I've written in the past about how to list REO's for banks, but what many agents overlook are the related expenses that go along with carrying many REO listings.
Becoming a REO agent can be very rewarding, but many agents neglect to plan ahead and understand that they will be paying utilities for REO properties that they have listed.
This article will explain exactly what you can expect and give you some tricks and tips on how to not get in over your head as you start paying utilities for REO properties as you become a top REO agent.
What Types of Bills WIll I have to Pay for My REO Listings?
Read this twice: It's not only utilities and its not just while you have the REO property listed!
It is incredibly important to understand the lifestyle of a REO listing as you start to budget expenses and paying utilities for REO properties. Most REO listings start out as "an assignment." This means that the bank or asset manager have decided that you will list the property. However, many times the property is in no condition to be listed.
To get the assignment ready to list on the market, you may have to have one or more of the following services performed:
-Trash Out (all debris, junk and left over belongings removed and hauled away)
-Cleaning
-Water shut off / Winterization
-Pipe Repair
-Lawn / Snow Maintenance
Obviously these services are not free. What many agents fail to realize is that the banks expect you to pay for these services up front. Yes they will reimburse you, but it can take anywhere from 30 to 120 days.
Once the REO Property Becomes a Listing...
Once your REO assignment becomes a listing, most of the major costs have been paid for (trash outs, pipe repair, etc). Hopefully your client will reimburse you quickly.
Now is when you need to make sure you are current on the REO listing's gas, water and electric bill. In colder climates, If the heat gets turned off, the pipes will freeze and your home will never sell. If you have no electricity, buyers can't view the home.
Also, don't forget that if you don't stay current paying utilities for REO properties, they can become a lien on the home. If there is a lien on a REO listing that you are trying to sell, it can delay a closing substantially. That means you're waiting even longer for your money.
Tips for Paying Utilities for REO Properties
Now that I've scared you out of the business, let me try and give you some tips for paying utilities for REO properties. This could save you thousands of dollars and help you avoid the huge cash drain that getting into the REO business can create.
1.) Know Your Contractors:I can not stress this enough. If you have a good relationship with your services you can save a substantial amount of money for the services. If your contractors know they will get all of your business, their rates will be lower. If their rates are lower, you have less money that you are waiting to be reimbursed for.
2.) Negotiate with Your Contractors: As you get into this business, you'll be contacted by many service providers in every industry trying to earn your business. That's great for your cash flow situation! Set up agreements with them that you will pay them immediately AFTER THE BANK SENDS YOU A CHECK. Even if its only $100, once you get up to 30 or 40 listings, that money adds up. If they won't wait for the bank to pay you, offer to pay them half up front and half once you are reimbursed. As you get started listing REO's and paying utilities for REO properties, don't make the mistake of thinking you can carry the costs because "it's only one listing." Take a long term approach and think about every transaction multiplied by 40 listings.
3.) Talk to your local bank: Many banks will be more apt to make a small business loan if you explain that the money will only be used for paying utilities for REO properties. If you can show them your client list, many banks will take that into consideration when factoring in risks. When the banks are lending against big name lending institutions and know that you will be reimbursed, its much easierfor them to justify loaning you the money than if you were using it for marketing or business expansion.
Before you go out and brave the world of real estate, prepare yourself for your journey. Talk to a real estate agents, ask all the questions you needed answered. Check the web sites of real estate and compare them against each other. In that way, you can tell which is the best option for you.
Have you heard about REO properties? Under market value properties? Short sales? Let me give you some bare facts about these things.
REO or Real Estate Owned property is a property now owned by a bank after property was foreclosed due to the inability of the original owner pay off his debt. People can take advantage of getting these properties available at a cheap rate when government or lending banks declare auctions.
On the other hand, may be cheaper but we must also be careful, banks sell these properties in their original condition. Banks don't usually make repairs on the properties. You must be careful and wise in buying any kind of property. You should inspect the property first and check for damages before making an offer to the bank and you should include an inspection contingency period in your offer that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not repair.
In general, REO properties are cheaper but you must steer clear from properties that need a lot of repair because in the long run, you will spend more than you expected.
Under market value property is a property that is priced below the normal market value of the property. Market value is the estimated amount a property would trade in a competitive setting. You can find this kind of properties direct from vendors or from motivated sellers willing to accept a below market value deal. REO properties are also under market value properties. If you are patient, you can find a property that suits you at below market value price or you a realtor to find one for you.
A short sale, on the other hand, is selling of a property with the consent of the lender and the lender accepts the proceeds as payment of debt of the owner even if it is less than what the owner owes. The lender accepts the amount paid even if it was less than the amount owed and forget the difference. The lender will not pursue the borrower legally for the remaining debt.
The buyers like short sale because they can get a good deal out of it. But before you buy a short sale, you must check first the the public records. You should research carefully before making an offer to purchase. Then you should hire an agent with short sale experience to protect your interest.
Be a great investor and get the best deal in real estate. Know all the facts!
Both Brian Anthony & Reggie Jackson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Brian Anthony has sinced written about articles on various topics from Travel and Leisure, Real Estate and Foreclosure Help. I hope this article has helped you. My team lists over 100 REO properties each year and you can see more about how we did it here: . Brian Anthony's top article generates over 9900 views. to your Favourites.
Reggie Jackson has sinced written about articles on various topics from Real Estate. . Reggie Jackson's top article generates over 9900 views. to your Favourites.