March 31, 2014
When a credit union ends up with real estate through foreclosure, the goal is obviously to recoup at least the outstanding mortgage amount by selling the property at the highest price the market permits while holding the line on associated costs.
That can be a challenge, given the typically declining value of a home with a mortgage in default and fees associated with the foreclosure process, says Theresa Guerriero, VP/lending with Niles Township Schools Credit Union, Morton Grove, Ill. “You want to get as much exposure as possible without having to pay the standard commissions,” Guerriero, a CUES member, notes.
So when $84 million, 4,200-member Niles Township Schools CU ended up with a single-family home through a foreclosure, she decided to try listing the property through For Sale by Owner.
“Within hours of it being listed, we were getting calls and emails,” Guerriero says. “We had the property sold in three days.”
The sale was completed through a “co-op” arrangement with a Realtor who contacted the credit union to ask if it would be willing to pay his commission, which amounted to less than half the normal fee, for a quick sale, she says.
For Sale by Owner might be an option for credit unions that have a staff person with experience in buying and selling homes, familiarity with sales contracts, and the time and willingness to show the property, Guerriero suggests.
“I’ve been in the industry for 25 years, so I’ve had a lot of experience with sales contracts, and I’ve bought and sold a couple homes personally,” she notes. “And we did have our attorney review the sales contract once it was presented.”
The credit union did not offer a mortgage on the property. “It would have appeared to be a non-arms-length transaction,” Guerriero says. “There is good sense in keeping the transactions completely separate. There could never be a presumed conflict of interest.”
Karen Bankston is a long-time contributor to Credit Union Management and writes about credit unions, membership growth, marketing, operations and technology. She is the proprietor of Precision Prose, Stoughton, Wis.