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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

Serial procrastinator? Check your mental energy, not time management

(EDITORIAL) Need a hack for your time management? Try focusing on your mental energy management.




Your author has a confession to make; as a “type B” personality who has always struggled with procrastination, I am endlessly fascinated by the topic of productivity and “hacking your time.”

I’ve tried most of the tricks you’ve read about, with varying degrees of success.

Recently, publishers like BBC have begun to approach productivity from a different perspective; rather than packing days full of to-do items as a way to maximize time, the key is to maximize your mental energy through a different brand of time management.

So, why doesn’t time management work?

For starters, not all work time is quality time by nature. According to a study published at ScienceDirect, your average worker is interrupted 87 times a day on the job. For an 8-hour day, that’s almost 11 times per hour. No wonder it’s so hard to stay focused!

Second, time management implies a need to fill time in order to maximize it.

It’s the difference between “being busy” and “being productive.”

It also doesn’t impress your boss; a Boston University study concluded that “managers could not tell the difference between employees who actually worked 80 hours a week and those who just pretended to.” By contrast, managing your energy lets you maximize your time based on how it fits with your mental state.

Now, how do you manage your energy?

First, understand and protect the time that should actually go into deep, focused work. Studies continually show that just a few hours of focused worked yield the greatest results; try to put in longer hours behind that, and you’ll see diminishing returns. There’s a couple ways you can accomplish this.

You can block off time in your day dedicated to focused work, and guard the time as if it were a meeting. You could also physically retreat to a private space in order to work on a task.

Building in flexibility is another key to managing your energy. The BBC article references a 1980s study that divided students into two groups; one group planned out monthly goals, while the other group planned out daily goals and activities. The study found the monthly planners accomplished more of their goals, because the students focusing on detailed daily plans often found them foiled by the unexpected.

Moral of the story?

Don’t lock in your schedule too tightly; leave space for the unexpected.

Finally, you should consider making time for rest, a fact reiterated often by the BBC article. You’ve probably heard the advice before that taking 17 minute breaks for every 52 minutes worked is important, and studies continue to show that it is. However, rest also includes taking the time to turn your brain off of work mode entirely.

The BBC article quotes associated professor of psychiatry Srini Pillay as saying that, “[people] need to use both the focus ad unfocus circuits in the brain,” in order to be fully productive. High achievers like Serena Williams, Warren Buffet and Bill Gates build this into their mentality and their practice.

Embracing rest and unfocused thinking may be key to “embracing the slumps,” as the BBC article puts it.

In conclusion, by leaving some flexibility in your schedule and listening to your body and mind, you can better tailor your day to your mental state and match your brainpower to the appropriate task. As someone who is tempted to keep a busy to-do list myself, I am excited to reevaluate and improve my own approach. Maybe you should revisit your own systems as well.

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Opinion Editorials

6 skills humans have that AI doesn’t… yet

(OPINION / EDITORIAL) It’s not unreasonable to be concerned about the growing power and skill of AI, but here are a few skills where we have the upper hand.



Man drawing on a roll of butcher paper, where AI cannot express themselves yet.

AI is taking over the workforce as we know it. Burgers are already being flipped by robotic arms (and being flipped better), and it’s only a matter of time before commercial trucks and cars will be driven by robots (and, probably, be driven better).

It may feel unnerving to think about the shrinking number of job possibilities for future humans – what jobs will be around for humans when AI can do almost everything better than we can?

To our relief (exhale!), there are a few select skills that humans will (hopefully) always be better at than AI. The strengths that we have over AI fall into 3 general categories: Ability to convey emotion, management over others, and creativity.

Let’s break it down: Here are 6 skills that we as humans should be focusing on right now.

Our ability to undertake non-verbal communication

What does this mean for humans? We need to develop our ability to understand and communicate body language, knowing looks, and other non-verbal cues. Additionally, we need to refine our ability to make others feel warm and heard – if you work in the hospitality industry, mastering these abilities will give you an edge over the AI technologies that might replace you.

