If you are a real estate professional in the Phoenix Metro area you may have noticed today’s [11/5/11] front page story in the Arizona Republic. Traditionally front page stories related to real estate are bad news – the media loves bad news – surprisingly this news was good. The headline: Banks In Arizona Shift To Short Sales.
Like all news related to a market, it is good for some and bad – for others. First the good. If you have clients swirling around the bowl of the foreclosure process this news will be welcome. It appears that Arizona banks have figured out after over 175,000 [ONE HUNDRED SEVENTY FIVE T-H-O-U-S-A-N-D] foreclosures in the Phoenix metro area, that short sale is a better option than foreclosure. It makes more sense for all involved: banks, sellers, the housing market, the government and don’t forget about the economy to allow a short sale as opposed to a foreclosure.
The article went on to say “Lenders don’t want to foreclose anymore, they want to short sale”. Short sales, traditionally sell for more than foreclosures [average $71 per square foot for short sales compared to $60 per square foot for foreclosures] which in most cases will help the Phoenix Metro housing market recover – faster. The trend of banks favoring short sale over foreclosure in Arizona could lead to a rise in the average home value because it reduces the number of homes sold for ridiculously low prices on the court house steps – at auction.
The “about face” of banks favoring short sale over foreclosure is nothing less than a miracle. Only 24 short months ago Arizona banks dealt with delinquent homeowners almost entirely by foreclosing. This system pushed housing prices in the Phoenix Metro area down to a 10 year low, perpetuating the problem. Each foreclosure further lowered neighborhood prices which in many cases lead to more foreclosures or strategic default [walking away]. Allowing a short sale minimizes losses for all involved.
Good news for some is bad news for others
Over the last 5 years fortunes have been made by some that rely on the banks decision to foreclose. This news could be bad news for some of them. This includes REO {Bank Owned} REALTORS® that list the foreclosed homes for sale, REO Title Companies that process, close and insure the transactions, foreclosure attorneys that offer legal opinions, contractors that fix the properties up, and of course, investors that swoop in, fix-n-flip the properties for a quick buck.
Failure To Plan is Planning To Fail
No housing market lasts forever. The end of one market and the beginning of another often breeds life but also leaves its own casualties. The 2004 refi boom ended with many loan officers losing their REALTORS® they neglected while chasing consumer refinances. The 2005 – 2006 housing boom ended with real estate investors holding properties [they couldn’t sell] with interest only mortgages or hard money loans, and the current REO market will end leaving another casualty: Many REO agents and REO title companies [that focused almost exclusively on REO business], that may soon be discovering, the one trick pony they have been riding may be their undoing.
Lack of Communication Complaints
During my years as a title rep I have heard many complaints about REO agents and REO title companies. Many real estate agents complained about not being able to reach REO agents, calls and emails not returned or in some cases rudeness and/or sarcasm “didn’t you read the MLS -it says don’t call me!” The complaints over title companies that exclusively handle REO transactions have been even louder, many real estate agents promising “I will never use XYZ Title or ABC escrow officer again!”. At its core real estate is a service, one that relies heavily on communication. It makes the job of a buyers agent extremely hard [and negatively impacts their ability to garner referrals from current and past clients] when communication is late or in some cases non-existent with the banks agent or title company. Many escrow officers will realize “just because an REO agent or buyers agent “HAD TO” work with you or your company during an REO transaction does not mean he/she will WANT TO when choice is an option.
The Irony
When I was a title rep I often called on many of these REO agents in hopes of getting them to use the title company I worked for. These attempts were sometimes met with arrogance and downright rudeness. I get it, they were getting phone calls, emails, pop bye’s, Facebook messages etc, from title reps every day at one of the other 60+ title companies in the Phoenix Metro area, all trying to “earn” their business. My message was different. “What are you doing to prepare for the next real estate market”? While some did listen, many others ignored me.
Some of the REO agents became wildly successful at listing REO [bank owned] homes not because of their expertise and/or knowledge of dealing with distressed properties, but luck. Many were at the right place at the right time or they knew someone who knew someone who, well – you get the point. Many of these REO agents have no clue what it is like to fish, [to go out and get their own business] instead they have had the fish [listings] handed to them by the banks [Wells Fargo, Bank Of America, Chase, WAMU, Fannie, Freddie, FDIC, etc]. Many do not have a database and those that do likely have not contacted or marketed to it in years. As the banks continue to shift towards short sale instead of foreclosure, many of the REO REALTORS® and REO title companies business will without a doubt slow.
The Shift In Consumer Behavior
Making matters worse, traditional marketing methods, staples of real estate and title company marketing only 5 short years ago, [post cards, flyers, cold calls, yellow pages, newspaper ads, branded fly swatters,calculators, battery powered fans, buyers books, sellers books, FSBO books, hand written notes, labels, geographic farms, glossy sports schedules, glamour shot business cards, door hangers, print real estate publications etc] are becoming less effective as consumer behavior has shifted to the Internet. These staples of real estate and title company marketing are being replaced with Self Hosted WordPress Websites, Content Creation, Indexable IDX Solutions, Search Engine Optimization, Search Engine Marketing, Social Media Marketing, Craigslist, Video, Video Optimization and Content Syndication.
These real estate agents and title companies will need to learn the merits of inbound marketing for real estate whereby you help a consumer find you online at the moment they are interested in hearing what you have to say as opposed to outbound marketing [interruption marketing] or the “spray and pray” model of spamming everyone and hoping it lands at the moment they need you. Many of these real estate professionals will be looking to their title companies and title reps to help them “get found” online by their ideal client. This PAIN in their businesses will force them to seek vendors that can actually help them grow their business, not with a branded coffee mug, a round of golf or even lunch but with traffic and conversion techniques.
Take a look at your own behavior, when is the last time you were excited about a cold call or you made an important financial decision based upon a post card or flyer in your mailbox?
Ready? Go.
