Columbus Realty: Fast Growth from REO Sales

REO sales may not be for everyone. But with the right team and the ability to get in front of banks, it can be a profitable one.

September 1, 2008

After starting as a real estate investor and rehabber, then spending a few years as a real estate salesperson, Michael Zouglas launched Columbus Realty in 2002 as a traditional residential brokerage. In two years, it grew to 25 sales associates. But when his St. Louis market started slowing in 2005, he switched gears, focusing on REO property.

To ramp up the company’s REO expertise fast, Zouglas joined forces with Blair Lavagna. “Blair’s eleven years of REO experience provided instant credibility with banks,” he says.

Today, as a company specializing in REO properties, Zouglas has increased his company’s revenues by 273 percent from 2005 to 2007. At the same time, he’s cut his sales force to eight full-time and four part-time associates, including Lavagna’s two-person team.

Right Time, Right Strategy

Zouglas’s timing was nearly perfect. Three years ago, bank executives were just starting to see their inventories of foreclosed properties climb, so many were open to overtures from brokers. A company with a buyer for a property could almost always get a hearing, says Zouglas. But that was then.

“It’s not impossible to break into the REO business at this point, but it’s more difficult,” Zouglas says. “Today, banks have a huge number of brokers who’ve applied to them. And banks are so busy—one bank official might be responsible for a few hundred properties—the last thing they want to do is shop around for another broker.”

Getting REOs Sold

About three-quarters of Columbus Realty’s buyers are local investors who buy one or two properties at a time, most of them in the $30,000 to $70,000 range. A small portion of buyers are from out of state, including a few seeking to buy properties in bulk. A year-old Florida office headed by Lavagna is expanding the options for out-of- state sales.

The brokerage’s two main marketing vehicles are a weekly e-mail newsletter that goes out to the company’s investor clients and, where the brokerage makes extensive use of the site’s enhanced listing features.

“The cost to be the one at the top of the listing search, especially if you’re in the REO business and carry as many listings as we do, is a steal,” he says. “It’s what makes you visible to the person across the country or down the street who finds you and says, ‘I’ve got half a million dollars I have to spend.’”

Zouglas divides his company’s independent-contractor associates into two specialties, listing and selling. The listing specialists stay in front of banks, making overtures for new business and deciphering exactly how the banks want their properties sold. They also respond to the 300-plus e-mail messages the company receives each day from lenders.

“When you have an inventory of roughly 100 properties for sale and another 100 under management at any time and a relatively small staff, everybody in your office is constantly talking real estate to customers. Every time you pick up the phone, there’s an opportunity to make a sale,” he says.

REO sales may not be for everyone. But with the right team and the ability to get in front of banks, it can be a profitable one. 

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Robert Freedman

Robert Freedman is the former director of multimedia communications at NAR.