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Opinion Editorials

The REO problem is worse than you think



How REOs are killing the market

This week an asset manager contacted me to get pre-listing information on a house about to be foreclosed on. Brokers who do REO work know the drill: check occupancy status, secure the property (change locks), and tell the bank what you think the house is worth if priced for a quick, AS IS sale on the market today. Then, a few weeks or maybe months later, after the foreclosure paperwork is processed, you list the house for sale, hopefully at or near the price you recommended.

Well here’s a real life example of how REO properties are killing the housing market and making this mess worse. I had no clue just how much REO properties were impacting my small part of rural America until I ran their analysis.

This particular bank had specified that for my analysis, I was to only use similar REO properties. So no matter what the condition of the subject house, all sold comps and current listings used in my report had to be bank owned properties. Makes sense, right? Comparing apples to apples, you would think.

The hopelessness in a vacant home

The subject needed a trash out. The owners obviously left in a hurry. Clothes were hanging in some closets and children’s school pictures still decorated the walls. There is an element of sadness and hopelessness that you can feel when you enter some of these properties. These people did not beat the house or take it out on the property. The just picked up and left, taking what they could, and leaving behind what didn’t fit or was no longer meaningful to them.

This house was purchased six years ago for $55,000, shortly before the market fell. As I searched for comparables, I came up with a few great ones — in similar shape and condition, just a few blocks from the subject property. But none were REOs. Some were estates and others were simply resales. All were in the $30-40,000 range for value. I could not use them.

The REO comparables I found were in the $15,000-$25,000 range. See how REOs are skewing the market? It’s a downward spiral. Because of the comps I had in front of me, this foreclosure will likely list for around $20,000. But If I was sitting in front of a seller, or a seller’s son, telling him what his parent’s house should sell for, I’d be recommending close to $35,000.

A harsh reality for this subset

We did not see the massive numbers of foreclosures that other parts of the county saw. Foreclosure properties are still only a small fraction of our sales. Yet this subset of our industry is screwing it up for the rest of the sellers. Because once this house lists for $20,000 and sells (likely to a cash buyer, an investor who will rent it out or perhaps flip it and double his money), it becomes part of the record.

Appraisers will use this as a comparable sale that could affect other sales. And if the neighbor tries to sell in the next year or two, God help him. Buyers and other agents and the appraiser will point right at this house and say “But your neighbor sold for $20,000 so what makes your house worth $35,000?”

So it’s a great time — to be an investor. To be a seller… well, hang on tight. These REO sales are going to be haunting us for quite a while.

Erica Ramus is the Broker/Owner of Ramus Realty Group in Pottsville, PA. She also teaches real estate licensing courses at Penn State Schuylkill and is extremely active in her community, especially the Rotary Club of Pottsville and the Schuylkill Chamber of Commerce. Her background is writing, marketing and publishing, and she is the founder of Schuylkill Living Magazine, the area's regional publication. She lives near Pottsville with her husband and two teenage sons, and an occasional exchange student passing thru who needs a place to stay.

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  1. Sean OToole

    February 7, 2012 at 10:41 pm

    Really interesting to see what is happening in other parts of the country. We track foreclosures in California and our experience is completely counter to this. What we see here is a lack of inventory and huge demand for REO's that typically results in their selling close to market value (lower prices are usually due to condition, not the fact that it is REO).
    I think the biggest challenge facing policy makers today is to realize that there is no ONE solution to the housing crisis. Degree of negative equity, demand for housing, inventories, etc. vary a great deal by area. I have little doubt that only a bulldozer will help housing in certain areas that have seen generations of decline, while in other areas banks could foreclose in mass with little impact due to strong demand from investors and first time buyers. Unfortunately I doubt we'll ever see sensible policy decisions that will take these vast differences into account.

    Sean OToole
    Founder & CEO

  2. LandonSmith

    October 9, 2012 at 11:05 am

    I know there are different indicators that we can predict will trigger a fluctuation in the housing market. I just keep an eye on tubular services in my area. When demand for them goes way up I know we are having a good season.

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Opinion Editorials

How strong leaders use times of crises to improve their company’s future

(EDITORIAL) We’re months into the COVID-19 crisis, and some leaders are still fumbling through it, while others are quietly safeguarding their company’s future.



strong leaders

Anthony J. Algmin is the Founder and CEO of Algmin Data Leadership, a company helping business and technology leaders transform their future with data, and author of a new book on data leadership. We asked for his insights on how a strong leader can see their teams, their companies, their people through this global pandemic (and other crises in the future). The following are his own words:

Managers sometimes forget that the people we lead have lives outside of the office. This is true always, but is amplified when a crisis like COVID-19 occurs. We need to remember that our job is to serve our teams, to help them be as aligned and productive as possible in the short and long terms.

Crises are exactly when we need to think about what they might be going through, and realize that the partnership we have with our employees is more than a transaction. If we’ve ever asked our people to make sacrifices, like working over a weekend without extra pay, we should be thinking first about how we can support them through the tough times. When we do right by people when they really need it, they will run through walls again for our organizations when things return to normal.

Let them know it’s okay to breathe and talk about it. In a situation like COVID-19 where everything is disrupted and people are now adjusting to things like working from home, it is naturally going to be difficult and frustrating.

