I get these questions daily from REO Rockstars subscribers and from foreclosure brokers that I am coaching; "What is happening with bank owned properties?" "Why are the inventory levels fluctuating so much now?" "What can I do to keep from going under?" My explanation is this: The government and the banks are trying desperately to manipulate flow of distressed properties from hitting the market and thus manipulate the VALUE that they can get for their homes. The government, of course, wishes to preserve home ownership and neighborhood values. The banks, of course, wish to SAVE MONEY and REDUCE LOSSES. As a result, we are seeing many new programs and strategies implemented, in an effort to keep foreclosures from taking place, and to offset losses, by disposing of bad debt though other means, like short sales. An interesting note that you may or may not know, is that banks are consistently seeing about a 15 point higher return on short sales vs. foreclosures-only makes sense that they look towards these alternatives, as additional methods of property disposition.
Does this mean an END to REO is coming? Does it mean that we are going to see the REO world shrink drastically-NO WAY FOLKS! Here's the raw truth....Banks have been holding inventories for a LONG time and as supply goes down, prices go up....good for the banks but it doesn't solve the overall problem. Frankly, it's a big mess out there and there just ain't no easy way across the river of debt bubba! And they really shouldn't try to play games.
But TRY they will. And their efforts will (and already have) disrupt the ebb and flow of REO inventories. For 2-3 years, we've been riding the wave of inventory to new heights, then seeing it crash to record lows. Will they ultimately find a big, world changing solution?-doubtful. But they will find little patches and band-aids for their ailments. Most will peel off and expose the old wounds after a few months of wear and tear. But these little speed bumps will surely impact inventories along the way. We as REO brokers simply must hike up our boot straps and do the best with what we've got. We must continue to build our relationships with asset mangers and banks. We must do SUPERIOR jobs, so that when levels get low, we are the brokers who get those REO listings. And we MUST strive to improve the overall climate of the REO world ourselves, within our own businesses. In my own personal REO business, our internal policy (which, incidentally is much like that of the biggest banks, of putting occupants into good homes, without great expense after the sale, and selling at the highest reasonable prices, not only serves my community well, but it is good for the buyer and the client. THESE PRINCIPLES will always keep me in business, regardless of market shifts...No question about it.
Don't stress about inventory fluctuation folks. Have an extra cup of coffee and carve out extra time each day to work on "momentum" strategies when things slow down. ALWAYS think about how you can build for tomorrow. DO NOT flip out about today's lows. It kills your spirit. This is a 12-month business every year. Ride the waves and do a consistently excellent job. It all comes full circle in the end.
To your success!
Mike Costigan
