Realtors Adapt, Improvise to Reduce Inventory

A home for sale in Washington or Benton counties now stays on the market for an average of 150 days.

Edwin and Lucy Dooley’s new home in Rogers was on the market for about 10 seconds.

“I put down the phone and opened the e-mail,” Lucy Dooley said of the call she got from Coldwell Banker Faucette Real Estate senior vice president Jerry Dou. “As soon as I saw the house, I said, ‘We’ll take it.'”

Less than three weeks later, the cash deal closed and the Dooleys walked away from the table smiling with a 2,700-SF home built in 2007 for $172,500.

That was more than $100,000 less than it originally sold for, and averaged out to around $64 per square foot. The house, which was foreclosed upon by Countrywide, is one of scores of bargains now available in Northwest Arkansas as the market unwinds from its peak years of 2004 and 2005.

The area housing downturn has culled the unserious from Realtor ranks and a handful of those determined to stick it out are turning to creative ways to reduce inventory.

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The Dooleys found Dou through his Web site, NWAFireSale.com, and Dou got the listing from another Realtor who has been making the most of a slowdown in the Northwest Arkansas real estate market.

Ryan Russell, a senior vice president at Exit Pinnacle Realty in Rogers, launched NWABankOwned.com in late summer 2007. Between Feb. 27 and the Dooley closing on Nov. 7, Russell had already surpassed his total sales for all of 2007.

Russell, who was ranked No. 60 on the Northwest Arkansas Business Journal’s annual list of top Realtors with $6.89 million in 2007 sales, has already grossed $7.2 million in 2008.

Of the 39 homes Russell has sold in 2008, 33 were foreclosures. Unlike the boom times, there are no longer happy faces on both ends of a sale and that fact hasn’t been lost on him.

“It’s unfortunate,” Russell said. “Being in the business I’m in right now, I’ve just got to focus on the happy ending with the new buyer. It’s depressing if I look at it any other way.”

Russell said he’s looking forward to an eventual return to normalcy in the market.

“The way I see it, I didn’t choose to be selling foreclosures,” he said. “It’s something I had to move my business into to make a living and stay in real estate. I don’t want to be doing this three years from now. I want to be going on to selling the more traditional route.”

Ethan Nobles, director of media relations for the Arkansas Realtors Association based in Little Rock, said NWAFireSale.com and NWABankOwned.com are a natural function of a correcting market.

“It’s a sign of Realtors being innovative when the market is down,” Nobles said. “This is time to try to stand out from the pack.”

Selling Synergies

Although they have similar purpose, Russell and Dou set up their sites differently.

Russell stocked NWABankOwned.com with listings supplied from real estate asset management companies that are helping national banks like Countrywide and Wells Fargo unload foreclosed properties.

Dou invests in real estate and, like Russell, began watching the foreclosure market closely in 2007. As a daily bargain-hunter on the Multiple Listing Service, Dou came up with the idea for his Web site to identify the best deals in the market whether they were foreclosures or not. Launched in March, NWAFireSale.com has four categories: smokin’ deals, bank owned, relocations and short sales.

Relocations are properties owned by corporations who agree to purchase an employee’s home if it can’t be sold as part of their moving expenses when they take a new job.

Short sales are homes where banks agree to take less than the outstanding balance on a loan to cut their losses from a potential foreclosure proceeding.

“I was buying properties myself and got to thinking, ‘What a great way to create a niche,'” Dou said. “It’s not like your normal Realtor Web site where it’s all about me. It serves a greater good to get [homes] off the market.”

The two sites converged on the Dooley sale.

The Dooleys, who live in Fort Smith, were looking for a second residence to enjoy family gatherings and had their hearts set on something near water.

Dou had shown them one lake house, and they’d made an offer that wasn’t accepted but he knew what they were looking for. When he saw the listing pop up on Russell’s site, he quickly forwarded the link to Lucy Dooley.

She made it to Rogers so quickly that she ran into Russell while he was putting up the yard sign.

The Web site and yard signs announcing a home is in the “pre-listing” process are the biggest keys to marketing foreclosed properties, Russell said.

Once he gets a listing, Russell prepares a broker price opinion for the bank, which also commissions its own appraisal. While this process plays out, usually over a few weeks, potential buyers can scout out homes before they hit the MLS.

The “pre-listing” marketing is crucial, Russell said, because he only has 90 days to sell the house once the bank gives him a price, which usually comes in around 15 percent below market value.

Out of more than 70 listings he’s received this year, he’s lost just three that haven’t sold before the three-month deadline. Russell credits his team of Kerri Turner and Eric Duca for their help as business has increased.

Russell and his team have sold 13 homes in a single subdivision in Bentonville, and during one week from Sept. 12-19 he had 11 closings.

Both Dou and Russell are targeting investors, but so far end-users are their most frequent customers. Russell estimates that around 75 percent of his sales have gone to end-users, but is anticipating more business eventually from investors.

“If I was investing, I’d definitely call me right now,” he said with a chuckle.

One recent sale was to an Iowa woman who bought a home in Bella Vista with her insurance settlement following the devastating tornadoes this summer.

Dou said his split between investors and end-users has been more like 50-50.

“A quote I recently heard was, ‘Money is made when blood is flowing in the streets,'” Dou said. “This is kind of a once-in-a-lifetime or once-in-a-longtime opportunity where someone could really capitalize in real estate.”

Moving the Market

A large number of homes selling for below market value could have an effect on home prices, but Nobles, Dou and Russell agreed that outcome is unavoidable.

“It’s happening anyway,” Dou said. “Recently, everyone is looking for a deal. Everyone is looking for that foreclosure, that builder that’s hurting and short sales are the new sexy word.

“Until we get some of this inventory off the market, it’s going to keep getting worse and bringing these home prices down.”

So far, prices haven’t fallen drastically in Northwest Arkansas. The average sale price in Washington County in 2008 is $186,922, barely unchanged from 2005 and not far off its peak of $188,594 in 2006.

In Benton County, the average sale price is $192,722 so far in 2008, which is down about 3 percent from its peak of $198,617 in 2007 and nearly equal to the average sale in 2006.

“The fact the sites exist doesn’t have much effect on property values,” Nobles said. “Property values are reduced in those areas where the homes are located and for sale.”

Russell said the sooner the inventory gets moved, the better.

“Somebody has got to do this,” he said. “I don’t want to give the impression I’m the king of foreclosures. There are other agents doing this.

“This market has to take these lumps. Bank-owned inventory has to get liquidated before we can move back the other way. In the short-term, it’s not great, but for the longer term, it has to be done.”

The foreclosure market could change over the next few months. Countrywide and Bank of America have announced plans to refinance $8.6 billion worth of mortgages as a settlement with numerous state attorneys general who’d sued the lenders over loan products and origination processes.

Citigroup and J.P. Morgan have also announced foreclosure moratoriums as a way to stem the losses in mortgage-backed securities that are at the root of the current financial crisis.

“It will be interesting to see how it plays out,” Russell said. “My ace in the hole is I have a good inventory of listings. If I just sold what I have, I’ll be able to make it for months.

“I hope there’s not as many foreclosures. I’d rather be selling in an even market and everyone got to keep their house. I don’t know how it’s going to play out, but I’m just keeping my head down and moving forward.”