Hello:

I have been reading/researching, and it seems that you really need to have cash reserves to be able to handle having the reo listings. I have read that you may need around $1,000 per listing (and you get refunded, of course), but refunds could be in 45 days or more. If this is not correct please let me know.

It seems that for some reo's, the contractors get paid directly if you use a national company instead of a local contractor, (again if this is not correct, please let me know), but it seems that there are issues with some of these national companies, as I have read in the forums. Seems that some agents prefer to use the national companies not to use their cash reserves, and others prefer the local contractor for a job better done although the cost could be higher... is this correct?

When you started, what worked better for you to be able to handle these costs? Did you get a loan? Did you just use a credit card?...other?

Thank you.

The agent doesn't determine the national PP or local. That's client directed. The 1K per would probably be a decent benchmark based on averages. I run about 2K per when I cover it all and 500 when I just cover utilities. Some suprises can come up. CFK for 3 3 families at 4K each and your holding 36K. Some banks pay on 30 days, others pay on 60-90 days. They like to play with our money. Again, as a benchmark, if you're handling 20 listings and 1/2 are using nationals and 1/2 are yours, figure 20K almost constantly owed to you. Watch your exposure. When Freemont folded they left a ton of agents holding the bag. Rumor has it that a couple of outsourcers that are on having a financial pince right now. Whether or not they survive is an answer above my pay grade. And don't even ask the name, it's rumor only. My point being it happens so keep your ears open.
Regarding funding. Even if you can a=carry it out of pocket, establish a line of credit or HELOC to cover any unexpected extreme costs if the amount takes an unexpected bounce up. Major renovation, large number of CFK, heavy back water bills, etc. Also keep in mind that an inability to cover what these banks consider "normal" expenses could freeze you out of the game.
Hope this helps.

It really depends whose properties you are selling. Some companies require you to pay for everything up front, while some might be only the utilities. This means you might have a few hundred on some listings, or $10,000+ on others.

I use my own personal money. I opened an LLC and a bank account just for this and have put money in there over the years. Now I can handle just about anything that comes my way and will have a nice chunk of cash when reo dies down. I cant see using a credit card just for expenses unless it's 0% apr, because some companies take a few months to reimburse. I am also careful what companies I front money for just in case they fold.

It is one of the most disconcerting things about this job. I have just been asked to put up $2800+ in past HOA dues on a chincy little dink of a property. I do it out of fear of losing the listing if I refruse. They thoughtfully reminded me and other agents there are 10 other people standing in line to do my job. I wonder how many of them have $2800 of their own money to put on the line.

Regarding CFK, I think this is a disinsentive for the agent to negotiate as hard as he can for a successful transaction.

The most I have ever had on the line at one time is about 8k. I am not a large lister, I carry about 10 listings usually.

Yea, you will need some reserves to handle REO’s. $1000.00 seems about right on average but things can change. When I was busier, I had about $20,000 out with one client. Then they started reimbursements on a 60 - 90 day turnaround instead of 30 days and suddenly, I was out close to $40,000 with them. I have lost a bit of money from two lenders when they filed BK so you need to keep current with the rumors and start slowing down with suspect companies so you don’t get nailed too badly if they go out of business.

All in all, you need to remember that you are offering unsecured credit to someone that you don’t know all that well. Bankers will tell you that it is pretty stupid to lend money to someone without reviewing financials or pulling credit but that is what we do. Last month, I was out $10,000 on a CFK in addition to trash-out, minor repairs and utilities. I was able to sell the place quickly so the client will be cashed out in about a week but I probably won’t get my money back for another 30 days. I have had rehabs running $10-15 thousand, had to pay LID’s for several thousand each, bring HOA dues current and pay monthly and so on. So you can get some properties that are drain your account for some big bucks. You either do it or risk losing an account.

