Foreclosure Response Team - outsourcing SS negotiation and processing
Replies to This Discussion
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Permalink Reply by Steve Early on
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Hi John:
I was hoping to see others jump in on this so I could see what they said, but since nobody did ...
Since we are in that business (and have been for over 18 years) I will give you a viewpoint from my perspective and I'll try to be as frank and honest as possible. Whoever you look at, here are some statements I would be watchful for:
1) We have special contacts and can get your short sale approved in a fraction of the time
2) We can get your file jumped to the head of the line
3) We can almost always get paid by the lender so you probably won't have to pay us at all
My reasons for bringing out these items are as follows:
1) Some third parties will have good contacts with lenders, and can occasionally use those contacts to remove an obstacle. I emphasize occasionally because I sometimes think agents are lead to believe third parties can work magic because they have all these inside contacts. While there can be some truth to that (this week one of our contacts helped us push out a HUD approval in one day so we could close before the approval expired) I sometimes think the "inside contact" thing is oversold.
Even though we have a contact here and there, we can't use them on every transaction because a file may not be under their control or something they can access/influence. Sometimes what we need done is just not something they can do. More importantly, if we know someone with influence, we are very careful to use that contact only when there is a legitimate and urgent concern that could keep a file from closing. The fact that someone has been "waiting too long" or "the buyer is going to walk" isn't going to cause us to ask a contact for help.
Finally, remember that outside of the lender's process, the bottom line decisions that affect your short sale are NOT made by the lender, they are made by the investor. An institution like Bank of America has Fannie, Freddie, FHA, VA, private investors, MI companies and probably more to deal with. I don't care what VP you know, you're not likely to be able to change a decision made by any one investor, let alone influence the decisions of all of them. VP contacts may be able to influence their own process but aren't likely to be able to influence investor decisions.
2) If a third party tells you they have ways to "jump your file ahead of the others" they are full of it in my view. Negotiators work their files in chronological order, and the only reason I believe they will ever disrupt their process is to address an urgent closing issue (like my HUD example above), or pulling a file on a property that has an auction scheduled to stop the auction to do the short sale. We may not like the processes the lender has, but their negotiators are not going to show favoritism in my experience, nor should they.
As one negotiator explained, "Why would I put this guy's file ahead of any of the other people who are also waiting for me to order a BPO? Ask the agent if he would mind if I called him up and said - I have five other people who are bugging me to get their files done quickly. So even though you have been waiting longer than them I'm going to jump them all ahead of you - you wouldn't have a problem with that would you? " I think this is a common viewpoint among all negotiators - they just can't get into pushing one file ahead of another. It would create chaos in an already chaotic system.
3) Back in the "good 'ole days" we used to love to see short sales for a certain lender come in. We would put a 3% fee to negotiate the short sale right on the HUD and get paid on it all day long. No more.
Lenders have put the clamps on paying third parties, and while there can still be an occasion where a third party might be able to get payment from the lender, it is becoming less and less likely. Most of the time they are going to look to share in your commissions. As recently as 18 months ago, I wouldn't have made that statement, and 9 months ago I might have said we had a 50/50 chance of getting paid by the lender.
Now, any third party who says that they will get paid by the lender and only rarely have to dip into your commission is probably not being straight-forward with you. It just isn't that likely any more.
On the Decision Itself:
I tell agents that the decision on whether or not to use a third party is a balancing act. What is the potential to do more sales if you use a third party, and will the fact that you have to share in your earnings allow you to make more money in the end because you're doing more deals because you have more time? If the answer is yes, then maybe it is a good move for you. Otherwise, it probably isn't.
I would also encourage you to think about your local market. This can be a lousy deal for someone working in a market where the majority of the properties they will be selling short are below the $125,000 mark. By the time you take 5% or 6% of that and cut it up three ways, you're not even getting gas money out of the deal. It's like fighting over scraps and it sucks for everybody. We stopped taking on short sales under that amount for this very reason. (Actually, we will take them on but we tell the seller they have to pay us $2,500 at closing for our services, but they never take us up on that proposal - they don't have $2,500).
Also, if there is a chance that the third party may have a structure that would cause you to have to take some away from both sides of the transaction, be sure this gets disclosed to the buy-side agent. I would also get something in writing from them that acknowledges they understand this if it is the case.
