I was interested in learning more about the expenses associated with listing REOs. I have been reading the posts here, and I was concerned about the expenses versus the commission. Most banks only pay 5% commission for REOs here. Do you have to pay a referral fee to the bank, out of your 5%? Is is true that you don't get all of the money you spend on the property back?

I don't understand why it would be worth it to list these properties. What am I missing here???

Example:

List Price: 39,000. (average price here)
Commission: 1,950. (5%)
Buyer's Agent: 975. (2.5%)

Listing Agent: 975.00
Bank Referral Fee 25% -243.75
Listing Broker Cut: -
Expenses for Property -

Leave's me with owing somebody!!!

Thanks for your comments!

many have a min. commisson paid genarally $2000 Is the rule, But have seen a few as low as 1500.

you should get your money you put into your property back, definitly make sure you get all expenses approved with the AM. Also make sure you get in with companies that pay, As repairs and such could get expensive. as for commission, some of the REO companies have a minimum, some take a referral fee, but there are also those that do not. I have even seen some pay 7%. anyway hope tihs helps.

Most of the ones I've gotten as of late are not 50/50 split the between buyer's broker & listing broker. Buyer's broker has been recieving a higher compensaion, per the banks listing agreements.

The two co's that I reive most of my listings from are also getting away from ref. fees back, and of course lowering the total commision. IMO, I'd rather have no ref. fee. That stuff can turn into some serious bucks.

Thanks, for all of your replies. I was interested in learning-- what is the average amount of money you need to have up front for repairs? What do you invest upfront?

What I put out depends on the property. There is the cost of having a locksmith re-key and secure the property- usually $75-$150 here. The costs of having utilities put on in your name. Costs for trash-outs and cleaning the property (sometimes up to $1500), and minor repairs. I've never had any large repairs approved, but some banks paperwork says they can pay vebdors directly and I would certainly check on that.

Thanks Zephyr for your information. I will look into to this further. With sluggish sales here, and so many foreclosures, this is something I need to look into. The companies I do bpos for do not give out listings. I have read these posts where agents receive phone calls from asset managers to list, but I haven't been that lucky, yet. The same agents seem to get "all" of these listings.

Asset managers do not often make changes in area agent representations. Once a relationship is developed it is unlikely to change with out some significant reason... like death, going out of business and other similar occurrences.

Your best bet may be to get into the 2nd opinion BPO end and in a few years you may have an realistic opportunity if your evaluations are pr oven correct.

This is not recommended as a "fill in" business for slower market times. It is a niche market requiring special knowledge and significant funding to support. It would not be unusual to be $3k to $5k out of pocket in some REO properties before you receive reimbursement. And the 5% is not all yours as has been stated AND you receive no interest or special payment for arranging, monitoring and paying all the subcontractors. That all comes free for them providing you with the listing.

Right now, I have a little over $3000 out for 3 in pre-list and 2 on the market. That's hard, sometimes, to front that much money. But besides the money output and the specialized knowledge of the market that is needed, one thing that doesn't get mentioned a lot, that is an absolute must- be emotionally stable! This business can be a roller-coaster ride, with a lot more stress, and a lot of other human emotions being thrown at you (the people who get angry and start fights or threaten you, the ones who get discouraged and depressed and won't move, those who lie to try to keep from getting evicted, etc). they've all got a story, and while I hope none of us ever get to the point that we just don't care about others, you have to be pretty thick-skinnned to deal with it day after day. I've sat with a man who cried that he didn't know what to do, that he failed his family and lost everything including their respect; and I've got into the van and left in a hurry when I started getting cussed at and threatened by another guy. You never know what you're gonna walk into, and the expenses are just a little bit of that.

Realty Check and Zephyr, thanks! This is the information that I needed to know. Sounds a little over my head, for right now.

Second opinion bpos? Is this different than the bpos that I'm doing now for CC?

Zephyr, thanks again for the 'Realty Check'!

...Well, it's back to the drawing board...

I've been searching this forum for 3 or 4 days straight now and have gained valuable information for which i'm grateful- i personally love a challange and like the investing, reo side of real estate- i'm also trying to get into loss mitigation to help people out before reo. my question is this-- everyone says they pay for trash removal clean up? Can't you just do it yourself and save the money? Or does it have to be invoiced and billed to the asset company?

MissBea, most of my interior BPO requests are for second-opinions. Basically, another agent has been assigned the listing and has given their BPO to their AM. The AM wants a second opinion to be sure the listing agent is correct in his/her price opinion.

That is how I got started in the REO biz. I was doing second opinion BPOs and when the listing agent did not get the REO sold, the listing would sometimes get reassigned to me. I am now the primary REO listing agent for 1 company in my area and secondary for 2 more. (Please note that I do not list a huge number of REOs but at any give time generally have 1 or 2 listed.)

The expenses are part of the REO biz. What hasn't been mentioned is the large volume of paperwork that goes into this. Checklists, reports, reimbursement requests that have to be done exactly right or you don't get your money back, etc. For me, the paperwork is the PITA part of this way more than the expenses.

Here's a hint for the newbies: When you get a request for an interior BPO and the access contact person is a RE agent, that means this is a REO property. Completing those BPOs is another way to get your name in front of the people that give out those REO assignments.....at least that is what I have found in my experience.

You get refunded the money you front as long as you follow the guidelines of the bank and any "extra" expenses are approved prior to the work being ordered. If they authorize $300 for a trash out and your bids come in at $350.00 you better get approval before ordering the work because they will not pay. A lot of agents don't realize that you typically front expenses and wait up to 30-60 days for payment. An agent in our office just got 6 REO duplexes, she had to trash them all out, turn on utilities, pay past bills, etc. Came to about $6,000 that she fronted.

East Texas said:

"Here's a hint for the newbies: When you get a request for an interior BPO and the access contact person is a RE agent, that means this is a REO property."

You are incorrect, many times it is an owner occupied home that is being sold and it may be for a short sale.

EVERY interior second-opinion BPO I have ever done where the contact is a RE agent has been a REO that was vacant. As previously posted, that has been MY experience.....

I only know of a couple of agents that have ever been involved in short sales locally; it's just not something that we often see in my immediate area.

The difference in our experiences could be that short sales are more common in your area than in mine.