What The Fed’s Predicted Additional 1.5 Million Job Loss Means to Your Real Estate Business

As the year progresses, the Federal Reserve’s predictions have raised concerns about the job market, with projections indicating that another 1.5 million people may become unemployed by the end of 2023. This potential increase in unemployment will inevitably impact the real estate market, leading to an uptick in short sales, foreclosures, and mortgage defaults. In this blog post, we’ll explore the potential consequences for the real estate market and how agents can pivot their business towards REO real estate sales. Additionally, we’ll discuss the benefits of starting a property preservation business and becoming a notary to capitalize on the expected rise in mortgage defaults.

1. Impact on the Real Estate Market:

The predicted surge in unemployment will undoubtedly have ripple effects on the real estate market. A rise in joblessness often leads to financial instability, making it difficult for many individuals to sustain homeownership. As a result, there will likely be an increase in short sales, foreclosures, and defaults on mortgages.

Short Sales: A short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance. In a weakening job market, homeowners may struggle to make mortgage payments, leading them to pursue short sales to avoid foreclosure. Short sales provide an opportunity for homeowners to minimize the negative impact on their credit while avoiding the foreclosure process.

Foreclosures: If homeowners cannot make mortgage payments or sell their property through a short sale, the property may end up in foreclosure. Foreclosures can flood the market with distressed properties, impacting property values in the surrounding area. Real estate investors often seek out foreclosed properties as they can purchase them at a lower price and potentially rehabilitate them for profit.

Mortgage Defaults: A rise in unemployment can lead to an increase in mortgage defaults, where homeowners are unable to meet their loan obligations. Mortgage defaults can result in financial strain for both homeowners and lenders. Homeowners face the risk of losing their homes, while lenders may experience losses due to non-performing loans.

2. Impact on Real Estate Agents:

Real estate agents, who primarily deal with traditional sales, may face challenges during this period of economic uncertainty. With more properties going into short sales, foreclosures, and defaults, there will be fewer conventional sales transactions. This could potentially lead to reduced income for agents relying solely on traditional sales.

However, amidst these challenges, there are opportunities for real estate agents to adapt and thrive in the changing market.

3. Starting a Property Preservation Business:

With the expected rise in mortgage defaults, real estate agents can consider starting a property preservation business. Property preservation involves maintaining and securing properties that have been abandoned or repossessed by banks. By offering property preservation services, agents can tap into a new revenue stream.

Property preservation tasks may include:

a. Securing the Property: Ensuring that the property is locked and secure, preventing unauthorized access.

b. Maintenance and Repairs: Performing routine maintenance tasks such as lawn care, cleaning, and minor repairs to keep the property in good condition.

c. Winterization: Protecting the property from potential winter-related damage by properly insulating pipes, shutting off utilities, and addressing any weatherization needs.

d. Eviction Assistance: Assisting with the eviction process by coordinating with legal professionals and removing personal belongings from the property.

Starting a property preservation business requires understanding the local regulations, obtaining necessary licenses or certifications, and building relationships with banks, asset management companies, or other entities that handle REO properties.

4. Becoming a Notary and Loan Signing Agent:

As mortgage defaults increase, there will likely be a surge in loan modifications, refinancing, and other mortgage-related transactions. Real estate agents can seize this opportunity by becoming notaries and loan signing agents. Notaries play a crucial role in verifying and authenticating important documents, including mortgage-related paperwork.

By adding loan signing services to their skillset, agents can assist borrowers and lenders in completing loan documents accurately and efficiently. This diversification can contribute to a more stable income during times of economic uncertainty.

Becoming a notary typically involves meeting the state-specific requirements, such as completing an application, passing an exam, and obtaining a notary bond or insurance. To become a loan signing agent, additional training and certification may be required.

Loan signing agents act as neutral third parties who facilitate the signing of loan documents and ensure their proper execution. They may meet with borrowers at their homes or another convenient location to complete the necessary paperwork.

5. Shifting from Traditional Sales to REO Real Estate Sales:

Real estate agents can strategically shift their business from traditional sales to REO (Real Estate Owned) sales to capitalize on the changing market conditions. REO properties are those that have been repossessed by banks after foreclosure.

To transition into REO real estate sales, agents can take the following steps:

a. Networking: Connect with asset management companies and banks that handle REO properties. Building relationships with these entities can provide access to REO listings and opportunities.

b. Education and Training: Consider furthering your education by taking courses or certifications related to REO sales and property management. This knowledge will help you navigate the unique aspects of working with distressed properties.

c. Market Research: Stay informed about the local market trends and the availability of REO properties. Understanding the demand and competition in your area will help you make informed decisions and set realistic expectations.

d. Marketing and Promotion: Develop a targeted marketing strategy to reach potential buyers and investors interested in REO properties. Utilize online platforms, social media, and traditional marketing channels to showcase your expertise in this niche market.

As the Fed’s predictions point towards potential job losses and their effects on the real estate market, real estate agents must be prepared to adapt. Embracing the REO sales business, offering property preservation services, becoming notaries, and specializing as loan signing agents can help agents navigate the shifting landscape and find new opportunities in the industry. By diversifying their business and staying informed about market trends, real estate agents can position themselves for success amidst the challenges and changes ahead.