REOs & Short Sale Success

by Kris Cone | Dec 29, 2009 | Real Estate Info, Real Estate News

If you had a strong background as a project manager in the corporate world and decided to take on a new opportunity in real estate as a career, where would you focus your attention in the market today?  That question was on the mind of Rhyne Gamble, RE/MAX Realty Suburban, Shawnee Mission, Kansas, just over two years ago when he decided to leave his career as the director of a sales and service company and join his my wife, Tonya, who had been in real estate for 15 years, to create the “The Gamble Team”.  The Gamble Team now numbers five employees with Rhyne specializing in listing only and his wife and the rest of the team working with buyers.

After analyzing the market conditions and what prognosticators felt would be happening, Gamble’s choice for direction was to focus on the distressed property segment of residential real estate.  What he saw was a financial market which was focused on foreclosure and was being “shepherded” by a special type of real estate agent who was focus mostly on the transaction, not the relationship with the homeowner.  As he observed, “The typical REO agent just put a sign in the yard, put the listing in the MLS, did not spend any money on marketing the property and proceeded to answer their phone once a week to sort through all the calls from interested prospective buyers so they could find one offer to present to the lender owning the property.”  He saw how long this process took and learned how costly this process had become to both homeowners and lenders as the U.S. residential real estate market continued to escalate downward.  Industry experts estimate that the cost of foreclosing on a residential property have been running as high as 50-60% of the value of the property during 2008-09, for example.

Gamble’s analysis led him to focus on the Short Sale approach as the preferred way to address distressed properties.  His research revealed that over 50% of homeowners who have fallen behind on their loan payments have never contacted their lender (mostly out of fear or lack of understanding) and that after 3-4 months of the lender not getting any communication from those homeowners, the lender proceeded with foreclosure actions.  And, in many instances the homeowner became emotionally distraught enough to proceed with trashing their own home, thereby further increasing the cost of foreclosure.  He reasoned that there was a huge disconnect between the lender and the homeowner—-and, certainly a very poor communication channel between the two and that there had to be a way to mitigate the communications gap between the two.  He reasoned that it would be far better to reach out to homeowners who were delinquent, helping them understand that there is help available to them before it is too late and providing them with assistance in negotiating with their lender so the homeowner does not let their credit rating be destroyed with a foreclosure and so the lender is able to liquidate the property at a much lower cost.  As Gamble says, “It just seemed to me that there is a true “win/win” solution which was not being focused on by enough lenders and homeowners.  I felt that there had to be enough lenders and homeowners who can be brought to understand that there is much more good in negotiating a Short Sale than continuing down the path of foreclosure.  I also believe that it was most important to invest in marketing the property vs not spending anything on marketing like most REO agents have done in the past.  The need is to get this sale completed as fast as possible—everyone benefits if the transaction is completed faster!  So, I researched the market for a concept which would be easy to employ, which would be state-of-the-art and which would differentiate my listings from all the others in the market, so my sellers’ properties would be on the market for fewer days and sell at a higher percentage of the listing price.  I found that the FloorPlanOnline (www.floorplanonline.com) concept gave me a solid competitive advantage and I have utilized it on properties priced as low as $200,000 most successfully.”  50% of his business today is distressed properties and by far the majority of Gamble’s Short Sale listings are sold to owner occupants as a result of his marketing program.

Gamble soon learned that he was a bit naïve’ in thinking that all parties would automatically recognize the virtue and the “win/win” in his Short Sale approach and, when the average Short Sale took from 90 to 180 days to close after submitting an offer to the lender, he quickly learned how to cut corners within lender’s organizations so the homeowner’s situation could be mitigated prior to foreclosure proceedings being enacted.  In fact, during Gamble’s two plus years of focusing on Short Sales, he has only had 1 transaction which went to foreclosure.   Gamble’s success ratio (% of Short Sale transactions which get closed) is 95% vs the national average of 20%.  But Gamble believes there is good news on the horizon.  Gamble believes that lenders are finally getting the message from the federal government, which is strongly encouraging lenders to focus on Short Sales as the primary approach to liquidating their deliquent home loans vs the foreclosure approach.  Gamble believes that lenders are increasing staffing so Short Sales can be negotiated faster and so Short Sales can be closed much faster, thereby salvaging the credit of more homeowners.   Rhyne Gamble can be reached at rhyne@key2kc.com or 913-220-0818.