REOs Can Rev up Business
Knowledgeable brokers can help their clients purchase bank-owned properties
By Shelley Kaye, president, REOMAC
Origination volumes are suffering for many loan officers nationwide, and those who are still
farming their old client base likely are
getting few results.
There’s an emerging market, however,
that can prove to be a successful niche
for loan officers: real estate owned (REO)
properties. These are foreclosed-upon
properties that the banks now own.
The market is inundated with properties that need buyers — and those buyers
will need financing. The National Association of Realtors estimated there were
4. 3 million homes available for sale this
past August, representing a more-than-
10-month supply. With ARM resets continuing at high levels, this inventory — and
REO volume — likely will increase.
There are many benefits to working
with REO properties. By gaining knowledge
about REOs, networking with other professionals and understanding what loan products are available for these properties, loan
officers can help move this inventory and
find a profitable venture. One loan product
that can be beneficial for REOs, particularly those that need repairs, is the Federal
Housing Administration’s (FHA) Streamlined 203(k) program.
To start making a name for yourself in
this niche, learn all you can about REO
properties. For those that need repairs,
know what it takes to get them in shape
so they can be approved for FHA financing. Create a contractor network that can
help you get fair bids to repair these properties in a timely manner.
In addition, know what lending programs are available to help your clients
purchase these properties. When home-buyers want to purchase a house that needs
repair or modernization, they usually must
first obtain financing to purchase the home
and then acquire additional financing for
the rehabilitation construction.
FHA’s Streamlined 203(k) loan program addresses this situation. With it,
borrowers can get just one mortgage loan
at a long-term-fixed or adjustable rate to
finance the property acquisition and its rehabilitation. According to FHA Mortgagee
Letter 2005-50, REOs are eligible for the
program if the needed repairs qualify as
FHA-defined eligible work items. Further,
borrowers can finance $5,000 to $35,000
for needed home repairs and improvements with the 203(k) program.
are now realizing that they can afford
Further, lenders holding REO properties often are willing to make deals and
give concessions to mitigate their nonperforming loans. They may even be willing to
assist with the financing.
Instead of working your past-client database, get a list of renters in the area you
want to market, get them preapproved and
help them finance their first home. With
apartment rents continually increasing, for
many renters, it makes more sense to own.
Shelley Kaye, president of REOMAC, is serving her fifth year on the REOMAC
board of directors. Previously, she served as secretary, treasurer and sponsor
chairwoman. Kaye also is a consultant with ECC Capital Corp. in Irvine, Calif.
She has been a licensed Realtor for more than 20 years. Before entering the
mortgage-banking field, she sold residential properties in Southern California.
Reach her at firstname.lastname@example.org.
With home prices down — the national
median home price fell to $203,100 this
past August — many potential homebuyers can now qualify to purchase a home.
Also, as foreclosures continue to increase, banks and mortgage companies
are facing a pileup of REOs on their books
and likely will continue cutting prices.
The homes are out there, and more buyers
Networking in the REO field is crucial
to your professional success. Who do
you know that has had success in working with REO property? Talk to them, and
extract as much information as possible.
Partner with real estate agents who are
successful in marketing and selling REO
properties. Help them with financing the
properties, and work to build a relationship
of trust and confidence. Show them that
you are dedicated and willing to learn.
Also, become proficient in REO-related issues such as cash-for-keys,
Continued on Page 58
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