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The Golden Era of REO Came and Went with Nothing More than a Whisper.
Since 2008, I have been hearing that banks and lenders are going to flood the market with REO inventory and spark a “gold” rush of sorts in real estate. In fact, I distinctively remember huge parties and networking events around this whole “REO Tsunami” idea however, what we have learned is history repeats its self.
At that time, I like many others, wondered just exactly what was going to happen to all the REO inventory we knew the bank were holding. I like many others asked around and gleaned as much information as we could and ultimately I saw two different schools of thought forming.
The first school of thought or the Tsunami crowd was throwing lavish networking events, hosting charities parties and even organizing education conferences around this whole crowd mentality that the banks and lenders were going to inundate the markets with non-performing assets. I was never a part of this crowd but, honestly…..I did start asking “what is going to have to happen to all this inventory?”
The second school of thought was a more controlled response where the banks and lenders were going to trickle the inventory on the market. The argument here was, banks and lenders aren’t able to flood the market because it would collapse the American economy. Now, this sounded more reasonable to me and this was the camp I was in however, I knew that in the back of my head, somehow, someway, inventory was going to have to move but, I just didn’t know when.
2009 – 2012, agents across the country saw banks clamoring for their help to unload REO inventory. We could put an application in with a non-traditional REO disposition channel and be approved for listings in a couple weeks and in some cases a couple days. Now, granted, getting in direct with organizations like Fannie Mae or HUD was still a nightmare and impossible for most, none the less, the REO Agent ranks started swelling with over puffed up agents claiming to be local experts and before you knew it, every city was swollen with rank and file amateurs selling REO. I remember one large…very large, national outsourcer tell me that they DNU’d (Do Not Use) categorized more agents in 2008 than they accepted applications.
During this time, many could argue we had a “REO Golden Era” but the truth of the matter is, it never lived up to the hype….or better yet, it never lived up to what many of us saw was actually happening in our markets. Just because we had a record number or REO agents out there selling a record number of REOs, we still had homes setting on the market, with no agent sign in the yard, just setting vacant, abandoned and on the banks books as a non-performing asset. In fact, it was so rampant that many of us, myself included really was starting to believe a REO tsunami was definitely on the horizon however, it never came.
Instead of a Tsunami, we got a short sale bonanza or in some areas a property management nightmare. Those professionals who had been around the block in the 80’s knew we would never see a tsunami and they were right….are right however, like I said earlier, it left us all wondering just exactly what was going to happen with all this inventory. What we didn’t know was that the largest holders of REO inventory, HUD, Fannie Mae, Freddie Mac, Bank of America, Wells Fargo, Etc… was going to end up as political punching bags and political puppets for the attempted socialization of the American housing industry. Instead of letting the free market run it’s course, we found ourselves at the mercy of politicians who used the crisis to help re-elect liberal or progressive politicians that promised housing reform. This housing reform was just a guise to put in public welfare policies which would keep people in homes longer even though, it was incredibly obvious these homeowners were never going to be able to keep the home.
Finally, the tsunami will never come because of the push to property management. Many politicians are starting to see the writing on the wall and are realizing that these banks just can’t keep people in the home for an indefinite amount of time and because of such, they now have to rent these homes to the same people who can’t pay the mortgage. Well, at an extremely reduced rate, that is.
You end up with a market place that is overly burdened by government / political influence and that is creeping along (regardless of lame stream media reports) because it’s directly tied to unemployment rates. You end up with high fraud levels because distressed homeowners have no idea what is all happening and turning to less than reputable agents or predators to save their homes and worse of all, you end up changing the homeowner mentality from one of “homeownership is a privilege” to “homeowners his a right”. Once this fundamental transformation of the real estate industry is complete, we will have another entitlement program in this country….housing.