By Steven Maher, Managing Broker, Kinzie Real Estate Group
As many sectors of the real estate market recover, opportunities continue to grow for investors and financial institutions to sell REO assets. In fact, the workout and disposition of these assets have been a large part of Kinzie’s business since it was formed in 2011. With more than 25 years of experience in real estate and dozens of successful REO projects to our credit, here are some insights from our team on ways to keep your REO deals on track.
1.) Complete your due diligence. There is no such thing as a “typical” REO property, which means there is no “one size fits all” approach to bringing a formerly distressed asset to market. It’s important to take a fresh approach to each deal and have a keen understanding of both your property and of what is happening in that market. Know who is buying, what is selling, and what the prices are. Explore what is selling well, but also what isn’t selling as well to know how to uniquely position your asset to maximize its value. And, of course, know who you are selling to. Are you targeting investors or owners/end users? Each would require a different approach.
For example, we were recently retained to complete the build-out of and bring to market a townhome community in Frankfort, Ill., Kinzie spent a great deal of time examining that particular subset of the market. We identified our target buyer and focused on what changes we needed to make to create a property attractive to that group. We investigated what aspects of the development may have contributed to its lack of success when it was initially marketed in 2010 and made adjustments. Lastly, we tested the market with a handful of units, which we are happy to report sold quickly. By dissecting the market, we were able to identify the “sweet spot” for these particular townhomes, and will be offering the remaining townhomes for sale in 2015.
2.) Maintain open lines of communication. The biggest hurdle to the successful repositioning and sale of a REO property is often communication between all parties. Perhaps even more so than a traditional real estate transaction, the preparation for market and sale of a REO asset requires clear, open and frequent communication as well as appropriate expectations for everyone involved.
For example, we have been working on a townhome community in Evanston, Ill. that stalled when the market took its downturn. The unsold townhomes became bank-owned, while the individuals who had purchased units had to deal with issues relating to incomplete infrastructure and other unresolved issues from the former developer. Kinzie stepped in on behalf of the bank to work with both the townhome association as well as the city of Evanston to discuss and satisfy the concerns of all involved. At the same time, we needed to offer a plan that would also result in the profitable sale of the remaining unfinished units for our financial institution client.
By initiating open lines of communication with all involved and maintaining transparency throughout, we have come to an agreement that will benefit the city, the current townhome owners and, of course, our client.
3.) Create a unique marketing plan. Use the information garnered during your initial market research to create a marketing plan that is unique to the asset. Not every property can be successfully sold with a simple MLS listing or ad. Know the market for the particular property: are you selling to investors or end users? Will the property attract a group with a special interest, such as a home with historic significance? Make your marketing outreach as targeted as possible. And don’t forget the brokerage community and members of the media to help spread the word.
For example, Kinzie recently sold a bank-owned historic mansion on Chicago’s North Shore designed by architect David Adler. This beautiful home, which we worked with the bank and the Illinois Landmarks Council to rehab, required a targeted approach in order to find the right buyer. First we developed a marketing plan that included producing a 16-page book with research about the architect, history of property from the Winnetka Historical Society and rare photos from the Ryerson and Burnham libraries of the Art Institute of Chicago. Additionally we held private broker events for top-tier Realtors in the community, and offered exclusive media tours of the home. The result was an all-cash sale less than 35 days after listing at a price that gave the bank a return four times great than its rehab investment in the property.
4.) Continue to show your commitment to the deal. This goes hand-in-hand with maintaining open communication; in order to see a deal through to the closing table, it is important to make sure all parties continue to feel comfortable.
Part of why Kinzie’s receiver services as well as our asset management and disposition division have been so successful is because of our strong commitment to each deal. Because of our integrated approach, we are involved in every aspect from the initial advisory period to construction and project management to the sales and marketing. Our deep level of involvement makes the other parties we work with more comfortable because they know we have “skin in the game.” Our commitment is evident in the time and resources we invest from start to finish.
So keep your deal on track by showing your commitment through to the end. Remember open communication is vital to the success of the project, and check in frequently with everyone involved. This can help foresee – and hopefully avoid – any issues that could stall your deal. About Kinzie Real Estate Group: Built on unique real estate experience, Kinzie Real Estate Group provides integrated solutions for all our clients’ development, residential, commercial, mixed-use and distressed asset needs. With over 25 years of experience across the real estate industry, our accomplished team and nimble structure provides creative and comprehensive solutions with a relentless focus on maximizing value for our clients. Kinzie Real Estate Group provides strategic planning and value-added services in the areas of Development Services, Asset Management and Disposition Advisory, Receivership, Brokerage, General Contracting, Property Management and Leasing. For more information on Kinzie Real Estate Group, visit www.kinziegroup.com.