REI INK

Seattle, WA

Rain City’s Market Remains Hyper-Competitive, “Complicated” By Carole VanSickle Ellis When investors think of Seattle, Washington, companies like Amazon, Starbucks, Zillow, and Microsoft likely spring to mind along with sky-high property values and lots and lots of rain. These are certainly facets of life in “Rain City,” but they only touch the surface of a complicated housing market and local economy. Although inventory levels in Seattle are sporadically rising, buyers are still facing extremely high housing costs and heated competition to reach the closing table. According to information from the Northwest Multiple Listing Service (NWMLS), prices in King County, where Seattle is located, are up about 14 percent year-over-year. In neighboring Pierce County, prices are even higher. Even with more inventory, as long as prices remain high the advantages to buyers may have more to do with the ability to bring back some of the “traditional” parts of the home purchase process like home inspections and the idea of using comps to set the starting bid. “Paying a fair price and being able to have a home inspection” could be back in the equation for Seattle-area buyers in the coming months, predicted Jon Bye, team lead at local real estate group Jon Bye & Associates. Bye told local news outlet King5 in mid-September that for the past couple of years if you wanted these things and you wanted to own a home in Seattle, “you had to roll the dice.” Now, the slight decrease in pressure on inventory might mean things that used to be “given” in the home-buying process might come back. He continued, “Before, when you had 10 offers, you would have six to eight of those be fairly normal, and then you would have two people that would really be running the price up really high. I think that is the stuff we might not see as much as what we have been used to over the next year or two.” Marco Santarelli, founder and CEO of Norada Real Estate Investments, summarized the situation, observing, “King County and Seattle remain a seller’s real estate market with only 0.62 months of inventory – still well below what is required to meet the volume of buyers right now…. If interest rates were not so historically low, buyers would be unable to afford the escalating cost of housing.” Santarelli predicted buyers would continue to seek homes in the Seattle suburban markets since increasing listing volumes are doing little to ease inventory shortages in the city proper and emphasized the market still offered opportunities for investors. “Seattle has a track record of being one of the best long-term real estate investments in the U.S.,” he concluded, citing 140-percent appreciation since 2012 and noting Realtor.com named Seattle as the #5 housing market for “combined sales and growth for 2021.” Thriving Local Employers Keep the Market Baseline Strong Although Seattle has had its fair share of COVID-related challenges since the novel coronavirus seized hold of the U.S. economy and began to shake things up in early 2020, the resilience of its largest employers (think Amazon and Microsoft) has helped keep the underpinnings of the real estate market strong. “The Emerald City…seems to be more insulated than other metros of comparable size,” observed Motley Fool Millionacres contributor Tara Mastroeni. This has held true not just for owner-occupied properties, but rental occupancy as well. “Other major metropolitan areas have had people fleeing their cities in droves now that they are free to work remotely. By contrast, Seattle’s rental vacancy rate rose 0.1 percent on a year-over-year basis, which is good news for landlords,” Mastroeni said. Of course, during the pandemic, low vacancy rates do not necessarily lead to high rates of on-time rental payments. Although Washington state estimates that statewide, between 80,000 and 150,000 renters were behind on rent payments in June of this year, The U.S. Census Bureau reported in September that “60,000 adults in the Seattle area are behind on their rent.” About half of those individuals reported being five months behind on rents but, interestingly, only about three percent said they were “very likely” to be evicted, likely because of current employment status. Amazon, Microsoft, and Starbucks alone account for about a sixth of employment in the Seattle area, and all three companies have resisted the pandemic downturn. Amazon reported 220 percent increases in profits in May 2021, while Microsoft reported a 33 percent profit this past July. Although Starbucks, the city proper’s second-largest employer, took a hit during pandemic-related shutdowns, in April of this year it reported a “full recovery” in the United States along with profits that had nearly doubled year-over-year. Investors interested in rental properties in the area can rely on solid employment opportunities for tenants but should bear in mind Seattle’s local government as well as Washington state’s government have a history of extending eviction moratoriums and stonewalling frantic landlords’ attempts to remove tenants who are deliberately damaging their properties. “The challenge is during this COVID moratorium, the city has passed new legislation which makes it more onerous…for us to successfully evict the tenants, and it has made it extremely expensive,” one local landlord complained. He cited as an example a tenant who has allegedly failed to clean up after his pets “in months,” owes $25,000 in back rent, and, at time of publication, could not be proven to a local court’s satisfaction to be “a threat to health and safety,” which would enable the landlord to remove the tenant in spite of the moratorium. Short-term rental investors should also be aware of Seattle limits on Airbnb properties imposed in 2017, which required all short-term rental operators to be licensed and limit new operators to listing only their primary residences and one other unit. The restrictions were intended to address a then-burgeoning (now full-blown) housing inventory shortage in the area. At the time, critics of the rules argued that most of the properties currently in use as short-term rentals were “unlikely to become affordable options for locals”

