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REO asset managers provide their services to banks and other mortgage lenders attempting to sell off foreclosed properties. These properties are known as real estate–owned assets, or REO assets, and they revert back to the lender after initial attempts at a sale fail. Such lenders must employ REO asset managers to try and sell off these properties and recoup some of the losses associated with a foreclosure. Managers may be employed in house by the lenders, or they may be independent managers contracted on a temporary basis.
When a bank or other mortgage lender has to foreclose on a home because the borrower has defaulted on his payments, it will initially try to sell the house to the public at auction. In many cases, the market value of the home will be less than the value of the loan still owed to the lender. A foreclosure auction may be futile in such a circumstance, so the lender then takes ownership of the house, which becomes known as a real estate–owned asset. At this point, the lender will turn the property over to REO asset managers, who will then be in charge of selling the home to real estate investors looking for a bargain.
Many lenders who deal in a great volume of mortgages may have REO asset managers as part of their staff. There are also independent REO asset management teams who are contracted on a case-by-case basis by lenders. This allows lenders to concentrate on making new loans and allows the management team to worry about the REO assets.
In most cases, REO asset managers are in charge of just about every aspect of selling a home that has been repossessed by a lender. An agent will be assigned to a specific property and will spearhead the efforts to get the house sold. This process begins when the agent inspects and evaluates the home and begins the process of preparing it for possible sale, which can include maintenance work and proper upkeep if the home stays on the market for a while.
Another task that most REO asset managers will perform is the marketing of the home, which entails making sure that investors know about its existence and scheduling any potential open houses to show the property. Managers also deal with the intricacies of the sale process, including determining the asking price and negotiating with potential buyers. Once the home is sold, the managers also make sure that payments are received on time, and they create final reports for the lender on the sale.