AHMSI is turning out to be my favorite client as they pay for everything, utilities and all. They use FAS so the maintenance of their properties is lacking sometimes but I appreciate not having to handle reimbursements on their assets.

I don’t recommend borrowing to fund these expenses for a couple reasons. First, the carrying costs are high and secondly paying interest on a credit card to loan to someone else for no interest doesn’t make much sense. If you use your own money, your only loss is income loss from an alternative investment opportunity and the fees some clients will charge you to process your reimbursements.

One of the "rules" I have adopted regarding this issue is that I will not pay for anything if the AM company wants to reimburse when it's sold and have it placed on the HUD-1. I can live with 60 days, but not with the when (or if) it closes.

Well said.

I got stiffed for quite a bit by Keystone one time when their client Conseco,filed for bankruptcy, so that made me skittish. I try to be careful, especially if it's some new company. I don't pay CFK, and so far all of them have coughed up the money. I don't even turn on utilities unless they insist.

I lost a little (a few rekeys) in the Conseco mess, but overall have been okay with Keystone.

When they ask for something that is not utilities, I will email the asset manager that I need that item set up as a task in the online system and don't pay the bill until it is setup.

In some areas, I don't do the utilities until I have too for inspections. I seem to get a lot of old utility (water, sewer, trash) and have the same problem about $ amounts.

I had a similar situation when Conesco went belly up. I advised Keystone that I had no contract with their client. I had performed the work at Keystone's request and the funds were due from Keystone. It worked.

I do Freddie Macs and they like a $5,000 reserve per property. They pay well, and the commission split is even for a change, so I don't complain. I'm running around 15 properties per month right now, and every servicer requires the utilities be on. Now some of my Fannies are calling for septic tank inspections prior to contracts. Meaning a $900 expense out of my pocket for just one.

You've really got to have some reserves to use for REO's. Honestly, if I didn't have money saved up from one transaction to another, there'd be trouble. The credit card is not a good idea. The banks won't reimburse you interest. They also won't reimburse you late fees on any bills, so don't miss any or you'll be out that too.

And prepare for loosing money whenever you don't submit your invoices on their timeline. One day past what they'll do, and you won't be reimbursed.

It didn't work for us. I felt my agreement was with Keystone, not Conseco; but they didn't pay us. I never did any work for them again; i won't take the chance.

Anybody with LPS Invoice Management for REO's? NREOB notified me I would have to send all invoices through this LPN company. I had to take a on-line class and test plus pay $50.00 to get signed on with them.

I have used LPS for my NREOB listings. I don't like paying per invoice but the system is not too bad when you get used to it. I doubt I will use it much anymore because NREOB just lost most of their assets in CA. Not sure about other states.

NREOB must have lost some in Georgia too. A week before closing I was notified that Chase was placing my listing with another management company. I was to keep the listing but would be given the new AM info. That didn't happen because it closed before they could make changes. I sent a few invoices through LPS but haven't been reimbursed yet.I will invoice utilities but not larger amounts like cash for keys. I tell them I do not have those funds available and they overnight it. Thanks for the input.

I severely dislike LPS invoice. Honestly, that system finds more ways not to reimburse you. The $5 fee per invoice is rediculous, every time you get a new servicer you have to make sure they get added on, and documents uploaded sometimes will show uploaded but actually aren't. And with the $100 minimum per invoice, you have to wait sometimes a good while to build up enough expenses to be paid. If I could avoid it, I would.

$100 min invoice? That must be asset management company specific, I submit less than $100 regularly without issue, but often combine them to limit to 1 $5 fee
That $5 fee should be reimbursed to us..what other job would make you pay to get reimbursed for expenses you incur at the request of the employer or contracted employer in this case.
I like the system though, they dont bounce back much and process payments very quickly by comparison.

Fannie Mae has a $250 per invoice minimum. They do not charge for the invoice, like LPS, though. LPS charges, but they pay pretty quickly. Fannie is taking three months on some of my reimbursements.