We are about to see a ballooning of foreclosures in our market.  It may not reach the levels of Florida, Phoenix or Detroit but it will be significant.  Foreclosure filings were reported on 276 Maine properties in June 2008, a 14 percent increase from the previous month, and a 61 percent increase from June 2007, according to the latest RealtyTrac® U.S. Foreclosure Market Report.

 

I have been working the foreclosure/REO market for nearly five years and currently represent most of the major banks in my area. My personal listings tripled in 2007 and doubled again in 2008.  I project that they will at minimum double again in 2009. While REO’s do present some challenges they are certainly not going away soon. In our current market it is critical that agents learn how to represent their clients with regards to buying or selling foreclosures.

 

Here are important points from three perspectives:

 

1. Council your sellers that if they are going through pre-foreclosure, to sign for all notices that are delivered.  It is easy to think that avoiding notices will delay the process and it will.  It will also annoy the heck out of the lender and run up their costs dramatically.  While this might be entertaining, it will reduce the likelihood that the lender will work with the borrower on a proposed short sale and the lender will always attempt to pass those increased costs to the defaulting borrower.
2. If you are the listing agent asked to do a BPO, do a Google search and get a Better Business Bureau report on the lender asking for you to do the work.  There are some that are notorious for not paying for the report you submit.  If the relationship results in a listing, the lender often asks you to front the fees for snow plowing, lawn care, repairs, inspection reports, etc. and then refuses to reimburse you. More than one licensee has gotten an urgent call to do a BPO.  Think twice before accepting desperate calls for immediate help.  This often leads to you working for free.
3. As a buyer’s agent you should understand and council your client that title defects in foreclosed properties are common.  An example would be Foreclosure Deeds not being properly recorded.  Many of these defects take three or more weeks to rectify and to exasperate things, the purchase and sale contract that many of us use gives the seller thirty days to clean up the problem without permission from the buyer and no penalty to the seller.

 

Done well with a skillful licensee, BPOs and foreclosed properties (REOs) can be transacted with mutual benefits.  Just do them with open eyes and reasonable expectations.

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