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Confidence Backed By Experience

LRES is Primed to Support, Streamline and Optimize Clients’ Portfolios By Carole VanSickle Ellis When it comes to timing, diversified REO/asset management and valuations company LRES Corporation is fully focused on creating powerful solutions for investors and servicers facing today’s market pressures. This means constantly adding new tools and solutions to the company’s array of services and bringing in new talent (in new time zones) whenever necessary. The latest manifestation of this dedication to helping clients and investors make the most of the market and achieve the best timing in today’s economy is the merger between LRES and Keystone Asset Management. LRES president Mark Johnson describes the move as key to bringing clients of both businesses the “tremendous presence” needed in asset management and operations coming out of the COVID-19 pandemic. “This move brings experts in REO marketing and ‘traditional’ mortgages alongside the LRES team that specializes primarily in reverse mortgages and the REO (real estate owned) business associated with reverse mortgages,” Johnson said. “This merger has really expanded our talent pool to make us one of the largest REO companies in the country with expertise that truly and fully covers the entire span of products.” Ryan Hennessy, former CEO of Keystone and current senior vice president at LRES, agreed. “The lift that we are able to create in this industry, together with both current and future clients, is really exciting,” he said, describing the merger as a “two plus two is greater than four” situation. Hennessy added, “Keystone and LRES have worked together for the better part of a decade, so we knew that it would be good for everyone for the companies to come together.” Both executives agree that the current real estate market is primed for a change and LRES is positioned to play an essential role. As government-enforced mortgage forbearance and eviction moratoriums end this fall if, indeed, they do so, the housing market is going to experience a shift simply due to changes in supply and demand. “We are definitely not going to see a 2008 again, but we and our clients are going to be much busier than we have been,” Hennessy predicted. “That is why we wanted to combine the tremendous presence of the two companies as well as their technology resources, widely distributed existing operations, stable infrastructure, and a lot of customer support.” “We have definitely expanded our talent pool, our education, and our abilities,” Johnson said, adding, “and we liked the fact that Ryan and his team are based in the eastern time zone [LRES is based in California]. It increased our office hours by at least three hours a day for all of our clients, and a second office on the other side of the country complements our disaster recovery operations services as well, which is vitally important to the industry.” Helping Clients Make the Most of New Marketplace Opportunities As part of its ongoing efforts to expand services for clients seeking new opportunities in the real estate sector, LRES is always on the lookout for spaces where existing services could be improved or sectors where additional services might be provided. When a potential for improvement in the company or a potential for adding on a new service is identified, LRES moves quickly to fill the gap. As a result, the company offers one of the most comprehensive reverse mortgage REO asset management and listing services in the country, working with 8 of the top 10 reverse mortgage lenders in the country to process these complex loans. Since the majority of reverse mortgages will end with the collateral property as an REO, there is a substantial need for servicers who understand the requirements and regulations associated with processing these loans from beginning to end. “When you think about traditional mortgages, only about 1 percent actually wind up going through the foreclosure process and into REO status,” Johnson said. “Home equity conversion mortgages (HECMs), or reverse mortgages, on the other hand, naturally progress to REO status in nearly all cases.” Although there are three types of reverse mortgage, HECMs are the most common class. Under the terms of most HECMs, the home serves as collateral for the mortgage and the homeowner receives payment in the form of a lump sum, over a predetermined period of time, or as a line of credit against the equity in the home. Borrowers younger than 62 cannot qualify for a reverse mortgage regardless of the amount of equity in their homes, and senior borrowers are federally prohibited from taking out loans in excess of the estate’s value and placing their heirs in a position of responsibility for any excess debt. Since the reverse mortgage generally “comes due” when the borrower departs the home and senior borrowers in this category generally prefer to age in place as long as possible, nearly all reverse mortgage transactions conclude with the lender in possession of an REO. As have other types of mortgages during the COVID-19 pandemic, reverse mortgage regulations were affected by some state and federal health policies, including mandatory extensions on mortgages that would normally have proceeded smoothly into REO status. Fortunately for LRES clients, the company has a long history of navigating complicated mortgage-related requirements and regulations as well as with listing high volumes of REO properties. “We act as service providers to the clients who either service or manage the reverse mortgage loans,” Johnson explained. “We bring a lot to the table because we have experience with both reverse and forward mortgages.” Hennessy added, “Our long success in efficiently processing these transactions is already an invaluable resource for our clients who are reverse mortgage lenders, and we are seeing many other lenders and servicers looking into expanding their presence in this growing marketplace.” With a likely influx of reverse mortgage REOs coming sometime in 2022 or 2023, LRES is preparing with its clients to handle the higher volumes. “We are going through some exercises to help them get ready, revamping workflow processes, and really