The best advice is to encourage people to turn off the TV and stop frequently checking the news websites. As fast as news is happening, it will not make a difference in what we can control ourselves. Right now most of us know what our day will look like, and nothing that comes out in the news is going to materially change it. If we avoid the noisy inputs, we’ll be much better able to focus and get our brains to stop spinning on things we can’t control.

And this may be the only time I would advocate for more meetings. If you don’t have at least a daily standup with your team, you should. And encourage everyone to have a video-enabled setup if at all possible. We may not be able to be in the same room, but the sense of engagement with video is much greater than audio-only calls.

We also risk spiraling if we think too much about how our companies are struggling, or if our teams cannot achieve what our organizations need to be successful. It’s like the difference in sports between practice and the big game. Normal times are when we game plan, we strategize, and work on our fundamentals. Crises are the time to focus and leave it all on the field.

That said, do not fail to observe and note what works well and where you struggle. If you had problems with data quality or inefficient processes before the crisis, you are not fixing them now. Pull out the duct tape and find a way through it. But later, when the crisis subsides, learn from the experience and get better for next time.

Find a hobby. Anything you can do to clear your head and separate work from the other considerations in your life. We may feel like the weight of the world is on our shoulders, and without a pressure release we will not be able to sustain this level of stress and remain as productive as our teams, businesses, and families need us.

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Opinion Editorials

Declutter your quarantine workspace (and brain)

(EDITORIAL) Can’t focus? Decluttering your workspace can help you increase productivity, save money, and reduce stress.




It’s safe to say that we’ve all been spending a lot more time in our homes these last few months. This leads us to fixate on the things we didn’t have time for before – like a loose doorknob or an un-alphabetized bookshelf.

The same goes for our workspaces. Many of us have had to designate a spot at home to use for work purposes. For those of you who still need to remain on-site, you’ve likely been too busy to focus on your surroundings.

Cleaning and organizing your workspace every so often is important, regardless of the state of the world, and with so much out of our control right now, this is one of the few things we can control.

Whether you’re working from a home office or an on-site office, take some time for quarantine decluttering. According to The Washington Post, decluttering can increase your productivity, lower stress, and save money (I don’t know about you, but just reading those three things makes me feel better already).

Clutter can cause us to feel overwhelmed and make us feel a bit frazzled. Having an office space filled with piles of paper containing irrelevant memos from five years ago or 50 different types of pens, has got to go – recycle that mess and reduce your stress. The same goes with clearing files from your computer; everything will run faster.

Speaking of running faster, decluttering and creating a cleaner workspace will also help you be more efficient and productive. Build this habit by starting small: try tidying up a bit at the end of every workday, setting yourself up for a ready-to-roll morning.

Cleaning also helps you take stock of stuff that you have so that you don’t end up buying more of it. Create a designated spot for your tools and supplies so that they’re more visible – this way, you’ll always know what you have and what needs to be replenished. This will help you stop buying more of the same product that you already have and save you money.

So, if you’ve been looking to improve your focus and clearing a little bit of that ‘quarantine brain’, start by getting your workspace in order. You’ll be amazed at how good it feels to declutter and be “out with the old”; you may even be inspired to do the same for your whole house. Regardless, doing this consistently will create a positive shift in your life, increasing productivity, reducing stress, and saving you money.

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Opinion Editorials

How to ask your manager for better work equipment

(EDITORIAL) Old computer slowing you down? Does it make a simple job harder? Here’s how to make a case to your manager for new equipment to improve your productivity.



better equipment, better work

What is an employee to do when the work equipment bites.

Let’s be frank, working on old, crappy computers with inefficient applications can make the easiest tasks a chore. Yet, what do you do? You know you need better equipment to do your job efficiently, but how to ask the boss without looking like a whiner who wants to blow the department budget.

In her “Ask A Manager” column, Alison Green says an employee should ask for better equipment if it is needed. For example, the employee in her column has to attend meetings, but has no laptop and has to take a ton of notes and then transcribe them. Green says, it’s important to make the case for the benefits of having newer or updated equipment.

The key is showing a ROI. If you know a specific computer would be a decent upgrade, give your supervisor the specific model and cost, along with the expected outcomes.

In addition, it may be worth talking to someone from the IT department to see what options might be available – if you’re in a larger company.

IT professionals who commented on Green’s column made a few suggestions. Often because organizations have contracts with specific computer companies or suppliers, talking with IT about what is needed to get the job done and what options are available might make it easier to ask a manager, by saying, “I need a new computer and IT says there are a few options. Here are my three preferences.” A boss is more likely to be receptive and discuss options.

If the budget doesn’t allow for brand new equipment, there might be the option to upgrade the RAM, for example. In a “Workplace” discussion on an employee explained the boss thinks if you keep a computer clean – no added applications – and maintained it will perform for years. Respondents said, it’s important to make clear the cost-benefit of purchasing updated equipment. Completing a ROI analysis to show how much more efficiently with the work be done may also be useful. Also, explaining to a boss how much might be saved in repair costs could also help an employee get the point across.

Managers may want to take note because, according to results of a Gallup survey, when employees are asked to meet a goal but not given the necessary equipment, credibility is lost.

Gallup says that workgroups that have the most effectively managed materials and equipment tend to have better customer engagement, higher productivity, better safety records and employees that are less likely to jump ship than their peers.

And, no surprise, if a boss presents equipment and says: “Here’s what you get. Deal with it,” employees are less likely to be engaged and pleased than those employees who have a supervisor who provides some improvements and goes to bat to get better equipment when needed.

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