Our ability to show deep empathy to customers

Unlike AI, we share experiences with other humans and can therefore show empathy to customers. Never underestimate how powerful your deep understanding of being human will be when you’re pitted against a robot for a job. It might just be the thing that gives you a cutting edge.

Our ability to undertake growth management

As of this moment, humans are superior to AI when it comes to managing others. We are able to support organization members in developing their skillsets and, due to our coaching ability, we are able to help others to grow professionally. Take that, AI!

Our ability to employ mind management

What this essentially means is that we can support others. Humans have counseling skills, which means we are able to help someone in distress, whether that stems from interpersonal relationships or professional problems. Can you imagine an AI therapist?

Our ability to perform collective intelligence management

Human creativity, especially as it relates to putting individual ideas together to form an innovative new one, gives us a leg up when competing against AI. Humans are able to foster group thought, to manage and channel it, to create something bigger and better than what existed before. Like, when we created AI in the first place.

Our ability to realize new ideas in an organization

Think: Elevator pitch. Humans are masters of marketing new ideas and are completely in-tune with how to propose new concepts to an organization because, you guessed it, we too are human. If the manager remains human in the future (fingers crossed!), then we know what to say to them to best sell our point of view.

Using what we know, it’s essential for almost all of us to retrain for an AI-driven economy that is most likely just a few years away. My advice for my fellow humans? Develop the parts of you that make you human. Practice eye contact and listening. Think about big pictures and the best way to manage others. Sharpen your mind with practicing creative processes. And do stay up to date with current trends in AI tech. Sooner or later, these babies are bound to be your co-workers.

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Opinion Editorials

Your business model doesn’t have to be a unicorn or a camel to succeed

(OPINION / EDITORIAL) It’s not unusual for people to suggest a new business model analogy, but this latest “camel” suggestion isn’t new or helpful.



Camels walking in desert, not the best business model.

This year in 2020 I’ve seen a great deal of unique takes on how our system works. From 45 all the way down to children instructing adults on how to wear masks properly. However, after reading this new article published by the Harvard Business Review, I don’t think I’ve ever seen something so out of touch with the rest of the business world. Here’s a brief synopsis on this article on business model.

The author has decided that now of all times it’s drastically important for startups and entrepreneurs to switch their business tactics. Changing from a heavy front-end investment or “startups worth over a billion dollars” colloquially called “Unicorns” to a more financially reserved business model. One he has tried to coin as the “Camel”, using references to the animal’s ability to survive “long periods of time without sustenance, withstand the scorching desert heat, and adapt to extreme variations in climate.”

The author then goes on to outline best practices for this new business plan: “Balance instead of burn”, “Camels are built for the long haul”, “Breadth and depth for resilience”.

Now I will admit that he’s not wrong on his take. It’s a well thought-out adjustment to a very short-term solution. You want to know why I’m sure of that? Because people figured this out decades ago.

The only place that a “Unicorn” system worked was in something like the Silicon Valley software companies. Where people can start with their billions of dollars and expect “blitzscaling” (a rapid building-up tactic) to actually succeed. The rest of the world knows that a slow and resilient pace is better suited for long term investments and growth. This ‘new’ business realization is almost as outdated as the 2000 Olympics.

The other reason I’m not thrilled with this analogy is that they’ve chosen an animal that doesn’t really work well. Camels are temperamental creatures that actually need a great deal of sustenance to survive those conditions they’ve mentioned. It’s water that they don’t need for long periods, once they stock up. They have to have many other resources up front to survive those harsh conditions the article writer mentioned. So by this analogy, it’s not that different than Silicon Valley’s strongly backed “startups.”

If he wanted to actually use the correct animal for this analogy, then he should call it a tortoise business plan. Actually, any type of reptile or shark would work. It would probably be a better comparison in temperament as well, if we’re talking ‘slow and steady wins the race.’ Whatever you do, consider your angle, and settle in for the long haul.

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