Every business suffers downtime, when things are slow and the money isn’t pouring in as fast as it otherwise does. For REO properties, the end of the year and the holiday season in particular are that downtime. Very few bank-owned properties hit the market during this time, for a variety of reasons. For banks, that’s something of a good thing — no bank wants to build a portfolio of foreclosure properties.
For brokers and agents, however, REO properties may be your bread and butter, and when there aren’t enough on the market, this can be a difficult time of year. What it is not, however, is a time to rest on your laurels and hope for things to get better. The end-of-year downtime is something you should expect, and for which you should plan. Consider some options for what you can do to maintain REO downtime productivity and prepare for the busy season once more.
Downtime for REO Agents
There comes a time when every business is slow. For REO brokers and agents, this time is predictable, as it happens every holiday season at the end of the year. The reason for this is that there’s not a high inventory of properties because most banks put a moratorium on foreclosures and evictions over the holidays.
Downtime can be very costly for any business. In fact, while the costs can vary greatly from business to business, slow periods can result in losses in the hundreds of thousands of dollars. Businesses can only tolerate a certain amount of this loss before it causes serious damage. On the up side, you should know to expect the annual winter downtime in the REO industry, and this can allow you to prepare and be more productive.
When you expect downtime, you can create benchmarks and objectives regarding the time that you’ll need to restore operations, as well as the maximum amount of loss you can afford in that time. Remember, though, it’s not all about dollars, it’s about clients and business relationships. One bad experience can cost you a customer, and that can be far more damaging than the money you lose.
Why the Holidays Represent Downtime
The reasons for this are many, but the most obvious of them is that it’s the holidays, and it’s just unethical to put people out of their homes during this time of year.
This year, Freddie Mac and Fannie Mae announced publicly that starting on December 17 through January 2, 2019, there would be a moratorium on eviction lockouts that applies to all foreclosed and occupied homes owned by the lenders. While foreclosure activities will continue, occupants will not be evicted from their homes, giving them a cushion during which they can attempt to find other options.
Not only is it an ethical issue, there’s the issue of the weather. Finding a home during the coldest months of the year is difficult in the best of situations, and when someone finds themselves without a place to stay, the effects can be devastating.
These two companies, the two largest government-sponsored enterprises or GSEs, have a tradition of doing this every year to help provide families with some level of certainty through the holiday season. This serves to help borrowers who are struggling and to give them a chance to reach out to their servicers to get help avoiding eviction. No bank wants to end up owning a home, and most would much rather work with borrowers to see their mortgage brought up to date.
Still, while the holidays are good for families who are behind on their bills, it creates a circumstance where REO agents don’t have the opportunity to build their property portfolio.
What Does “REO Downtime Productivity” Mean?
During downtime, the most successful agents view downtime as an opportunity rather than a time for concern or a time to sit and wait.
You need to maintain and potentially even increase your productivity during downtime. This means selling properties, not spinning your wheels and chasing down others to make sure they are doing their job. It means that you need to spend your time doing the things you need to do, rather than wasting it looking after others.
Every real estate agent, for example, has to do weekly or bi-weekly inspections on each asset they represent. It’s important to ensure that everyone involved with maintaining these properties, from groundskeepers to carpenters, are doing what they are supposed to do. As a broker, you shouldn’t be doing their jobs for them or chasing them down to get the jobs done.
The Challenges of Slow Times
The biggest challenge an REO broker faces during slow periods is to how to stay afloat when your inventory is down. After all, you rely on having a solid range of properties in your portfolio to put on the market, sell and from which to make a profit. You have bills to pay, operations to run, expenses and overhead to pay, but during slow times, far fewer products to sell.
This isn’t an issue that’s unique to the REO world, but when you are slow, you face the challenge of losing contractors. That can perhaps be the most devastating effect of these times. After all, you can attempt to plan for a low income period. But when you’re slow, the people with whom you conduct business aren’t going to be as dedicated. As contractors, they too need to go where the money is.
This means that if you don’t have work to give them, they have to seek business elsewhere. In the end, that means when business picks up again, they might not be as available for you as they have been in the past. You thus run the risk of losing business relationships with needed contractors as time moves on.
What an REO Broker Should Do During Slow Times
There’s nothing you can do about a slow inventory season. It happens. What matters is what you do during that season. Maintaining REO downtime productivity can mean other things besides gaining assets. Naturally, your first goal should be to maintain and sell the properties you do have in your portfolio. This means staying on top of the upgrades, fixes and updates that need to be done to get those properties off the market fast.
Make sure your contractors are staying on top of the necessary interior work, including a fresh coat of paint, upgrading the kitchen and bathroom, installing new lighting fixtures and installing new flooring. Outside, get on top of the curb appeal. Make sure that it’s ready for the spring and properly winterized against the cold weather.
Winterizing is Vital
One of the biggest risks for REO agents during this time of year is cold weather. It can result in frozen pipes and other issues that can create real structural damage to homes, which can cost in the thousands to repair. That’s why winterizing the home is such an important part of your REO downtime productivity. Make sure that the plumbing is properly insulated and do not shut off utilities. Keep the interior temperature at the home at 55 to 58 degrees to keep pipes from freezing up.
Make sure all appliances are unplugged to be sure they’re free from the risk of short circuits that can cause electrical fires. Eliminate debris lying against the house that can cause damage to the exterior walls during the winter deep freeze, and consider weather stripping around your windows and doors.
Winter security is also vital. Squatters will actively look for places to get out of the cold, and thieves looking to steal copper are a big risk to vacant properties. Besides locking the place up securely, consider having an alarm installed, and put timers on the lights so that they go on and off in different rooms at different times. This makes the place look lived-in, which is a deterrent to unwanted visitors.