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Increasing Cap Rates and NOI

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How Asset Managers Can Utilize Security Deposit Replacement and Rent Guaranty Insurance By Adam Meshekow Every asset manager is focused on acquiring and selling assets to maximize cap rates and asset values. One key item when acquiring or dispositioning assets or asset portfolios is understanding the bad debt. Bad debt directly effects NOI and Cap Rates. While infrequent occurrences, defaults can ruin an otherwise strong financial performance. The SFR housing market is experiencing the greatest in-flow of capital in the history of the asset class. Finding prudent ways to generate higher NOI, which ultimately leads to higher Cap Rates, is becoming more difficult. There are only a few ways to generate higher returns, and that is either by raising rent prices or reducing expenses and bad debt. Security Deposit Replacement Insurance is a great way to reduce bad debt and reduce the burden of the administration and expenses associated with security deposits. Rent reform continues to gain traction across the country, with many sponsored bills coming to statehouse floors in the coming months. In the midst of all of this pre-tenant legislation, new and innovative rent protection products are helping to deliver tools to asset managers to transfer risk and increase the financial performance of their assets. A Thing of the Past Security deposits have been used for generations to limit the amount of risk that a landlord takes when renting out an asset. In most jurisdictions, landlords are required to follow strict rules and regulations governing how large of a deposit they can demand, how to hold cash deposits, and for what they can be used. The process of administering, accounting for, and returning security deposits represents a cost center for landlords across the country, costing $35-$60 per door per year to manage. Landlords have been “self-insuring” against bad debt through the use of cash deposits for generations, which ultimately ends up minimizing some of the bad debt but rarely covers or eliminates bad debt when things go bad. Innovations in rent protection and security deposit replacement insurance are being driven by rent reform as well. New rent reform legislation changing the amount of cash deposits and requiring landlords to offer insurance alternatives has passed or will pass in cities such as Atlanta, Cincinnati, Baltimore, and New York. For asset managers, this places much more risk on these assets without these new products. These new “soft capital” solutions are a win-win for both the operator and the resident. Residents are feeling the pinch from COVID-related loss of employment and reductions in income. Liquidity is at a premium today and residents are loath to pay over one month of rent or more in cash to a landlord only to have it sit in the bank. Cash security deposits are a highly inefficient use of capital and a poor form of self-insurance when compared to these novel soft-capital products. A New Way of Doing Business Rent guaranty and security deposit replacement insurance products allow landlords to enjoy as much and often more coverage than that of cash deposits. These products are paid for by the resident, providing asset managers the opportunity to eliminate two separate expenses to increase financial performance – administrative expenses associated with security deposits and bad debt. For example, let’s say the rent on a single-family rental in Florida is $1,800 per month and the landlord wants a $2,500 security deposit to cover damage, utilities, rent, and legal fees. In lieu of cash up front, the resident pays roughly $25 a month in insurance premiums. Allowing the resident to pay over a set period of time at a rate of approximately 1% of the cash security deposit per month is a true win/win for both the owner/operator and the resident. It gives the resident flexibility to move in without having to come up with all of the cash required, saves the owner-operator around $50 per door in security deposit administration, and it provides the owner with almost 50% more coverage in the event of missed rents, fees, and damages. Now let’s talk about how these new products increase the value of properties from a cap rate perspective. When applied across all assets in a portfolio, this type of insurance improves portfolio value by increasing occupancy, reducing vacancy loss, and improving overall NOI. It may seem small for an owner that owns a few doors, but as the portfolio grows this is a great way to boost the economic value of these assets. Owners/Operators across the country are embracing this type of insurance technology across multifamily, student housing, and single-family rentals as a way to boost NOI as much as $900,000 per every 1,000 doors. As the industry continues to evolve, asset managers will look for these products and continue to drive innovation for the industry. It is still early in the phases for this type of insurance to become the everyday norm, but I do believe that over the next five years asset managers will easily be able to underwrite and forecast bad debt as this type of coverage gets baked into their view of all types of real assets.

