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4 Tips for Successful REO Transactions

July 08 2013

4 tipsForSuccessful reoThe real estate market has turned the corner. The signs and economists are saying that barring unforeseen calamities or further limitations on available mortgage credit, the housing market will continue to gain momentum into 2014.

Distressed properties are still prevalent in most parts of the country though, and real estate owned (REO) properties are still common in certain markets as well. Here are four tips about how to represent buyers' best interests in these often-challenging transactions.

1) Educate Buyers

REOs aren't for everyone. Agents will want to use the buyer counseling session to assess the types of properties the buyer does and doesn't want to see. This will require agents to credibly explain the common terminology and process of distressed property transactions and provide realistic expectations of what buyers can expect if they decide to pursue an REO.

2) Do the Homework

Not every REO listing is a great deal. While there are some deals to be found, there are also many REO properties that are poorly priced relative to the work required and comparable properties in the area. Buyers don't have much recourse in an REO transaction, making it extremely important to thoroughly research the property condition and history. Also, agents need to make sure their buyer can use the property as they intend to. For example, if they're investing in a condo, agents will need to check the owner/renter ratio and determine if there are any rental restrictions for investors.

3) Be Aware of "Rules"

You already know what's expected in a typical transaction, but in REO sales, all those rules change. The seller is a lender represented by an asset manager who prizes a quick cash sale. Properties are sold as is. An agent's job begins with one or more occupancy checks. Steps must be taken to remove anyone living there and/or their personal property. Everything must be handled in a particular way so agents and buyers don't overstep their bounds or walk into a potentially dangerous situation. Even if you have sold REOs before, each lender, and consequently, listing agent, uses a different format.

4) Stay on Top of Deadlines

A missed deadline can constitute a breach of contract and cause an asset manager to cancel the deal, however, problems can be avoided with good upfront planning. For buyers, closing dates are firm. Buyers need to have a clear understanding from their mortgage lenders regarding their ability to meet the closing deadlines. Agents need to consider everything that must be done and submit a buyer's offer with a feasible closing date.

Asset managers rely on Broker Price Opinions (BPOs) from two or three real estate professionals, in addition to the listing agent's BPO, to decide whether to put a property on the market, walk away, repair it, leave it as is, or whether to accept or counter an offer. For those who embrace the challenges and begin to build a strong referral business for REOs, there are certainly rewards to reap.

Learn how to conduct BPOs and sharpen your valuation skills with the "BPOs: The Agent's Role in the Valuation Process" course. Visit to find a course near you.Visit to find a course near you.