The advantage to using a third party is that you can focus more of your time on listing and selling. It also gives you someone to "blame" if it is taking too long (which it always does). Using a third party frees you from having to fax the same documents multiple times, call the lender all the time, and follow up on BPOs, bank statements, pay stubs and all that other stuff. It also leaves you out of the loop in terms of taking in a lot of confidential information on your seller and protecting it. Almost all states have privacy laws with really nasty penalties if information is lost or disposed of improperly. (Improper disposal in my state is a $50,000 fine). Virtually all documents you need to collect for a short sale would be documents you have to protect under those regulations.
We also have the client sign acknowledgments and forms in an effort to cut down on the ability of the client to hold us or the agent responsible for a variety of claims. For example: One of the legal issues that Realtors have run into is having the client come back on them and say, "You never told me I could have a tax liability", or "You told me I wouldn't get a deficiency judgment". Well maybe you never said those things, but can you prove it?
The forms we make the client sign before we take them on are designed to make it clear that we told them they would get a 1099C if they were forgiven debt. They sign off on the fact that we informed them that there are no guarantees that the short sale will go through or that they will be forgiven any debt. They acknowledge that we advised them to consult an attorney and a tax adviser on how a short sale can affect them. Can the client still sue us both? Sure, but it gets harder for them to succeed.
The disadvantage, if there is one, is that you will have to be in touch with the third party to see how things are going. Some agents cant' stand not being in complete control. If you're a control freak, it may not be for you.
To help in that regard, we use a system that sends out email updates on the short sales we are working to cut down on the number of calls we need to take, but agents are still anxious and nervous and call all the time and that's fine too. And, yes we do want to get paid for what we do which is part of what you have to consider in your thought process.
Good luck in your decision.
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Permalink Reply by Bryant Tutas on
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Great response Earl. Thanks for sharing all of that info.
Steve Early said:Hi John:
I was hoping to see others jump in on this so I could see what they said, but since nobody did ...
Since we are in that business (and have been for over 18 years) I will give you a viewpoint from my perspective and I'll try to be as frank and honest as possible. Whoever you look at, here are some statements I would be watchful for:
1) We have special contacts and can get your short sale approved in a fraction of the time
2) We can get your file jumped to the head of the line
3) We can almost always get paid by the lender so you probably won't have to pay us at all
My reasons for bringing out these items are as follows:
1) Some third parties will have good contacts with lenders, and can occasionally use those contacts to remove an obstacle. I emphasize occasionally because I sometimes think agents are lead to believe third parties can work magic because they have all these inside contacts. While there can be some truth to that (this week one of our contacts helped us push out a HUD approval in one day so we could close before the approval expired) I sometimes think the "inside contact" thing is oversold.
Even though we have a contact here and there, we can't use them on every transaction because a file may not be under their control or something they can access/influence. Sometimes what we need done is just not something they can do. More importantly, if we know someone with influence, we are very careful to use that contact only when there is a legitimate and urgent concern that could keep a file from closing. The fact that someone has been "waiting too long" or "the buyer is going to walk" isn't going to cause us to ask a contact for help.
Finally, remember that outside of the lender's process, the bottom line decisions that affect your short sale are NOT made by the lender, they are made by the investor. An institution like Bank of America has Fannie, Freddie, FHA, VA, private investors, MI companies and probably more to deal with. I don't care what VP you know, you're not likely to be able to change a decision made by any one investor, let alone influence the decisions of all of them. VP contacts may be able to influence their own process but aren't likely to be able to influence investor decisions.
2) If a third party tells you they have ways to "jump your file ahead of the others" they are full of it in my view. Negotiators work their files in chronological order, and the only reason I believe they will ever disrupt their process is to address an urgent closing issue (like my HUD example above), or pulling a file on a property that has an auction scheduled to stop the auction to do the short sale. We may not like the processes the lender has, but their negotiators are not going to show favoritism in my experience, nor should they.
As one negotiator explained, "Why would I put this guy's file ahead of any of the other people who are also waiting for me to order a BPO? Ask the agent if he would mind if I called him up and said - I have five other people who are bugging me to get their files done quickly. So even though you have been waiting longer than them I'm going to jump them all ahead of you - you wouldn't have a problem with that would you? " I think this is a common viewpoint among all negotiators - they just can't get into pushing one file ahead of another. It would create chaos in an already chaotic system.
3) Back in the "good 'ole days" we used to love to see short sales for a certain lender come in. We would put a 3% fee to negotiate the short sale right on the HUD and get paid on it all day long. No more.
