Editor’s Note: This feature originally appeared in the July issue of DS News, out now.
For many people, summer evokes thoughts of long days and vacations, but for REO managers and servicers, the summer months are the prime selling season. You’ve heard the adage that warm weather creates a “buying season” for real estate, as families are eager to buy or relocate when school is out. In fact, according to the National Association of Realtors’ 2017 statistics, the months of May through August represented the highest real estate sales volumes of the year. An eye-popping 40 percent of existing home sales for 2017 occurred during this period.
Because inventories are expected to remain at historic lows, and demand remains strong, the summer of 2018 may come to be known as the “extended summer.” The traditional high-volume sales season could easily extend to a 10-month window running from March through December. Bye-bye to the old selling summer months, hello extended summer!
Early 2018 data from the National Association of Realtors is pointing to a strong seller’s market with inventory down by 7.2 percent over the previous year, supply numbers near 20-year lows, and median sales prices up by 5.8 percent to just over $250,000. In addition, activity from first-time homebuyers continues, representing 30 percent of existing home sales.
As we look ahead to the extended selling season, expect to continue to see inventory, especially at lower price points, remain competitively constricted. This tight housing market leads homebuyers to move quickly on available properties and creates an opportunity for REO managers and servicers to sell their inventory in a shorter time frame. This demand for properties makes it essential that REO managers quickly convert assets to be sales-ready. The ability to effectively turn over a property will position REO asset managers for success.
Preparing your Summer Checklist
So, during an extended summer, where should REO managers focus their efforts? Below is an essential checklist for all servicers and REO managers to efficiently make assets sale-ready. By focusing on these critical solutions, assets will be well-positioned to compete for a quick sale.
» Schedule repairs. Review the property closely for essential repairs and schedule estimates for all repairs that require a contractor. Over time, building a relationship with a reliable and trustworthy contractor who can address repairs quickly will save you time and get REO assets on the market more efficiently. If the property has outbuildings, remember to inspect them to ensure they are in good condition and are not a liability for the asset.
» System check. After taking over management of a new property, inspect all systems to ensure they are operating correctly. Check for proper airflow, that the hot and cold water is flowing from every tap and drains are clear, and that all heating and cooling systems are working correctly. In humid areas, having a working air conditioner, dehumidifier, or fan system with strong airflow to help prevent wall sweating and mold is essential. When checking the air systems, it is also a great time to replace air filters. While you are in the basement, be sure that any existing sump pumps are operating correctly and that the area remains dry. Homebuyers are often leery of water stains so be sure to check skylights for condensation and proper insulation.
» Make it appealing. First impressions matter and curb appeal plays a vital role in forming the potential buyer’s opinion of a property. A 2016 report from the National Association of Realtors points to lawn care as the No. 1 project that appeals to buyers. Impressively, basic lawn care also has an estimated return on investment of 303 percent when selling a home. How the property looks from the outside impacts perceptions of the value of the property. That said most lawns shouldn’t require expensive investments. With dry conditions in much of the country, it may be essential to plan extra watering sessions for the yard to keep it green and inviting through the late summer months. Inspect the external areas of the property, picking up debris, trimming low branches and pulling weeds, and taking note of and repairing any damage. Now is also the time to properly secure the yard, get the pool swim-ready, schedule additional lawn services, and clear gutters and downspouts, ensuring they are draining properly and distributing water away from the property.
» Clean up. Nearly every REO property requires significant cleaning; so don’t let this item fall off your checklist. It’s hard for buyers—especially first time buyers—to look past cosmetics and see the potential in a property. If the property is dirty, potential buyers will have a hard time imagining themselves in the home. Give the property a thorough cleaning inside and out. Remove any debris, treat carpet stains, clean windows, and give the entire property a deep clean. While the cleaning crew is going room to room, have them make sure that every fixture has proper lighting to show off the newly cleaned rooms.
» Cook up a sale. It is essential for REO managers to give the kitchen a little extra attention. The kitchen is the center of most homes and the area where significant value can be added. First, ensure all appliances are in working condition and remove those that are not working or can’t be quickly repaired. You don’t have to upgrade a kitchen for it to be ready for sale, but it should be cleaned from top to bottom. Thoroughly clean everything, including removing all debris, defrosting the refrigerator and turning it to the warmest setting, cleaning all appliances inside and outside, and vacuuming out all drawers.
» Inspect for insects. No one wants their future home to come with unwanted guests. Properties that sit empty over the winter months, or that fall into disrepair, are prime candidates for pest issues. Give the property a thorough inspection for any existing insect or rodent issues. Address any existing issues and check for new entry points for bugs, rodents or other wildlife. Address identified entry points immediately. Depending on the property and the location, it may be necessary to schedule regular exterminator appointments to keep the house pest free while it is waiting for a buyer.
» Show off. You’ve done the work, and now it’s time to show it off! Take quality photos of the property and write a thorough and inviting description to accompany the listing. While great images can be taken with a cell phone these days, if you are not a strong photographer, this may be a valuable opportunity to bring in some additional help. Homebuyers are relying on the internet to get a preview of the property. Having great photography that displays a home’s strongest assets will help to bring potential buyers out for a showing. Once those potential buyers are on-site, your hard work to prepare the property will pay off.
As an REO manager, it’s essential to take advantage of this favorable market and differentiate yourself from competitors by positioning your properties for a quick sale. Small fixes can make a big difference, so it’s essential to view a property through the buyer’s eyes. The best way to consistently deliver for your clients is to be systematic in your approach, thorough in your execution and selective with where you choose to invest money. The metaphorical extended summer won’t last, as the industry will one day find equilibrium with both supply and demand. But until that time, by following this checklist, REO managers will remain optimally prepared for the long selling season.