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Future is Certain, REO to Rent to Become Stable Market Segment
A recent article by Amilda Dymi published on 9/12/2013 @ 2:24pm ET titled “The Single-Family REO Asset Class is Here to Stay” brings up a very interesting set of questions for the REO industry.
Amilda’s article sources are Jade Rahmani of Keefe Bruyette & Woods believes foreclosure to rent properties are growing and perhaps are already considered a growing segment of the REO market which will be with us for the long haul.
Jade reports that the next 12-24 months will see growth in this market so, as a REO agent, I stop and ask myself, what does that mean to my REO listing inventory? Well, I can safely assume we will see more of the same. More specifically, we will see more and more REO agent portfolios shrink and in many cases, become non-existent. This will further weed out the REO agent specialization and further teaches agents that keeping their ear to the pulse of the industry and being able to change focus will remain paramount to the success of high producing agents.
Before 2007, agents were all a buzz with certifications, designations, training courses, etc.. to sale new homes, stage homes, learn about new home green features, etc… After 2007, agents started seeing classes, certifications, designations, training courses for REO and foreclosures. In 2009, we saw a huge emphasis on foreclosure prevention, avoid foreclosure, modify, refinance, etc… 2012’ish, we saw the huge push for short sales and all kinds of seminars, certifications, designations, training courses, seminars, etc… were on every corner. Now, with this whole REO-Rent segment, guess what we are seeing, all kinds of courses, certifications, designations, seminars on how to be a REO Property Manager.
The big push of this “new” type of segment is due to positive cash flow. The truth of the matter is, unemployment is forecasted be high for the foreseeable future and with high unemployment, comes high distressed homeowners. These homeowners will be forced into the rental market, one way or another and if they can stay in the home and just rent it….at least the asset is performing and in most cases, the bank can still get a positive cash flow, even if it’s considerably less if the occupant was paying their mortgage. In other words, it’s not going anywhere, anytime soon and per the article, it’s going to grow like gang busters the next 12-24 months.
So, what do we REO Agents do? We endure, as we always have. The only thing now is, we need to ensure we are diversifying our own business to ensure we continue to endure. We all know NAR has done little to nothing to address our REO woes and therefore, it’s on us to ensure our business survives and if God willing, thrives and the name of that game is diversification.
Yeah, that means we are likely going to be jumping on and off the “education” wagon for all kinds of new certifications, designations, etc… but, we also should be looking closely at our revenue streams and ensuring that REO…in all it’s forms….isn’t the sole majority of our income. Truth be told, in this political climate, it’s just too risky.