Savings and loan associations, commercial banks and even some credit unions make real estate mortgage loans. Today many of these loans are sold into the secondary market. However, sizable proportions are held in portfolio by the lending institution. When defaults occur on these loans, the institution ends up obtaining property in most instances. The properties are placed in REO inventory to be managed or resold to the public.
The methods used to sell REO properties may vary with each institution. In fact, one individual institution may use a variety of methods over time, depending on the size of its inventory at what seems to be working at the time.
If the inventory is relatively small, as it is in most times when the real estate market is hotter than it currently is, the institutional probably grant exclusive listings with local real estate brokers. An exclusive listing gives one broker the right to sell the property for a commission to the exclusion of all other brokers. This provides the security necessary to allow the broker to advertise the listing. Other brokers will still work with the listing broker if the listing broker belongs to an MLS or multiple listing services.
In today’s market the number foreclosed loans, and thus the inventory of lending institutions, is at unprecedented levels. This means that things are being handled in different and highly unorthodox ways, basically whatever is working best for individual lending institutions to reduce their inventories quickly as possible. One of these techniques is instead of going with brokers the establishment of in-house management and sales staff to work exclusively on the lending institution’s foreclosed home inventory.
In most cases you’ll find the lending institutions act much like any other property seller, from real estate agent to individual. The main difference, however, is directly related to the government mandated regulations on how they sell properties.
These lending institution based mandates provide a few advantages and disadvantages. The largest advantage is that the institution is usually eager to sell a home and we’ll work with you beyond what a homeowner would do. In addition to this lending institutions often are willing to finance home sales. The biggest disadvantage for buying a home from a lending institution is that there is often a lot of the administration and red tape to go through before making a home purchase which means that your offer may not be economically feasible anymore by the time it is finally approved.
Hopefully now you’ve learned quite a bit more about real estate lending institutions, what they are and how they operate.