Asset managers and banks are getting more aggressive about requiring real estate brokers to help supply more revenues in exchange for REO listings, say Realtors. Is that good or bad? Depends on how much business a broker wants to do in REOs.

A handy case in point is the second annual Fidelity National Real Estate Conference which was held last month in a Denver suburb. In just a year, this conference grew from 250 attendees in 2001 to over 685 registrants this year. Why the jump in attendance? REO brokers were told to come if they wanted more business from Fidelity National Asset Management Solutions, a subsidiary of Fidelity, and the largest national asset manager in the nation. They paid a conference fee, their airfare and hotel, and they came.

"I was told that if I didn't come, I wouldn't get any more business," said North Carolina REO broker Terri Moloney. "I called my asset manager and asked if this was true, and she said, 'I report to Tom DiMercurio, and this is the way it is.'"

Moloney came, but with resentment. "I've only had one listing from them this year," she groused.

Fidelity National Asset Management Solutions president and COO Tom DiMercurio confirmed what Moloney told Realty Times when he spoke to the assembled REO brokers and reminded them of FNAMS's new color-coding system. Brokers that support FNAMS get the highest ranking and more business from the company. He said that the asset management company will "support brokers who support FNAMS" by sending business to the brokers who attend the conference. Brokers who use ancillary services such as Fidelity title services and who buy Fidelity products such as the new transaction management software sold through REO.com, will presumably earn their place at the table, too.

DiMercurio told Realty Times, "There were two sets of people in attendance - people who had done business with us before - and those who hadn't. Some asked, 'If I come would it help me get business?' I said, 'To the extent that they understand our procedures, they would get business. If you come to the conference, we would do everything to get you a listing and we monitored that successfully, there were only a few places where we didn't have inventory. I've had some come who haven't gotten a listing. They come anyway because of the networking opportunity. Why would we force people to come to the conference? That is not a self-funding conference. We do it because it makes us better and more efficient. We try to be as democratic as possible. For 95 percent of brokers, they can't have more than 10 listings from us because we want to spread the business around. We want to meet new people."

Fidelity also took the opportunity to show brokers a series of new products, some from FNAMS, some from FNIS, asking brokers to place orders for software if they wanted to be early opportunity adopters. Some software will eventually be a requirement (within reason) for brokers who want to do REO deals through Fidelity because of the efficiencies it creates for the asset manager.

Explains Dana Keith, president of REO.com, a strategic partner with FNAMS, "The thing is banks and asset managers ten years ago had large staffs of people that could deal with the large volume of properties that were coming back to them. Now we are at a 30-year high. Do they rehire people or do they use technology to be more efficient? We need to choose real estate agents who can help create these efficiencies."

"A lot of companies are emulating our model," says DiMercurio.

Moloney confirms that other asset management companies are also importuning her to attend conferences. "If I went to every conference I was supposed to go to, I wouldn't have time to sell real estate," she says.

Pleasing the asset manager is a concept that makes sense to Dallas REO broker Cody Farris. He does as many as ten deals a year through FNAMS, along with other corporate sellers.

"I felt the conference was worthwhile," says Farris. "I've had a stream of business from them - 10 or 11 listings this year. If you are new to the relationship with Fidelity, it would be in your best interest to support them. How often do you get to meet a corporate seller? I want to develop the relationship, but I can understand how another agent might not have the financial resources to do so."

Farris' take is that the conference wasn't a trade show for Fidelity, but a way for Fidelity to demonstrate its needs as a client to its broker base.

"One thing is if you are going to list bank-owned properties," says Farris. "You need to invest in what makes the client's life easier. That means communication in their preferred method, and it is going more and more toward automation because Fidelity has to turn around and report to lenders. I understand Fidelity's side of it. I was a VP and AVP of default at two mortgage servicing companies. They have to minimize costs and that means automation. They are moving to an integrated solution for vendors and clients to interface."

Farris believes that Fidelity's transaction platform is brilliant.

"This is a natural extension (between REO.com and Fidelity where the transactions are accessed online) of what happens at earlier stages of the default process," says Farris, "and, the thought process is if you use Fidelity on your REO transaction, you will use them on your other title business. That's what they are wanting - for you to close your files through Fidelity. I have gotten great service from the Fidelity closer, and use them for other files," says Farris.

In addition to conference fees and software sales from asset managers, REO brokers are also facing more pressure from lenders to show "support."

"Another trend I see is that lenders are looking to the broker community to support them with loan referrals," says Farris. "They are offering incentives to buyers like no origination fee or free appraisals or free home warranties. Through RESPA, they can't require the buyer to get the loan from them, but they can ask the buyer to prequalify with them. Lenders are looking to the real estate community to talk up the loan programs, and they give preferred status to brokers who do a lot of loan orginations. They say, 'Have you sold any loans for us or sold any properties for us?'

These are material facts that people wanting to do REOs need to know - that asset managers and lenders have greater expectations than in the past that the brokers will share more costs for their referrals in the form of conference fees, software sales and loan referrals.

Although Farris says he is seeing more people enter the REO side of the real estate business, he is discouraging about the amount of work there may be available.

"The list is growing of brokers who say they are REO brokers," says Farris, "but there are only about five or ten who do any volume in Dallas. There's only so much to go around. If I'm a bank or a Fidelity, and I have five Realtors who do a good job, but I don't have enough business for them, I won't be bringing new people into my network."

Farris also says that REOs is one area where experience counts.

"Agents need to understand that REO properties require a lot of babysitting," instructs Farris. "They can't cherry-pick which ones they are going to represent. They have to take the $30,000 properties along with the $300,000 ones. They have to understand that the paperwork and client procedures are cumbersome. Your market evaluations have to be accurate. There is a referral fee involved. They have to front expenses and have deep pockets to advance on property maintenance."

So how does an REO broker handle the competing demands of clients? Buy our software. Refer our loans. Sell our inventory.

"You go along with it to get your foot in the door," says Farris, "and then you decide to deepen the relationship or back away."

"At some point, you have to decide if it is mutually beneficial," he continues. "and you can cooperate with the client, and you look at the volume of business, the referral fees, the holding times, the average sales price of the properties and ask yourself is the relationship valuable to you?

"It isn't a unilateral relationship," he adds. "I've walked away from clients in business. Not every customer is a great customer. You have to look at the business and say, 'Do I want to be in this?' If you are good, you bring value to the table, too. I provide good service, and that's worth something more than people who aren't experienced, so it is a two-way street."

Realty Times regrets its errors to the first published version of this story when it stated that the REO.com software could be used as a revenue source for brokers which could kick back profits to Fidelity companies as they are positioned to be de facto suppliers of title, flood and other services. The product in question is actually a desktop transaction management system from FNIS. The editor apologizes to FNAMS.

Published: September 18, 2002

Use of this article without permission is a violation of federal copyright laws.

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