Those who wish to become REO agents must first attend courses and pass the exam to obtain a real estate license.
As the rate of foreclosures in the US increases, so does the need, and opportunity, for REO (real estate ownership) agents. Anyone with a real estate license can become an REO agent, but that doesn’t mean doors will open automatically. The field is competitive and is very much a “who you know” branch of the real estate business.
REO agents deal with properties that banks have repossessed. In fact, they have three functions for banks: to help value foreclosed properties, to hold those properties until they are sold, and to sell them. However, this plethora of responsibilities means that banks tend to work only with REO agents they trust.
Banks can mitigate their losses by selling REO homes when a customer defaults on a mortgage.
The question, then, is not so much how to become an REO agent, but how to function profitably as one in a volatile market. Generally, contact between banks and agents is made directly or through a “predetermined notification list,” which designates all properties of the bank or creditor that are being foreclosed. Anyone intending to become an REO agent must have the ability to establish a relationship with a bank or lender that sends them business.
Of course, some unpleasant things are inherent in the job. An REO agent usually attends sheriff’s evictions and is responsible for dealing with things (trash and stuff) that recent owners have left behind. Often, the agent must pay outstanding utility bills and then wait up to 90 days for a refund. Until the home is sold, the REO agent must hold the property, fill out a BPO (Broker’s Price Opinion) form to set a sale price, list the property, and schedule showings.
Becoming an REO agent is learning how to function on a constantly changing terrain. If multiple homes in a neighborhood are foreclosed on, pricing one of them can be tricky. Unlike a traditional real estate transaction for a homeowner who likely has a more relaxed time frame in mind, a bank or other commercial lender will be eager to get rid of a foreclosed property because it is absorbing money rather than producing it. An REO property exists in limbo, for the bank and the agent.
Someone who demonstrates competence in this housing niche is likely to end up with as many deals as they can. However, REO agents must also be careful not to acquire more foreclosure properties than they can hold onto, lest they enter a cash flow crisis. For this reason, many REO agents have the 90 day notice as one of their main tools, for their own use.