Brokers get commissions in several different ways, but what about a foreclosure real estate agent? Do real estate agents make money on foreclosures? Find out if realtors get paid for selling foreclosure properties!
Today I’ll answer your question, “Do real estate agents make money on foreclosures??
Hopefully, this question isn’t coming from a real estate agent or a broker. Nationwide, in the good years for real estate, the individual states will have licensed and trained over a million licensees.
In difficult times, many of the licensed real estate agents would put their license on hold because they can’t earn enough money to run an office or pay for a car. There’s just not enough money left over for a family.
My point is, it’s a tough business. Although it appears that people are making a lot of money, the newspaper, magazines, and the TV are not always accurate.
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WILL BANKS PAY FORECLOSURE REAL ESTATE AGENTS?
Foreclosure real estate is distinctly a different property. Foreclosure can be a passive investment, or it can be very active.
The legal system is somewhat complicated, and the banks have many rules on how they expect the foreclosure property to be returned to the bank.
The banks are willing to pay commissions to real estate agents.
Bank foreclosures take 90 days, 180 days, and sometimes 1 year to actually finish the process.
Banks and lenders are constantly troubled with foreclosure properties because homeowners are challenged in bad economic times to make their payments. Foreclosure is a constant worry for all homeowners.
FORECLOSURE AUCTIONS
Large population counties like Los Angeles, Houston, or Miami-Dade will have thousands of defaulted properties annually.
I have seen times when the banks were foreclosing on a thousand properties per week in just Los Angeles County.
Foreclosure auctions for mortgages are conducted daily at the county courthouse, usually on the courthouse steps.
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FORECLOSURE REAL ESTATE AGENT COMMISSIONS
So let me answer your question, do real estate agents make money on foreclosures? The answer is yes.
A foreclosure real estate agent will get paid commissions for finding buyers. And yes, if they purchase from the bank and resell for profit, they would make money.
HUD PROPERTIES
Real estate agents have access to many HUD properties, Housing and Urban Development properties.
HUD is an agency of the federal government that has made thousands of low down payment loans which have failed, and the property buyers have walked away.
Usually, these are first time home buyers that have no idea what the cost of owning property really is. HUD pursues the property owner, but more importantly, they want possession of the collateral.
FORECLOSURE REAL ESTATE AGENT COMMISSIONS ON HUD PROPERTIES
Many real estate agents will sell these properties to make commissions.
The property comes with a low down payment, the government loan. Obviously, there is a bigger market for people with low down payments than with the more normal 20% down payment.
Real estate agents receive commissions on these properties.
The real estate agents can find thousands of these properties available nationwide. They are easy to purchase and require very little money. Unfortunately, they are not bargains, but they do have good financing.
THE RISK OF FINANCING
The foreclosure market is huge, and in bad economic times, the defaulting homeowners are also in the thousands.
The risk of financing a 97% loan is high, and in many cases, the banks will recover their collateral.
Not only have they not collected the loan, but they have attorney fees and brokerage fees during the recovery. These foreclosure homes could easily be a burden for the bank of 110% or 120% of value.
THE DISTRESSED REAL ESTATE BUSINESS
During the years from 2006 to 2012, hundreds of banks and millions, I’ll say that again, millions of individuals ended up in bankruptcy.
Banks auction properties, and banks allow brokers and agents to sell properties.
Distressed real estate is a big business. It’s not easy. It’s a very low profit business.
THE UNIQUE BUSINESS OF TAX LIENS AND TAX DEEDS
About 30-years ago, I discovered tax liens and tax deeds. This little-known, highly lucrative business is perfectly legal and has been administered and mandated by local counties for over 200 years.
The business is unique. There are little or no ups or downs. It doesn’t follow the economy of boom and bust. There are no emotions or direct contact with homeowners or banks. The counties are very measured and follow strict mandated procedures.
MORTGAGE-FREE BARGAINS ON TAX DEED PROPERTIES
When investors discover tax deeds, they are able to buy no-mortgage property with starting bids of only 10 and 20 cents on the dollar.
As I said, it’s a little-known but lucrative business. However, it’s slow, and the counties are old fashioned and behind the times.
TAX DEFAULTED PROPERTY AUCTIONS
Only recently have they begun online auctions, which are perfect for entrepreneurs and mavericks.
Brokers and agents and other real estate people are required to follow very specific rules.
Real estate agents and brokers must disclose all activities. This puts the agent at a distinct disadvantage because buyers are apprehensive about tax auctions.
Referring back to foreclosure properties, the properties end up being owned mostly by the banks.
The banks will struggle and attempt to sell them at retail price. Realistically, all readers know they are not going to purchase distressed property at retail prices.
IN CONCLUSION
In closing, agents can make money on foreclosures. Brokers can make money, but these are only small commissions. It’s not a lucrative business.
Foreclosure in the mortgage states can take up to a year. 6 to 9 months is not unusual.
Foreclosure in the deed of trust states is much faster. For example, in Texas, it’s 21 days, Oregon 60 days, and California 111 days. Everyone must act quickly in those states, otherwise the lender will own the property.
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