When banks anticipated the foreclosure of millions of properties, after the Real Estate crash of 2006 they reached out to Asset Management companies to help them with the task of liquidating these assets using Realtors as un-paid Property Managers!! The role of these Asset Management companies had 2 major roles which was to provide a valuation platform on these assets in addition to managing the process of expenses and day to day interaction with Real Estate agents who were assigned to market these assets. These companies provide 2 main functions including Valuation Platform in addition to Expense Management.
These Asset Management companies in turn were using Realtors all over USA to get FREE Property Management. For instance, these lucky realtors who were assigned to market an REO property for sale, has to provide these services FREE of charge to Banks and their retained Asset Management companies:
1) Occupancy Check: Within 24 hours of being notified a Real Estate Agent was required to visit the property and report on the Occupancy Status of the property. The had to go online and fill out a report about the Occupancy and also determine if the home was occupied by the Owners or Tenants. Real Estate agents were NOT paid for Occupancy Checks.
2) Re-Key: If the property was vacant, the Realtors had to order Re-key services and install a Combo Lockbox with approved code provided by the banks and the Asset Management company. Real Estate agents were required to pay for the rekey services and then submit an expense report to be reimbursed. We still have more than 20 of these locks in our office collecting dust. Just like Occupancy checks, the Realtors were never paid for Re-key Services.
3) Broker Price Opinion (BPO): Real Estate agents were required to develop a FREE BPO just for the honor having the opportunity to list the property.
4) Cash For Keys: In case the REO property was occupied, the Real Estate agent assigned to market the REO was required to negotiate a Cash-For-Keys Contract which is similar to a relocation offer. The owners were supposed to receive some relocation funds if they agreed to an interior inspection and cooperated by vacating the property within 2-4 weeks.
5) Monthly Status Reports: Real Estate agents responsible for marketing the REO, were required to develop FREE BPOs every month during the marketing cycle of the property with recommendation on price adjustment any repairs required to market the property.
6) Order Utilities: REO Listing Agents were required to order utilities in their own name and then be responsible for payment. And with the absurd practices of Asset Management companies who stopped reimbursing for expenses only 10 days after the close of an escrow, the REO Listing Agents were shafted with the Utility bills since the Asset Management companies refused to reimburse the expense if the billing cycle was outside their 10 day window!
7) Rehab Services: If the REO property was a fixer upper and the bank needed to make safety repairs prior to Listing the property for sale, the REO Listing Agent was required to recruit, monitor and pay for these services. If the repairs were more than $500 dollars, the REO Listing Agent had to provide 2 bids for repairs. To add insult to injury, the banks retained National Firms to do these repairs which made the process of marketing much more cumbersome since the contracting companies for California properties was often located in Ohio or Wisconsin and the contractors they retained were not local which made the coordination of repairs much more painful. Again, these services were provided FREE of charge to the banks and Asset Management companies by REO Listing Agents.
Final insult to the REO Listing Agents were when these Asset Management companies were were not satisfied with the fee they were charging to the Banks per Assets and they started taking up to 1% of the Real Estate transaction commission at the expense of the REO Listing Agents!!
In short, we know too many REO listing Agents including ourselves who have lost money on REO listing if we account for the amount of un-paid Property Valuation and Property Management services we provided to the banks for FREE! This might sound absurd but it’s true, specially with aggressive Expense Mangement tactics of these Asset Management companies.
What has been your experience with Asset Management companies!? Let us know.