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Cashing In on the Foreclosure Boom

Speaking of businesses making money from the downturn, The New York Times reports today on how the real estate industry is trying to cash in on the glut in REOs, or Real Estate Owned properties. Those are foreclosed homes that don’t sell at foreclosure auctions or sheriff’s sales and are taken back by banks.

Cashing in on the REO boom is sort of like finding an economic opportunity in the American Dream gone wrong. The Times describes real estate agents and property managers at a busy and lavish conference in Palm Desert, Calif., dedicated to the REO market, comparing notes on the best way to evict tenants from bank-owned foreclosed homes.

Welcome to the spring 2009 Reomac conference, which has attracted nearly 3,000 real estate agents and property managers to this lush desert resort. The crowd brimmed with a gusto that is hard to find in this recessionary era. The hotel bar did more business on Saturday night than it did on New Year’s Eve. Small wonder: These are the people cashing in on the boom in foreclosed properties.

R.E.O. is industry lingo for “Real Estate Owned,” the term that bankers assign to homes they have taken in a foreclosure. Reomac is the industry group that serves the mortgage default trade, specializing in selling the busted-up American dream.

“Things are going tremendously,” said Darren Johnson, an R.E.O. agent from the Detroit area, who has handled about 180 bank property sales in the last year. “It has never been this good.”

Here’s an anecdote demonstrating how nice it was at the conference, according to The Times:

The convention at the Desert Springs J. W. Marriott formally began on Sunday, with a golf tournament, featuring a “19th hole” bash cosponsored by Coldwell Banker, the giant real estate firm. Other convention-goers were at the resort spa, getting top-priced treatments, like the protein-rich caviar scrub for $185.

Before a property becomes an REO, however, there’s usually an owner who lost a house he or she had pinned their hopes on, had their credit ruined, and no doubt went through months of excruciating financial stress. One agent did tell The Times he hoped efforts to help people stay in their homes were successful, because he didn’t want to make money off of other people’s misery. But others at the convention seemed to have few such qualms. Again, from The Times:

Sherry Waite, who serves an affluent community in southern California near San Diego, is eagerly awaiting the foreclosure of some of her neighborhood’s high-priced homes.

“Three dozen R.E.O. listings between $1.8 and $8 million,” she said, a pomegranate martini in her hand, as she cited what she soon hopes to be handling. “Hello! Those are big numbers.”

Benny Nassiri, who with a partner handles R.E.O. sales in California, Kansas and Louisiana, was sitting poolside Sunday on a chaise longue in a red-white-and-blue bikini, Dior sunglasses and Bebe sandals, sipping a beer and asking her assistant about the party planned that night.

Then a call came in on her cellphone, related to a property she had put on the market just two days ago in Carson, Calif.

“Asking price $360,” Ms. Nassiri told the prospective bidder. “Yes, we already have a couple of offers. Are you ready to make one?”

The call complete, she had her aide send an e-mail message to the possible buyer, as she promised him she could help arrange financing. Sales certainly are hot, she said. “There just is not enough inventory,” she said, before looking once again poolside.

Maybe there’s not enough inventory, because even some high-end homeowners are managing to hang on to their properties. But REO agents aren’t exactly cheering for foreclosure moratoriums and homeowner rescue plans. For them, that would be nothing to celebrate, as they try strive to turn a profit from someone else’s dream gone bad.

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