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How brokerages can diversify and prosper in the new year
For the typical REO brokerage, 2011 saw an increase in requirements and overhead but not necessarily inventory. Major changes occurred in the regulatory, legislative, and overall business climate but little of that translated into increased REO volume for brokerages. The industry will close the year with an estimated seventy percent drop in inventory levels.
Amidst the uncertainty surrounding future housing policy, 2012 will bring significant changes. HUD is on schedule to issue a new wave of contracts, known as M&M 3.5, and the agency has made significant changes to the size of their geographic regions that should lead to smaller contract areas and more overall contractors. Beginning in the new year, brokers in many states will have new opportunities to earn local listing broker (LLB) contracts with this new wave of asset management companies.
In late 2011, HUD, Treasury, and the Federal Housing Finance Agency (FHFA) issued a joint Request for Information (RFI) to explore a possible REO to rental strategy. This strategy-if carefully and selectively implemented-could buttress recovery in a number of markets and allow REO brokers to expand the scope of their businesses.
REO to rental is similar to what many brokers are already doing if they are managing a high volume of occupied properties or have had to manage an asset for a number of years. In our response to the RFI through the National Association of Women REO Brokerages (NAWRB), we suggested that REO to rentals could work in certain markets and should be explored as a possible “tool in the tool shed” to aid recovery.
In short, new opportunities for 2012 are already taking shape. HUD expects more contracts throughout the year, REO to rental is looking like a possibility and the federal Home Affordable programs are being revisited to reach more borrowers.
What brokers have to understand is that their brokerages must follow the market. The next several years will require diversified default services businesses that can handle cradle to grave REO disposition, short sales, property management, and put homeowner outreach at the center of each of those areas of business.
This year has shown that REO brokerages need to diversify to prosper in this market and, more than likely, three to five years thereafter. For the brokers who can translate their skill set into well-rounded default services professionals, not just an REO agent or short sale expert, they will survive-and prosper-in 2012.