Changing the Paradigm

As the United States has seen its housing industry crumble and markets hitting lows not seen in many decades, many forecasters suggest hard times lie ahead along with long, uncertain paths to recovery. Yet, with a little innovation, the path out of the 2009 foreclosure crisis may be simpler than many economists think.

The 2009 foreclosure crisis has illuminated many weak points in the U.S. financial system with regard to the housing market. One such weak point is the current process commonly used by note holders in REO sales. This process was designed for the quick-turnaround, “as-is” sale and for only a few properties per year, rather than the tens, if not hundreds, of thousands of foreclosures commonly seen today.

We have created a multi-party process that is mutually beneficial to all of the involved parties, including:

• Banks, note-holders and other financial institutions
• Consumer-buyers of homes for their families
• Real estate firms and their agents
• Community entities, such as homeowner’s associations and cities

The recent history of marketing these properties has been done by individual agents or “teams” who have become property managers not marketing experts. In the rush to get them sold these agents have simply put them on the local multiple listing services and waited for offers. Or worse, made them available to only their investor groups at advantageous prices.

Properly renovated and managed for marketing, these properties could be offered to consumer real buyers buying for their families, benefiting the cities and neighborhoods. 

In our focus groups on these issues, we found that it was not unusual for an REO agent to have two phone numbers; one that they answered and one they did not. The one they answered was from the banks and the one they did not was from other agetns and buyer inquiries.  Clearly, effective marketing and lead capture together with the proper renovation optimizes the return on the asset and shortens the time on the market.

We foresee the following needs:

• Note holders will demand much stronger accountability
• Real estate firms will have greater control of renovation and marketing
• All involved will require stronger, streamlined communication and interaction
• Integration among note-holder, agent, real estate firm, mortgage providers
• Training for both listing and buyer-side agents in the complex process of foreclosure

Looking at this list of needs, it is important to understand why new solutions are necessary, and how the current system no longer fits the needs of all parties involved.