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REALTOR® REO RESOURCES
How do lenders choose listing agents?
Many lenders look for experience in listing bank owned properties, experience in the
real estate business, technical ability and access. One avenue to asset managers is
doing Broker Price Opinions. You may be called upon to do a BPO for another
transaction, which is a good opportunity to break into the market.
What is a REO listing?
REO stands for real estate owned, also known as bank owned. REO sellers are unique
because they are corporate clients – either the lender itself or another party that has
contracted the lender to manage the sale (sometimes called asset managers.) Lenders
usually require additional services from listing agents, such as property management
and monitoring of repairs. Many require listing agents to file status reports, front all
monies for utilities and other expenditures, and coordinate the departure of occupants.
Where are these details explained?
Most lenders have a corporate specific listing agreement. It is long and detailed, or it
refers you to a website that contains the information. (Completely review the listing
agreement before signing so you and your broker know what is expected.)
What agreement details should I study closely?
The compensation structure. Most agreements dictate the co-broke structure. If you are
not comfortable with the co-broke arrangement, do not sign the listing agreement.
Further, most REO listing agreements preclude the listing broker from charging the
other broker a transaction fee.
My listing agreement requires me to submit bills for reimbursement on a specific
schedule. If I am not in compliance, can they refuse to reimburse me?
It depends on the terms of your agreement. A good business practice is to identify time
requirements and meet them.
How do lenders communicate with their listing brokers?
Most banks communicate through email or secure websites. Phone contact will be an
individual lender’s decision; but generally, they handle hundreds of properties at one
time and prefer email. If you can create a personal relationship with a lender’s
representative, all the better. However, that rarely occurs.
What if my municipality has certain requirements for all vacant homes or an
ordinance that requires the foreclosed property to be registered?
The lender relies on its listing agent to communicate all requirements to them and
complete all paperwork. Over-communicate at all times, even if you feel it is something
they already know.
TRANSACTION INFORMATION
If a property is occupied by either the previous homeowners or tenants will it be
vacant at closing?
Usually it will be vacant; however a new federal law gives tenants with “bona fide
leases” new rights after a foreclosure. Most lenders work with an eviction attorney to
remove current residents. Listing agents should contact the eviction attorney for status
updates.
How do lenders handle property disclosure information?
Almost all REO property is sold “as is” because the lender has never lived in the house
and has no direct knowledge about the property. They want buyers to do their own
research and most do not want their listing agents to research a property. This does
not, however, relieve a listing agent of his or her duty to disclose defects. As an
example, if a property has termites, the listing agent must disclose that fact. Buyers will
be required to sign a Sellers Addendum prepared by the lender, and in almost all cases,
the lender will not modify this addendum. If a buyer needs help interpreting the
addendum ADVISE THEM TO CONSULT AN ATTORNEY. DO NOT ATTEMPT TO
INTERPRET THIS ADDENDUM FOR THEM.
How does a lender handle offers?
Offers are presented either on a lender-designed work sheet, by email or through a
secure website. Lenders want a copy of the deposit check, a preapproval letter and the
executed purchase contract. Responses can be immediate or take up to several days.
Keep in mind they work regular business hours and are closed on weekends.
I submitted a full price offer to a listing broker for an REO property and it was
refused. How do I know they actually presented my offer?
Many REO properties are currently listing below market value because lenders want to
clear the inventory from their books. Due to this pricing, many properties receive
multiple offers before it is even placed in the MLS, so it is very possible that the offer
was presented, but not accepted. It is recommended you counsel your buyer about your
opinion of the actual value of the property and to ask the listing broker if there are other
offers pending. While it is frustrating to present a full price offer and have it rejected,
there is no incentive for the listing broker not to present your offer. A better bet is to
continue looking for other listings for your buyer.
Who closes the property for the lender?
Most lenders have a title company that coordinates the closing unless the contract calls
for the buyer’s title company to handle the closing.
It seems that REO closings are almost always delayed. Why is that?
There are many reasons. After a property is foreclosed, it requires a lot of paperwork to
ensure a clean and marketable title. Further, with some negotiated issues, the asset
manager handling the transaction may need to resubmit documents for approval, even if
the changes are minor. Patience is a requirement for any REO closing.
The purchase contract sent back to my buyer has a requirement that if there is a
delay in closing due to the fault of the buyer, the buyer will pay a certain amount
of money per day? Is this legal?
Any delays attributable to the buyer (e.g. financing delays or inspection issues) will likely
subject the buyer to a per diem monetary penalty. The penalty can be heavy. Some
lenders charge a small percentage of the overall contract value, while others charge a
straight fee of $50-$100 per day in order to dissuade buyers from delaying the deal.
This is something to watch closely as the lender usually will not waive it.
This publication is provided as a service to members of Florida Realtors® and is intended for educational use only. Opinions
or suggestions in this publication do not necessarily represent the official policies or positions of Florida Realtors. Florida
Realtors does not accept responsibility for any misinterpretation or misapplication by the reader of the information contained
in this article. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice
concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL PROBLEMS CONSULT LEGAL
COUNSEL.