A Glance at REOs Southwest
The most popular thing being said during any interview on a major media business outlet currently is that the United States has seen a boom in the number of foreclosures that are flooding into the local real estate markets. While this is definitely true, one might be better served to look more closely at this issue to understand it better and to comprehend both the effect on the local homeowner and the REO industry as a whole. With the rise in foreclosures, we will see the unintended growth of the REO and REO management industries. As the old adage goes that "all politics is local," I would say that all real estate is local, which is why the local markets nationwide are disappointing so many homeowners looking to sell their properties at this time. Like many other areas of the United States, the Southwest region has seen unprecedented changes in the recent few years. These changes can be seen in many ways, all of which are directly affecting the way in which REOs are currently being managed there.
REO in Arizona is a growing industry with many new members who are doing a great job for the most part. I am proud to be doing a good deal of work with a group of REO brokers that are on top of their game. Recently, there have been some changes with the way in which REOs are managed that have significantly impacted the REO industry. For example, the rise in the number of stolen HVAC and air-conditioning units has been staggering. While I do not believe that the industry yet keeps statistics on this particular item, I can say anecdotally that I have seen growth in the 90%-200% range in the last three fiscal quarters. It seems that the item of choice to steal by local vandals is these units. Meanwhile, field service companies and REO brokers are tasked with the responsibility to outwit the vandals in this arena. Generally speaking, I believe that the industry is doing a good job but could stand to improve. I can see very new, innovative ideas on securitizations of these units anytime that I am in Arizona or viewing feedback photos gathered by the agents that are partnering with me to sell the portfolio I work on. Other than the rise in theft of HVAC and air-conditioning units, there have been other changes locally also. For example, a significant amount of new expenses are being billed to REO investors from local HOAs. It seems that the HOA community of Greater Phoenix has decided that they have the ability to invoice for a very broad array of charges that did not exist even three years ago. Code violations have risen in huge percentages in the last three fiscal quarters also. This is being dealt with swiftly and well by REO management firms for the most part but should be addressed in some fashion by the REO industry in general. Speaking with local REO brokers will give you an even better idea of how this problem is affecting the industry. "It seems that when the HOAs see that the bank has taken a property back, it becomes a target for larger-than-normal fines and far more extensive code violations," says local REO broker Travis Larsen of Presidential Realty.
Nevada is a state that was going through a large boom in the not-so-recent past and now is an industry leader in the amount and variety of REOs to be found there at any one time. September marked the 20th consecutive month in which Nevada had the nation's highest foreclosure rate, with Arizona coming in third followed by Florida, Michigan, Georgia, Ohio, and another Southwest state, Colorado. Colorado foreclosures are nothing new to the residents of that great state but the sheer volume that they are experiencing currently is far and above what the market can handle while maintaining any significant equity in the homes of those who have done nothing wrong. For example, there are some counties in Colorado that are experiencing one housing unit in every 85 with some sort of foreclosure action filed on it. That doesn't necessarily mean that they are going to be REO properties, but it gives us a good idea of what we may expect in the near term and midterm future for the industry.
California is also being hit very hard with the current wave of foreclosures but due to the extreme nature of the way in which the value of homes went up, the residents of Southern California are seeing the prices drop just as dramatically. With the increase in volume of REOs in the Southwest, come new, more interesting REO management practices.
The industry is moving toward more technological advancement and with more automation built into the process, it is becoming more of a science than an art as it used to be. We need to remember that despite our volume increases, we must have our focus on seeing the trees through the forest and not set too broad of policies that can adversely affect one property in order to best serve another. I have full confidence that the REO and REO management industries can work together as partners to best serve their own interests, the interests of their investors as well as do what is best for the neighborhoods in which these homes are located.