Lenders have put the clamps on paying third parties, and while there can still be an occasion where a third party might be able to get payment from the lender, it is becoming less and less likely. Most of the time they are going to look to share in your commissions. As recently as 18 months ago, I wouldn't have made that statement, and 9 months ago I might have said we had a 50/50 chance of getting paid by the lender.
Now, any third party who says that they will get paid by the lender and only rarely have to dip into your commission is probably not being straight-forward with you. It just isn't that likely any more.
On the Decision Itself:
I tell agents that the decision on whether or not to use a third party is a balancing act. What is the potential to do more sales if you use a third party, and will the fact that you have to share in your earnings allow you to make more money in the end because you're doing more deals because you have more time? If the answer is yes, then maybe it is a good move for you. Otherwise, it probably isn't.
I would also encourage you to think about your local market. This can be a lousy deal for someone working in a market where the majority of the properties they will be selling short are below the $125,000 mark. By the time you take 5% or 6% of that and cut it up three ways, you're not even getting gas money out of the deal. It's like fighting over scraps and it sucks for everybody. We stopped taking on short sales under that amount for this very reason. (Actually, we will take them on but we tell the seller they have to pay us $2,500 at closing for our services, but they never take us up on that proposal - they don't have $2,500).
Also, if there is a chance that the third party may have a structure that would cause you to have to take some away from both sides of the transaction, be sure this gets disclosed to the buy-side agent. I would also get something in writing from them that acknowledges they understand this if it is the case.
The advantage to using a third party is that you can focus more of your time on listing and selling. It also gives you someone to "blame" if it is taking too long (which it always does). Using a third party frees you from having to fax the same documents multiple times, call the lender all the time, and follow up on BPOs, bank statements, pay stubs and all that other stuff. It also leaves you out of the loop in terms of taking in a lot of confidential information on your seller and protecting it. Almost all states have privacy laws with really nasty penalties if information is lost or disposed of improperly. (Improper disposal in my state is a $50,000 fine). Virtually all documents you need to collect for a short sale would be documents you have to protect under those regulations.
We also have the client sign acknowledgments and forms in an effort to cut down on the ability of the client to hold us or the agent responsible for a variety of claims. For example: One of the legal issues that Realtors have run into is having the client come back on them and say, "You never told me I could have a tax liability", or "You told me I wouldn't get a deficiency judgment". Well maybe you never said those things, but can you prove it?
The forms we make the client sign before we take them on are designed to make it clear that we told them they would get a 1099C if they were forgiven debt. They sign off on the fact that we informed them that there are no guarantees that the short sale will go through or that they will be forgiven any debt. They acknowledge that we advised them to consult an attorney and a tax adviser on how a short sale can affect them. Can the client still sue us both? Sure, but it gets harder for them to succeed.
The disadvantage, if there is one, is that you will have to be in touch with the third party to see how things are going. Some agents cant' stand not being in complete control. If you're a control freak, it may not be for you.
To help in that regard, we use a system that sends out email updates on the short sales we are working to cut down on the number of calls we need to take, but agents are still anxious and nervous and call all the time and that's fine too. And, yes we do want to get paid for what we do which is part of what you have to consider in your thought process.
Good luck in your decision.
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Permalink Reply by Kimberley Kelly on
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Thank you Steve. I have been handling my own Short Sales and get asked this all the time. It's been about 4 years of learning the ropes, how to approach loss mitigation people, what to say, how to follow up, when to push, when to not..I am so over these Agents saying they are "specialists" when they have taken one of the classes offered by a Short Sale Negotiation Co. and just turn their Listings over. I didn't learn to play the game of polo until I had learned to ride and groom..basics first.
I think that these companies work great for Agents that don't want to handle the paperwork, follow up, and want to concentrate on other aspects. I fully support that. I am working with one of these companies now because I submitted an offer for a Short Sale that they are handling. To put it mildly, I am less than impressed. I expected what I give..a weekly update, sometimes twice a week. Not so. I get a response only when I send an e-mail asking where we are. I do this every single week, so it is not saving me much time.
Thanks for taking the time to do such a thorough job of explaining the ins and outs..
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You're welcome Kimberly.
For what it is worth, the people that work for me handling files don't always call a lender often enough to have an update once or twice a week (even though I think agents might love to have an update that often). A lot of it depends on where the short sale is in the cycle. If the lender tells us it will probably be 3 weeks before they will order a BPO, calling every day is a waste of time. Calling in 2 weeks to see if the BPO will be done next week makes sense (to me anyway). And, of course, once the BPO is supposed to have been done you want to harass them to see if the results are back ... without being too much of a pain.
