What’s the Fuss about Foreclosures?

by Yvonne Coelet on July 29, 2010

Have you been thinking about pursuing foreclosures as listings? Well, you’d better think twice!

In the unlikely event that your new foreclosure listing has somebody living in it, you may have to deal with the “Cash for Keys” program. Some companies will overnight you the money…others won’t. This can be the beginning of your cash output.

The next thing to consider is the cost of putting the utilities in your name. Are you prepared to put down the required deposits for electricity, water and gas? Once you get past that financial hurdle, there are the monthly bills you will have to pay…on time. That doesn’t seem too hard, but then you need to input your expenses into the “system” for reimbursement. Now, that can take 30 days to get reimbursed. The bills may not seem like they could be that bad, but consider your market. Hot markets will require the air conditioner to be on, and cooler markets will require heat. Hmmmm… Let’s hope that nobody touches your thermostats to raise your bill!

The next item to take under advisement is repairs. Not every foreclosure home is “market ready.” Depending on the scope of repairs, you may need to get several bids. Once the winning bid is selected, you may or may not be required to pay the contractor directly. Again, expect about a 30-day waiting period to see your money.

Meanwhile, while you are playing ATM for your foreclosure listing, you will spend time performing monthly reports, marketing the property and fielding phone calls from vendors, asset managers, agents and clients. This can go on for a few months unless you have received an offer on the home.

Just when you feel like you have a handle on things and are seeing some of your money coming back to you, 90 days have passed and… Well, it’s time for a different agent to pick up your listing. Was it worth it?

If foreclosures are selling, why not represent buyers instead of  sellers? It seems like less hassle and less financial outlay for the same results.  Not to mention the fact that happy buyers are more likely to send you referrals than asset management companies.

That’s just my two cents–and you didn’t have to wait 30 days to get it back!

Pam Andrew July 30, 2010 at 7:59 pm

Yvonne — add a couple more items to your list for those thinking listing foreclosures are ‘easy money’

* occupied premises require negotiation with the occupant to leave the premises within a timeframe and cash for keys payment that is acceptable to the “seller”
* most sellers pay the cash for keys out of the agent’s pocket as a standard reimbursement that yes, is usually a minimum of 30 days. And what if you as the listing agent have multiple cash for keys properties all at one time?
* Weekly property inspections will cost you gas money that is NOT reimbursed!
* Does the property have a pool? You will have the initial pool clean, refill (water bill!!!) and then weekly pool service. Again, these are normally paid by the agent and reimbursed.
* Liability issues: Pool – Is the gate locked? Has someone “moved in” that doesn’t belong there?
* Are you ready for the calls if a water pipe breaks or the water heater springs a leak? Oh and you have to pay for those emergency repairs and get reimbursed.

So bottom line becomes … do you have the bank account to support what is needed to list foreclosures? Think hard … this can become expensive very quickly!! And remember to calculate your true cost to list the property … everything that is not reimbursed should be deducted from your commission to find your true “income” for that listing.

Yes I am a Foreclosure listing agent … and everything you have read is real.

S. Paulow August 1, 2010 at 8:53 am

Yvonne, I hear you. I have not pursued listing foreclosures for the reasons you have listed. It does seem like a lot of risk especially considering you have to pay out half your half of the commission to the Asset Manager. As the old saying goes, you have to have money to make money but in this case I’ve never felt it was worth it.

Francces Flynn Thorsen August 3, 2010 at 9:22 am

This is good food for thought!

Don’t forget to review the listing agreement. Many banks are working with their own listing agreements, written by BANK ATTORNEYS. These listing agreements shift increasing burdens of liability on the real estate broker, including risk attached to ownership/title issues.

Foreclosures are a very risky business.

I would like to see Realtors lobby for changes in the law exempting banks from disclosure. The Dept. of Housing and Urban Development has a battery of home inspections attached to every HUD Home and it makes those reports available to prospective purchasers. Large quasi governmental agencies do the same thing.

It’s time to make banks accountable on every level. They should not get a free ride on disclosures.

Flavio December 12, 2011 at 3:55 pm

good post, thanks for sharing…for many of the reasons you stated I only represent buyers in foreclosures…

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