Keep Up With Your Marketing
With a slowdown in revenue, many REO agents choose to reduce their marketing budgets. This can be a mistake. The slowest times for income are the best times to advertise. This enables you to get in front of potential clients exactly when you need to. If you think about it, when you’re pulling in the most money, that’s the time you’re least in need of advertising.
Marketing during these slow seasons can be a great way to spend what limited income you have. It keeps your name out there and helps you build and solidify your brand, right when you need it the most.
Quick Tips for Brokers to Stay Productive During Downtime
A number of things can be done to stay productive during downtime, and many don’t take that long at all.
- Set up your current properties for automatic showing requests through the MLS.
- Make sure all keys are returned to their lockboxes.
- Set up and maintain your email lists, and send offer packages to listing offices.
- Check your email several times per day
- Work with your lender contacts to shore up financing options for your clients
- Engage in corporate training through Realcomp, Shareholder associations and other professional societies.
Do Your Homework for the Coming Year
The real estate market is volatile — that’s about as much of an understatement as a person can make. It also means that, as an REO agent, you need to stay on top of the housing and mortgage trends for the coming year. There’s no better time to do this than during the slow periods. This year, it looks like some of the trends for the 2018 market are likely to continue into 2019.
Mortgage rates appear to be going down again, which could be good news for buyers, and good news for you as a broker looking to sell your properties. Due to the rising rates in 2018, home sales, both pending and final, were down every month as potential buyers chose to wait and see what happened with the market. Consumer demand, however, is up, and that means it’s a good time to prepare for sales.
Both the National Association of Realtors and the National Association of Home Builders expect mortgage rates this coming year to come in at just over 5%, higher than the lowest point from several years ago, but still low enough to encourage home buyers. The Mortgage Bankers Association, Freddie Mac and Fannie Mae agree, though Fannie Mae is predicting a friendlier rate of just under 5%.
Grow and Improve Your Business Practices
This time of year is the ideal time to really brush up on the areas where you could have performed better. No business, anywhere, is perfect in its dealings, and the ideal time to do some business-based self-reflection is not when you’re slammed with business, but when you’re not busy and you have time to perform these self-audits.
Consider during this time how you can better serve both your clients and your employees. Revisit last year’s projects to see where you may have come up short and strategize to avoid such shortfalls in the future. Consider how you can improve your relations with your contractors. Examine your overall business practices and think of ways you can improve your team’s performance. Implement metrics to measure your success. This will enable you to hit the ground running next year.
Get Out in the Field
Getting out in the field is also a vital thing to do this time of year. You should be doing research on potential new clients. Look into hedge funds, asset managers and even new banks and lenders that you can service by adding them to your client portfolio. Submit applications to those that look like they would be a good fit.
Meet with municipalities in your area, including inspectors and code enforcers, so you’re always up to date on the regulations and statutes you’ll need to obey in regard to your REO properties. Failing to meet current codes and laws can cost hundreds of thousands of dollars in fines as municipalities work to fight urban blight.
That’s why, at this time of year, it’s important to get up to speed on local codes. Being informed allows you to address problems before they arise and avoid potential fines and problems in the future.
Recruit and Secure Vendors
This is also the perfect time of year to meet your vendors and shore up your relationships. Make sure you keep that line of communication open. As we said earlier, when work is slow they will need to find other sources of income. Your ability to keep those communication lines open can be the difference between winning them back when new work arises and losing their business altogether.
In short: be proactive this time of year. It’s the time that you need to spend the most effort on maintaining your relationships. It’s the time to conduct research on the best property preservation and construction companies and determine what to look for in a property preservation and restoration expert. Learn the factors you need to consider to find the right REO services company: experience, history of working with banks, ability to work within your needs, and ability to work within your budget.
Find an REO Services Company
Taking the steps to stay productive during downtime is really upon you, the broker. While an REO services company can’t help you evaluate your business practices or shore up your relationships, they can be very useful in your future productivity. With the services of an experienced REO management company, you won’t have to chase down contractors to make sure people are doing their jobs during your inspections.
In addition, the right management firm can help you sell those properties you still have in your portfolio. They can also provide a great way to ensure that you have the services you need when the time comes to build your business once more. REO services can help you to add properties to your portfolio as well. They will provide real-time updates and budget monitoring for every stage of the sale process. They provide tenant-occupied services to deal with evictions when the time comes. They also provide the peace of mind that your preservation and upgrade services will be handled properly.
In fact, there are many benefits to working with REO management services. They can enhance the marketability of your property and reduce holding time. They can help you to mitigate the risks associated with maintaining properties. They help allow you to focus on marketing and selling the property without worrying about doing everyone else’s job at the same time. They accomplish all of this with expertise and experience, using licensed contractors and offering the best in support at every level.
Finding the right REO services company and establishing and maintaining a relationship with them can be the most important thing you do to stay productive during downtime with your REO brokerage.
First Freedom Preservation
First Freedom Preservation is an experienced Maryland-based REO services company that is here to make your portfolio more profitable across the board. We operate in Maryland, New Jersey, Pennsylvania, Delaware and Washington D.C. As a company, we have over 15 years of experience in the industry, and individually we bring decades of combined experience in the property preservation and management industry to the table. We work with only the very best professional contractors in the business.
We offer complete renovation and repair services, including upgrades both interior and exterior, damaged property estimates and repairs, curb appeal enhancement, lead paint abatement and needed updates, all with the very best craftsmanship delivered by full-time, licensed contractors. Maintain control of your properties every step of the way, while we take care of making your property marketable and get it in shape for you to sell fast and at top dollar.
From debris hazard and removal to winterization, lock box installation, code compliance — even quality assurance inspections and tenant occupied services — we can handle any job. We’ll do it within your budget, and it all starts with a thorough inspection of the property and breakdown of the services you need.