Then there are other times where we might give 2-3 updates over the course of a couple of days. Also, while we document every single conversation in our system, if there is no "real news" to pass on, we don't bother to notify the listing agent, seller or buyer agent. The real difficulty we have is that lenders often don't give us any real answers so there are no real answers to pass on.
I'm not sure if you agree with this or not, but that is what we see.
Oh, and as for those people who have taken a short sale certification course and are now 'experts' ... to me that is almost like taking a flying lesson and saying you're a pilot. There is no substitute for experience, and lots of it (which equates nicely to your own experience ... and your polo analogy, I think).
Kimberley Kelly said:Thank you Steve. I have been handling my own Short Sales and get asked this all the time. It's been about 4 years of learning the ropes, how to approach loss mitigation people, what to say, how to follow up, when to push, when to not..I am so over these Agents saying they are "specialists" when they have taken one of the classes offered by a Short Sale Negotiation Co. and just turn their Listings over. I didn't learn to play the game of polo until I had learned to ride and groom..basics first.
I think that these companies work great for Agents that don't want to handle the paperwork, follow up, and want to concentrate on other aspects. I fully support that. I am working with one of these companies now because I submitted an offer for a Short Sale that they are handling. To put it mildly, I am less than impressed. I expected what I give..a weekly update, sometimes twice a week. Not so. I get a response only when I send an e-mail asking where we are. I do this every single week, so it is not saving me much time.
Thanks for taking the time to do such a thorough job of explaining the ins and outs..
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Permalink Reply by Darlene Krause on
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First we do short sale negotiations and processing. We don't charge the realtor anything. We charge the bank, plus we are also a title company so we handle the closing which makes it better since we have already been involved upfront. Really believe that it is better to have a third party negotiate short sales.
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Why as a realtor do you want to give a third party 20-30% of your commission? You can find good companies that will negotiate short sales and pass the cost to the lender, not the realtor.
Keep looking, don't share your money!!
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Permalink Reply by Jeff Payne on
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Darlene, what happens when the bank won't pay 3rd party fees and they only agree to pay a $500 settlement fee to your title company?
Darlene Krause said:First we do short sale negotiations and processing. We don't charge the realtor anything. We charge the bank, plus we are also a title company so we handle the closing which makes it better since we have already been involved upfront. Really believe that it is better to have a third party negotiate short sales.
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I found this recent article online in regards:
Scott Coloney, president o fFort Lauderdale-based Foreclosure Response Team (FRT) has announced thecompletion of a national 20-month Pilot Program of its “Uniform Short SaleProcess.”
The only full-service, interactive short salesolution in the country, Foreclosure Response Team's (FRT) Uniform Short SaleProcess consists of: a national network (“Response Team”) of local real estateagents, title companies and attorneys, coupled with centralized loss mitigationsupport and innovative short sale processing technology that expedites andstreamlines the short sale process from pre-listing to post-closing, OnlineManagement System (OMS).
Working in collaboration with the FRT, DenverCO-based Default Servicing Solutions (DSS) conducted the Pilot Program andtracked the performance of Affiliate real estate agents throughout 28 statesover a 20 month period. DSS is the premier provider of default managementservices. Processing tasks for six of the top national mortgage servicers, DSSprovides a central processing hub for FRT Affiliates.
Results report a national closing ratio of 48%,with a closing timeframe of 99 days from contract to purchase. In addition tothe OMS report, the Pilot Program also concluded that by assigning one lossmitigation processor regardless of the number of listings, real estate agentswere able to process three to four times the number of listings typicallyfeasible, by turning their attention to actually selling the property. CurrentFRT real estate agent Affiliates number approximately 2,000 nationwide.
Importance of a Uniform Short Sale Process toprevent foreclosure:
Real-time communication, transparency and qualitycontrol - is attained through the OMS which allows FRT Affiliates to easilytrack and manage multiple short sale files throughout the process. The OMSfacilitates all documents and requests, and ensures team accountability througha centralized, paperless and interactive platform. (Vs.) All parties involvedin the short sale working in different systems for each file, managing aninconceivable paper trail, are unaware of the status of documentationpertaining to a file, and have no liability over their role.
