is a good strategy to start establishing relationships with these agents? They seem to be tough to find and what I have found so far, the best way to learn who's who in the REO game is to network. Any advice on this subject is much appreciated. Thanks, Mike

Tan Mehedi · Answer

Charlie, as a common sense, success fee that he was talking about sounds like unethical and illegal. NO bank in the planet would agree with an agent that get kickback from the backend.

Shannan Bowen · Answer

@Jonathan Greene Thank you for your response. Very helpful and informative. I will implement those suggestions moving forward. My motivation has been sparked to come up with creative ways to getting their trust. Yes, most REO listings that I've submitted offers on have been through the online portal as well. I agree in that hounding the agent never helps! Ask me how I know!

Shannan Bowen · Answer

@Michael Flynn great question! I always wondered why it takes so long, if at all, for the REO agents to respond to the offers I submit for my investors. Sometimes I feel like I'm being blind sided in that my clients offers aren't being fairly considered. @Ron S. that's the first thought that came to mind as I read the post. I would've immediately backed out or presented my concerns to my broker (as an agent). As an investor it is more difficult to know and understand what is ethical or not. It's important to have a well experienced attorney at bay to protect you from all sides. Just a suggestion Michael.@Jonathan Greene what has been your experience dealing with REO properties?

Jonathan Greene · Answer

@Shannan Bowen - most REO listings in my area are handled via an online portal for the offer and if not, they are handled internally and transmitted to the bank that way by the listing agent. I have waited three weeks for a response before and also just heard back from one yesterday in less than a day. What I have found is that bothering the agent, on behalf of a nervous client, never helps. REO agents sometimes can get 50 assignments at a time in a hot REO area and they use the portals as a wall because they have to - they would get calls 24/7. You have to prove to the REO listing agent that your buyer is serious and understands the game. With an online offer this is harder because there is no cover email, but you can add limiting language in the additional provisions that make it clear your client understands.

Jonathan Greene · Answer

@Michael Flynn - there are definitely REO agents like that around, but it is not the norm and not the proper way to do business. I am waiting on REO assignments now and plan to run them just I run my high-end listings. Most of the REO agents I deal with for my investors locally are just overrun with properties and can't always respond on time, but once they know you, they will get back to you. The banks DO NOT favor the type of behavior you described, they like a streamlined (mostly online) bid process so they can maximize their price and sell for cash, as-is whenever possible. In NJ, almost all REO listings are on the MLS so that does sound suspect to me.Try finding the ones on the MLS and make contact with them. If you are interested in auction options, I have a college friend who runs an auction house in and around the Boston and Cape areas. Just PM if you would like his contact info.

Ian Walsh · Answer

Search the MLS and see who is selling the most REO's

Ron S. · Answer

...which is why I said, "If it is not disclosed". AND, if its not disclosed and IF he states that he is operating the transaction at arms length (Which he would not be), then he could be committing a criminal act if the institution is Federally regulated. (Ask me how I know that).

Charlie MacPherson · Answer

@Michael Flynn @Ron S. There's nothing illicit about the agent requesting additional fees. The board would have nothing to say about it as long as it was properly disclosed in advance.I do think that requiring that he gets the listing of the flipped property might fail the test of "tying" - part of the antitrust act. However, giving the agent the listing is the norm because the buyer needs a solid relationship with their agent - who makes peanuts for commission on the initial sale.

Michael Flynn · Answer

The craziest thing is made his pitch to me via text message which I thought was it's given that the manner he wanted to conduct the transactions did not seem ethical or legal and perhaps violated his fiduciary responsibilities. I've been using around trying to figure how to get the REO deals. I drive around neighborhoods frequently and find houses all the time that are vacant and then learn they are bank owned; however, I rarely find REO listings on the MLS which makes me wonder how they are being sold. I spoke to a friend of mine the other day who recently became an agent and asked if there was an REO specialist in his office. He said yes there is and that he currently has 30 listings that were not on the MLS and he confirm my suspicion that these agents work with an exclusive group of buyers. Trying to figure out the system and how I can get into it.

Ron S. · Answer

Wow...that sure sounds like a slimy agent. I'd wonder what his local board would think of those tactics. I wonder what his employer would think or the banks he represents would think. Did he put any of those demands in writing?None of the agents i work with are as unscrupulous as what you've described. I would fire any agent that engaged that way and if might even be illegal. I can say without a doubt that most if not all lenders require all parties to a sales transaction to attest that the transaction is arms length. Any agent that wants to back door deal with you in that fashion and doesn't have these "arrangements" disclosed, would be committing a criminal offense if they executed the arms length affidavit without admitting a business relationship to one of the parties to the transaction.Sounds like your radar is working well in that you smell a car salesman. Sounds like you are taking the right approach to avoid that person. To your question though...how do you get in with the agents? I don't have the answer. All of my properties are listed with MLS to expose them to maximum buyer potential pools. My agents get full commission, as they should. I would say it is NOT common practice for agents to try and get a piece. Maybe i'm naive.