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Mitigating Property Loss and Liability

Develop a Loss Prevention Mindset to Increase ROI By Shawn Woedl In the real estate world, a critical component of asset management is risk management. Your risk assessment of the property and potential liability concerns should begin before you even purchase the property. Much of the advice that follows will seem common sense, but when you put on an insurance hat, you may see red flags you had not considered. To lessen your chances of property damage or an injury, you must cultivate a loss prevention mindset. First, you need to educate yourself on the circumstances which could put your property at risk. Then you can plan ways to minimize that risk and put your mitigation plan into action. What to Look for When Evaluating the Purchase Most seasoned investors have their own way of calculating their potential ROI on a property. Including the insurance premium in this calculation is common practice. But have you thought about factoring in potential, sudden property damage? Or what would happen if someone is seriously injured on the property? When walking through a property to determine if you will pull the trigger, look closely both inside and out for common issues that could be a risk factor. Outside Look down. In what condition are the hard surfaces? Look out for uneven walkways that could lead to a trip and fall. Look up. Are there tree limbs hanging over the roof? Are the trees healthy? Unhealthy trees can drop limbs unexpectedly causing damage to either the property itself or nearby vehicles; or worse, injure someone on the premises. Inside Be on the lookout for deteriorating stairs or loose handrails that could be a hazard. And make sure they are up to current code. Depending on the final intent of the property, some insurers require that the property be in good condition and meets current local ordinances or state codes. Look around for smoke detectors. These should be on each floor of the home (including the attic and basement), in every bedroom, near stairways, in or near all living areas, and of course the kitchen. The National Fire Protection Association (NFPA) recommends interconnected alarms so that they all sound when one goes off. Batteries should be changed twice a year and checked monthly. The importance of having smoke detectors in constant working order cannot be overstated from both an asset protection, and occupant safety and liability perspective. Working smoke alarms cut home fire deaths in half. And many insurers will deny a fire claim if it is determined that working smoke detectors were not present at the time of a fire loss. What to Plan for When the Home is Vacant A vacant home is at a higher risk of theft or vandalism. If the home is in an area that is more prone to crime, make sure that these are covered under your property policy. Also make the property less enticing to criminals. Mow the lawn and trim the bushes. Set interior and exterior lights on a timer to make the home look lived in. Be sure the property is securely locked at all times – both doors and windows. Change the locks after purchase. Depending on the area, you may even consider installing an alarm system, which can also become a beneficial selling point for future tenants. In a colder climate, turn off water at the source while the home is vacant to avoid burst pipes causing water damage in case of a freeze. When Showing the Property When you are showing the home to potential tenants, the increased foot traffic can increase the liability risk. If there is inclement weather, shovel snow off the front walk or sprinkle salt to melt any ice. If you noticed any potential hazards when you purchased the property, be sure they are repaired before you have people walking through to limit potential injury. Many property owners are allowing potential renters to view the property alone by either using a keyless entry or lock box. Unattended individuals could cause property damage or commit theft of anything inside the home. Be sure someone is present for the showing and that nothing of value is accessible to visitors. How to Mitigate Loss Once Tenants Move In Cooking Fires According to the NFPA, cooking is the leading cause of home structure fires and injury, but also one of the most avoidable. The most common cause is unattended cooking, and a major part of the problem is cooking oil or grease fires and the mishandling of them. Throwing water on a grease fire causes the fire to spread, the opposite of the desired effect. Ensure that a fire extinguisher is available near the kitchen and any heat source. Make sure your tenants know where they are and how to use them. You might also consider installing a fire suppression device above the stove. These products are activated by a flame and can release extinguisher powder down onto the stove, helping put out the fire faster than the cook can react to it. Animals Do you allow your tenants to have pets on the property? If their dog injures someone on the premises, you may be at risk of liability claims because you own the property. For this reason, you should be aware of whether or not your Premises Liability insurance has any coverage for canine liability (and any breed exclusions), and you might even consider requiring your tenants with dogs to carry their own canine liability insurance as a first line of defense. Understand Your Insurance Coverage It’s important to remember that insurance policies cannot cover every type of loss. Therefore, it is key to familiarize yourself with your coverages and any coverage exclusions within your policy. Wear-and-Tear is a standard policy exclusion industry-wide, so if your tenant leaves you with damaged window blinds, smudges on walls, etc., those are considered Wear-and-Tear and are not covered, which is why you collect a security deposit. It is also important for your tenants

