Scotsman Guide - May 2010 Residential Edition

By Desirée Patno
Owner and founder
Desirée Patno Enterprises Inc.

How to
Handle
REO
Deals als
Mortgage brokers can serve as an essential link in the real estate owned (REO) and
distressed-property markets. Bro-
kers, however, must work harder and
smarter than many retail lenders to
keep up with regularly changing lend-
ing guidelines.

Distressed-property
transactions require
elite performance
Getting started

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Often, this occurs outside of brokers’ control, but brokers can minimize damage by remaining informed. This is especially true when working with REO and time-sensitive distressed properties.

When handling deals involving REO properties, mortgage brokers often will work with REO listing brokerages. These companies represent the distressed-property eyes and ears for many financial institutions, including banks and lenders, and can manage the properties for them. REO-listing brokerages often possess credentials such as:

Diverse lending options, • which are a must when buyers or properties don’t meet standard industry requirements;

Financial backing, • which is imperative for keeping substantial operating capital available for managing REO properties;

Accounting experience, • including staff responsible for expenses paid on behalf of financial institutions and banks;

Repair teams and specialized REO • contractors, who manage property rehabilitation, code compliance and lender-required repairs; and

Office and field support personnel, • who confirm the remedy of code violations and lender-required repairs. They also can ensure compliance with sign-off requirements, city inspections and possible homeowners-association mandates.

Mortgage brokers who work with these property and listing brokerages must adhere to strict performance timelines and deadlines, as well. The time lost shopping for a better deal could derail the transaction and lose your buyers their dream home.

more likely they can help salvage a client’s deal. If no solution exists, quick communication will mitigate the loss of time, money and overhead for all parties. It’s a huge red flag for REO-listing brokerages when someone tries to handle an undisclosed issue behind closed doors.

Mortgage brokers also should define the services, loan products, commitments, timelines and communications they will provide clients. Give all involved parties your contact information and make sure the prequali-fication-letter issuers know current under writing guidelines before the under writer gets the file.

In many cases, appraisals must be completed within 15 days, and parties must meet financing-contingency deadlines. Otherwise, borrowers’ earnest money deposit can become nonrefund-able. In most cases, appraisals must be completely independent of a mortgage broker’s staff.

Many gray areas exist in getting loan documents addressed, processed, documented and produced in a timely and effective manner. Taking 48 to 72 hours to underwrite a file — and another 48 to 72 hours to produce loan documents on a clean file — doesn’t fall within the desired or even allowable timeline for many REO clients. Further, only last-minute checks such as Federal Housing Administration certifications, U.S. Department of Housing and Urban Development approvals, insurance, escrow, and title information should remain.

Sellers also are starting to invoke more of their rights to stop delays in closings by requesting that earnest money is released to them for buyers’ or lenders’ nonperformance or by charging per diem penalty fees.

Getting it right

REO-listing brokerages will remember which mortgage brokers perform and which don’t. Thus, it’s important to seek lenders with proven track records and to ensure your clients are qualified to buy now.

By submitting quality preapproval letters with buyers’ offers, you not only move deals forward but also establish yourself as someone with whom REO-listing brokerages will want to work and to whom they will refer other deals. You can help foster this by:

Giving prequalification letters • only to buyers whose supporting documentation you have examined thoroughly;

Being honest with • potential buyers and telling them if they don’t qualify;

Providing seamless communica- • tion to all parties involved and giving REO-sellers up-to-date timelines on all loans in process.

In addition, when unexpected situations arise, let all buyers, listing and selling agents, and escrow officers know immediately. The more detailed information listing agents receive, the

•••

With these factors in mind, it’s clear that dealing with REO and distressed properties requires specialized skills. Mortgage brokers who hone those skills can find themselves in high demand as these properties continue to come to market. Those brokers who establish themselves as elite performers can build a large foundation of satisfied clients.

By working closely with REO-listing brokerages, brokers can stand tall in knowing they’re doing their part to help stabilize the real estate market. •

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Desirée Patno is owner and founder of a leading real estate owned brokerage, Desirée Patno Enterprises Inc., and president and founder of the National Association of Women REO Brokerages. Patno incorporates 19 years’ service with major financial institutions, managing high volumes of pre-foreclosures, short sales and foreclosures. Her expertise allows her to meet each client’s unique needs. DPE and NAWRB donate a portion of proceeds to heavily foreclosed communities. Contact: desiree@desireepatno.com or (949) 559-1300.