Identical short sale packages - are facilitatednationwide by a network of Affiliate short sale experts who all use the samecentralized loss mitigation division. These highly-specialized loss mitigationprocessors effectively prepare short sale packages with all necessarydocumentation and presentation format required by the bank. (Vs.) Fragmentedand inexperienced real estate agents and title companies with inconsistentmethods for preparing a short sale package.
Proper attention to marketing and selling of thehome - is achieved by assigning a dedicated loss mitigation processor whoserves as one point of contact for the real estate agent who is relieved of thecumbersome and complicated tasks associated with the processing of a shortsale. (Vs.) The real estate agent having a typical 18 points of contacts whenhandling an average 10 short sale listings, and dealing with the processing allof the paperwork involved in the short sale instead of focusing on the sale ofthe home.
Banks are provided a solution - to the back log ofpending short sales offers by receiving short sale packages that are consistenteach time and meet bank guidelines; assisting in the decision making processand reducing closing timelines. (Vs.) Receiving inconsistent packages fromacross the U.S. lacking the necessary information and form required by thebanks, making it harder for decisions to be made in a timely manner.
“Foreclosure Response Team provides a realsolution for American’s struggling with their mortgage. As borrowers continueto submit their short sales through our uniform process, we are able toexpedite the sale of these properties so they do not go into foreclosure andhelp save their credit from further deterioration. By keeping real estate soldinstead sitting vacant, we can help stabilize the economy and housing crisis,”said Scott Coloney, president Foreclosure Response Team.
"We knew that the people who would have themost meaningful impact in executing Short Sales would be the agents and brokersworking directly with the borrower/seller. In order to provide a breakthroughsolution, it is critical to provide a great tool and service to the agents.Foreclosure Response Team has successfully provided both the service andinnovative technology that the industry needs," said Mike Sullivan, ChiefExecutive Officer of Default Servicing Solutions.
Track and Micro-Manage = team accountability
FRT’s highly-organized structure ensures thatevery short sale file is tracked and micro-managed; evidencing listing activityas recorded in the OMS, increasing transaction efficiency from listing to postclosing, and improving closing ratios.
“Track” - all OMS activity associated with a fileis documented and includes listing and contract information, contactinformation for all parties, loan activity; loan status is provided inreal-time. All data entry and document uploads are stamped with the time, dateand user name of the party. Required addendums, forms and lender specificdocuments are provided to agents in a central online forms drawer. In addition,key parties are able to email directly from the electronic file and emails arestored with the file.
“Micro-Manage” - a designated loss mitigationprocessor is assigned to each real estate agent as one point of contact tomicro manages the entire short sale process from listing to post closing in theOMS. Processors undergo rigid training and supervision, and also utilize DSS’sproprietary loss mitigation application, M-Vue. DSS thoroughly reviews eachshort sale package prior to being submitted to the bank to ensure bankguidelines are being met.
Score = proven performance
To maintain its position as a reliable andcredible national resource, Affiliate real estate agents are required to remainproactive within the OMS system and fully engage with the Response Teamthroughout the short sale process.
“Score” - as agent Affiliates work in OMS, theybegin to build a scorecard based on average turnaround time for documentcollection, pending contract and closing ratios. Real-time scorecards aredisplayed in the Agent Finder located in OMS; consumers will have access to theAgent Finder by January 2011. Score advancement is achieved by activeparticipation in the OMS, advanced training and by increasing short saleclosing ratio. Underperforming Affiliates may be terminated and permanentlyremoved from the OMS.
Response Team Realtor Affiliate status levelsinclude Basic Affiliate, Silver Affiliate, Gold Affiliate and PlatinumAffiliate. Statuses are achieved by demonstrating proven short sale performanceand activity tracked in OMS, as well as by completing advanced multi-leveltraining provided by Response Team for top-level education critical to shortsale success.
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My opinion of 3rd party negotiators is falling every month. It has become a fad to be a Short Sale Negotiation Team, and I am over it. It's like pulling teeth to get information. When there are problems, and I have not had a short sale WITHOUT a problem, I get told, "we don't handle IRS problems..or whatever" What?? You are the negotiators. I handle them in my Short Sales, so I know it can and should be done. I have found that many of these companies are working the numbers..lots of files from Realtors that don't want to handle their own, but want the Listings. Then they are overwhelmed and cannot handle the files properly. I still expect a weekly update..if that's too much, then so be it. Buyer's Agents and their clients LOVE to get weekly updates..no matter how inane. They at least KNOW someone is still working the file. I pick and choose the List Agents I will work with, it has become that insane..
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