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2022 Will Bring New Challenges for Asset Management

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Companies with Ability to Scale Will Succeed By Rebecca Smith and Andrew Oliverson What’s next for the U.S. housing market? That is the question preoccupying buyers, sellers, real estate investors, and mortgage servicers across the country. For the last eighteen months, foreclosure moratoriums and protections for homeowners impacted by the COVID-19 pandemic have contributed to a supply imbalance. As many of those protections retire at the end of this year, new challenges will be in store for mortgage servicers, investors, and asset managers who have been patiently waiting to resume business as usual. Mortgage servicers will face bottlenecks as they begin to restart evictions and foreclosure processes. Meanwhile, buyers and sellers will continue to grapple with the limited supply that is expected to persist into 2022. Asset managers will have their own challenges getting back to business, with supply chain disruptions and labor shortages continuing to tie up regular property maintenance and renovations. An Unprecedented Increase in Home Demand The COVID-19 pandemic is credited with creating unique market conditions that led to record appreciation in home prices. Foreclosure moratoriums and a temporary halt in construction ratcheted up the pressure by limiting the amount of inventory that came to market. As a result, competitive bidding wars for limited listings drove prices up. According to the Radian Home Price Index, provided by Radian’s subsidiary Red Bell Real Estate, LLC, home prices have risen 14.9 percent since the beginning of the pandemic, with the average home price appreciating more than $37,000 over the last eighteen months. When the Consumer Financial Protection Bureau (CFPB) rule restricting foreclosures is lifted at the end of 2021, servicers will begin to restart foreclosure and eviction processes. This will release some new inventory onto the market as some delinquent borrowers will opt to sell their home or are eventually taken to foreclosure. However, with some municipalities running on skeleton crews and shortened business hours, servicers will be jammed as they navigate mortgage servicing requirements for a backlog of borrowers impacted by the pandemic. Even as some new inventory begins to trickle into the market, experts say there is more demand than the market can handle. The National Association of Realtors reported there is still a shortage of 5.5 million new homes. Meanwhile, the millennial generation is coming into the market in a big way. They have formed 12.3 million new households since 2012, while only 7 million new homes were built during that time. All signs are pointing to a continuation of similar supply and demand pressures as we move into 2022. Investors who have waited on the sidelines are ready to jump in. There is an estimated $150 billion of unspent capital in private equity real estate funds. But investors will need more than cash to succeed. Major disruptions in the construction industry will have ripple effects on real estate investment and asset management for the foreseeable future. The Disruptive Landscape Continues While the pandemic bolstered home prices, it simultaneously disrupted