Expressions published in several social networks referring to the exclusivity that several banks have conferred to Realtors and/or Real Estate Companies motivate me to write this article with the purpose that we all have a better understanding of the subject.
If we focus on what the concept of “exclusivity” means, we can identify the main reasons for such a business relationship to be effective and reasonable for financial institutions, brokers and real estate companies, and above all, for the consumer.
It is clear that the main business of financial institutions is not to sell properties, that is why they are called “involuntary acquirers”, for such purposes it is important to clarify the concept of repossessed properties which are those real estate assets that were taken as collateral in exchange for a loan whose debtor could not conclude its payment plan and therefore the same had to be acquired by the bank in exchange for the repayment of such debt. This means that this is a portfolio that no bank would want because of what it entails: audits by federal agencies, additional reserves for their bad assets, administration and maintenance, security, high legal and other related expenses that directly impact their numbers, without this being their primary business.
Seen from this perspective and considering the ever-increasing volumes of repossessed properties, both residential and commercial, institutions need professionals to provide them with the full management support needed to manage this portfolio, for example:
In the “field”:
• Effectively inspect, classify, photograph and label properties.
• Coordinate maintenance, take preventive measures to avoid vandalism and identify important security issues.
• Follow up on the solution of the findings found in the inspections and that must be improved for the sale.
• Work on the solution of vandalized, invaded or occupied properties.
• File complaints for vandalism if necessary, among others.
In Sales:
• To complement appraisals with BPO’s (Broker Price Opinion) and establish sales prices consistent with the market.
• Create a methodology with uniform parameters for the evaluation of offers that allows for the inclusion of market factors: condition, location and absorption of the properties.
• Determine absorption rates by municipality, urbanization and/or priority type.
• Implement the methodology and evaluate the inventory to create sales strategies according to its classification.
• Effectively market properties using traditional and specialized promotional media.
• Pre-qualify prospective buyers.
• Negotiate offers and take options.
• Follow up with banks and customers to achieve closings in the shortest possible time.
In the Administration:
• Develop the necessary analysis to establish sustainable sales projections.
• Identify, recruit and maintain a committed, willing and able sales force to achieve projected production.
• Make periodic management reports and specialized studies required by the management of the institutions for project follow-up.
• Make studies and analyses to facilitate decision making in the evaluation of bids.
• Create the files with the necessary documentation to have the relevant and correct information about the property and provide it to the buyer.
• Identify and alert on unresolved legal issues necessary for the completion of the sale.
• Establish and maintain policies and procedures to ensure the security and confidentiality of all documentation.
This is why financial institutions have decided to grant exclusivity to brokers or firms that are sufficiently solid and/or specialized to provide them with the necessary response capacity to dispose of this inventory at the best price, in the shortest time and at the lowest possible risk.
Distressed loans in Puerto Rico “distress“, represent approximately 16% of the total loan portfolio and continue to grow.
Both U.S. banks and federal entities recognize agents and delegate these functions and responsibilities exclusively, agencies such as HUD, Fannie Mae, Freddie Mac, VA, FDIC and private companies and relocation experts, among others, use “Asset Managers: who have exclusivity in the management and administration of their repossessed properties. They in turn hire exclusive brokers to service this inventory.
Contrary to the perception of some, exclusivity, far from being a threat, represents an opportunity for the real estate industry since for the first time financial institutions recognize the value of a broker and/or real estate firm by conferring exclusive responsibilities in their repossessed properties without this representing a limitation in the sale, since any licensed broker or salesperson can “cobroke” with the contracted firms.
Credit to: Reality Realty | Published: August 29, 2012
By: Iván Zavala Steidel