many of the industries that support the real estate sector, including construction, materials, servicing, and property management. The cost of labor and materials has skyrocketed—that is, if you can even find labor and materials. With building materials in short supply and contractors booked out for months, renovations and even minor repairs have become significantly more costly and time consuming. Since the onset of the pandemic, the global supply chain has been under extreme strain. Bottlenecks in Southern California and China, as well as the recent debacle in the Suez Canal, have tied the global fleet of container ships in knots. This triggered a surge in the cost to ship materials—according to a Reuters report the cost of a shipping container from China to the U.S. has climbed over 500% in the last year from $4,500 to over $20,000. A shortage of nails has seen suppliers putting daily limits on the number of boxes contractors can purchase. The National Association of Home Builders reports that despite the drop in softwood lumber prices from astronomical highs earlier this year, it has been offset by huge increases in the prices of materials like building paper, nails, pipes, and windows. Over the first half of 2021, some building materials have increased more than they did in 2020 by many times over. To add salt to the wound, the construction labor market suffered an exodus of skilled workers during the pandemic that it is still desperately trying to recoup. To keep pace with demand, the Associated Builders and Contractors estimates the construction industry needs an additional 430,000 craft professionals this year and nearly one million over the next two years. It does not appear this problem will be fixed quickly, as the construction industry has an aging workforce and lack of new skilled workers entering the field. Companies with Ability to Scale Will Succeed So, what does this mean for small and medium-sized investors? The real estate landscape has changed significantly over the last eighteen months. Properties have become more difficult and expensive to acquire, and new challenges have evolved for repairing or rehabbing properties. Additionally, the build-to-rent (BTR) industry has gained momentum as single-family rental investors opted to produce their own inventory, creating competitionfor fix and flip investors. Likewise, servicers are entering a more complex environment than ever before. Mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners requiring loss mitigation assistance. They will have their hands full with carefully navigating legal and regulatory requirements for foreclosures and evictions. Succeeding in this new environment will require investors and servicers to have an asset management partner with scalable capabilities that include a comprehensive repair strategy, access to the supply chain and materials, and a reliable vendor network. Radian’s asset management subsidiary, Radian Real Estate Management LLC, maintains a nationwide network of over 40,000 vendors including contractors, property managers, and real estate agents that can help investors acquire, rehabilitate, and market investment properties as soon as they hit the market. Full-service asset management

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Modernization of REO Asset Management

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From “Oregon Trail” to Operational Efficiency By Mike Chew Growing up, most of us can relate to the concept of the “awkward years” – the years when your body seems to grow faster than your sense of style. Braces, bad haircuts, short-lived fabs, and strange clothing choices come to mind. However, most don’t recognize such awkwardness when it is happening. Awareness usually occurs years later when you revisit those old school pictures, the ones that cause you to laugh, cry, or in extreme cases, toss those photos in the trash. While reflecting on the past is sometimes cringe-worthy, it does offer perspective. For REO Asset Management companies that have been around through the years, revisiting the awkward past is a badge of honor. It means that the company has modernized to meet rapid changes affecting its institutional asset owners, vendors, realtors, savvy home buyers, and investors. So, what does the modern REO Asset Management company look like? While there are countless ways asset management has evolved, there are three general categories that are worth highlighting. New Property and Market Data Sources Offer Real-time Feedback Looking back at those old school pictures, you might ask yourself why you tucked that Motley Crew t-shirt into your jeans. And why didn’t your friends ever check you? This brings up our first point of reflection: In the past, asset strategy decisions were based solely on information obtained by two core valuations products: home appraisals and broker price opinions (BPOs), both of which remain a trustworthy source of property intel today. However, when a property value was questioned, the asset manager would need to order a second or third report and do manual research. Today, asset management companies no longer rely exclusively on these two report types. Instead, they are fed an abundance of local market analysis and property data intel with a simple click. Many modern REO asset management companies, like our own, have integrated property valuation services and analytics that offer automated, data-driven market reports, desktop valuations, and hybrid valuations in addition to the traditional BPO and appraisal. Data modernization and simplified access impacted REO asset management by enabling greater clarity regarding the most effective asset strategy, reducing risks, reducing costs, and increasing operational efficiencies. Back in the day, asset marketing timelines could get excessive if additional reports, value reconciliations, and bids were required. In many cases, the modern REO asset management company can get an idea of neighborhood and market performance before anyone sees the property. Modern Marketing Methods are Sliding into Your AMs During those “awkward years” you at least had a few tech gadgets; a Gameboy, Walkman, or mobile “brick” phone in a carrying case that more resembled a suitcase. All these items seem obsolete now, as technology has made tremendous advances over a relatively short period of time. Point number #2 has to do with the advent of innovative marketing tools and methods, which allow modern REO asset management companies to market the asset more effectively than in past decades. Some things in real estate marketing remain tried and true: realtor representation, location, curb appeal, and “good bones,” to name a few. What HAS changed? To start with, the audience. In the awkward years, REO asset management companies knew precisely who would buy an REO asset (primarily investors) and how to reach them (realtors). While investors still make up a significant portion of REO buyers, the “REO is only for investors” stigma has lifted, and not so “traditional” home buyers are willing to consider the REO asset (especially now in this low-inventory/high-demand market). The broadening of the REO audience has created a shift in how asset managers market and sell their properties. Consumer demand for convenient digital experiences continues to grow, and prospective REO asset buyers are taking the “search” process into their own hands before ever reaching out to a realtor. While technology is placing more power in the buyer’s hands, REO asset management companies have thousands of modern tools (email, SEM, ad retargeting, etc.) designed to attract those buyers. Some of our favorite go-to marketing tactics include real estate marketplaces such as auction platforms; visual and virtual marketing tools, such as 3-D tours; and social media, applications and real estate networking sites. There are a vast number of real estate networking apps, platforms, and websites that are highly targeted toward experienced and “new” REO investors. Shout out to the REI INK Referral Network, which is a great example of a highly targeted networking site geared toward the REO community. From Oregon Trail to Operational Efficiency Do you remember sitting at an oversized desktop computer playing Oregon Trail? It wasn’t until recently that Oregon Trail was re-launched and modernized. Fortunately, for REO asset management companies, the emergence of modern asset management systems and technologies started quite some time ago and continues to improve year after year. Some of the more seasoned REO asset managers will remember green screen REO systems, manual reporting functions, and excessive amounts of data entry. Those days are gone. Today’s modern REO Asset Management companies have access to innovative workflow systems, integrated digital services, OCR technology, AI, and automation. These solutions have hugely impacted back-office operations, creating value for all major participants in the REO asset management, marketing, and disposition process. Modern REO asset management systems and digital solutions offer effective and efficient ways to maximize REO partnerships, processes, and asset strategy. The systems of today often consolidate the various functions of REO and automate time-consuming tasks, enabling asset managers to focus on strategy rather than data entry or system trouble-shooting. A modern REO Asset Management company will likely have staff trained on multiple systems. Because these systems are well-designed and easy to use, there is a short adoption and training period. Modern systems also allow REO asset management companies to complete a wide range of transaction types such as short sale, REO sale, rental property management, and bulk portfolio sales. By reflecting on the awkward past of REO asset management, we gain

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