Why I think Realtors shouldn't be processing short sales.
Now I know from prior experience on this site I am going to get some vehement obections to this post but I wanted to put my two cents in anyway. I am at this point in time about one transaction away from making a company wide decision to not accept short sale closings that are processed by realtors.
Why you might ask...
As far as I am concerned it all comes down to financial responsibility. I would say that on almost 50% of the transactions we close that are negotiated by realtors there is some last minute fix that needs to be made because they do not understand the closing process and haven't completed everything in order to properly approve or close out the file. The most distressing thing about this is if there is a screw up. If the negotiating realtor didn't close out the file correctly. Has an approval letter that is expired and didn't get the extension. Or in the most recent case has an E-mail from the 2nd lender stating they will approve said amount but never actually got the approval letter. The financial responsibility falls on us.
Yes, it's our job as a closing company to notice these items and we do. What happens though when for some reason the processor on the file was overly busy and doesn't follow up to make sure the realtor negotiating the file did their job correctly. Who ends up being financially responsible when the new owner finds out there is still a mortgage on the property because they were all not closed out correctly. The closing company. The realtor could possibly be sued by the seller for not negotiating the loan correctly and the seller may win damages but guaranteed if the buyer makes a claim our title insurance company is going to pay it out in full. Too many of those and you're out of business permanently. Now as I said we've caught them all. All the little mistakes that our clients make when they negotiate their own files but what happens if we miss one?
I'm starting to think I may not be willing to take that risk.
So, now for your thoughts.
Replies to This Discussion
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Permalink Reply by Jim Schneider on
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I've had completely the opposite experience. In our area title companies and attorney offices have going into short sale negotiating, and I've been on both the listing and buyer side on this, the experience has been completely dismal.
First problem: Frequently these are pitched to realtors as, here go grab any listing and we'll handle everything after the contract. So the agent has no idea that the haven't submitted a contract that is likely to be accepted. No arm's length affidavit, no lender's addendum, does not take into consideration likely problems specific to the lender (remember AHMSI's 1% charge to the buyer, or BofA doesn't want any relative of any BofA employee). So the deal is struck with problems, because the agent thinks, "I'm supposed to find the buyer that title/attorney handles the rest". Often I find these agents don't even know how many liens are on the property, that the HOA's are unpaid, or how long ago the foreclosure process started.
Second, these types of firms tend to get bogged down in the amount of cases they take on. I dropped my last short sale negotiation attorney office, when the person negotiating my file was harder to reach than the short sale negotiator at the bank! I've had a good number of buyers buying on short sales negotiated by title co's, my favorite being the one that had no idea how a PFS file is worked on an FHA loan. They just tried doing like all of their other files.
Should an agent be a title examiner in order to negotiate a short sale, that's insane! Taken to the logical conclusion, you would need to be attorney, agent, mortgage broker, and title company, after all your company could be implicated in a RESPA violation from the actions of any of those parties, right?
What an agent needs to do is know how to communicate and what to look for from the other parties in the transaction, and that includes title. Agents need to know to have preliminary title run to find out how many lien's they are dealing with early, and they need to be talking to their sellers so they are aware of potential liens (contractor not getting paid, HOA's not paid, unpaid water bills). In a similar way I need to know enough about law and taxes so to know when to refer my clients to speak to an attorney or accountant.
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Permalink Reply by Cody Lampariello on
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I understand your point and there are companies and individuals out there in every industry that don't know what they are doing. My point comes more from the idea that I am depending on you the agent to close out your file correctly and to do your job in order to make sure I am not financially responsible for the lack of attention to detail.
This is something that I have to follow up on after the fact.
It doesn't translate to the same in a traditional closing which is what I think you were getting at in the end. Normally I have to do the research make sure everything is cleared pay off liens etc.. It all falls on my company to do our job correctly in order to make sure we are not liable for anything after the fact. The short sale is the only time when i have to actually follow up with the agent after the file is closed and funded to verify that everything has been closed out correctly with the bank. I am actually now asking some of my agents to give me their equator log-in so i can do it for them just to be sure its done.
Don't get me wrong there are some great agents out there that do their job exceptionally well. Just the worry I get with those agents who don't is starting to wear on me, atleast when dealing with short sales.
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Permalink Reply by Tara Samney on
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Wow, you go into Equator unauthorized where seller information is that you are not allowed access to...including possible other files. Unbelievable.
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Permalink Reply by Juan C Camelo on
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Tara, if you are working with an ethical attorney owned title company there is nothing to worry about. One might say ethical and attorney just does not go well together, I would yet a professional agent can spot a shady attorney. If you tend to work with a wanna-be title company there is where you will have a problem. I have been working with my attorney and his team for 3 years and I have yet to see anything wrong or strange with any of my short sale files that I negotiate directly. I respect their space and they respect my space. Keep looking for someone you can trust. If you are in the Miami area let me know and I will introduce you to the exception to the rule.
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Permalink Reply by Jeff Payne on
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I think she was referring to agents who allow the use of their Equator access to title companies...
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Yes, I was referring to not giving out Equator access to anyone else.
This thread has been great b/c it has shown just how much it differs at closing depending upon your state. Title company is selected by buyer in mine and they close in their office. Meaning my sellers use an attorney who works for them....but in the end closing takes place at the buyer's choice of attorney or title company. We cannot control who buyer uses and they often are inexperienced in short sales and completely unprepared. I have a great relationship with an attorney's office who does impeccable work in HUD preparation and advising clients and communication all around...but when the buyer's closing agent gives us the HUD they usually don't get it right- even though they have all approvals. Buyer and seller usually do not use same company here. Sometimes, but they are not required to.
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Permalink Reply by Mike Rosania on
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As an agent that negotiates short sales I would not schedule a closing without written approval by all parties on a transaction, While I am not a closing agent but have a pretty good understanding of closing process I think that it should be the responsibility of the closing agent or title co to be sure everything is in place in order to have a successful closing. I supply a written approval letter from lender which spells out exactly what needs to take place to make sure mortgage is released. Myself or my title co have never had any issue as we have everything in writing from lender prior to settlement. What I cant understand is why in the world would you go to settlement without a written approval from all lenders etc in the first place.
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Permalink Reply by Beverly Cibulsky on -
WOW, first of all, Giving you Equator log in to somebody, entire different Blog! Maybe ok if there is only one file, but I have several files, several lenders, that all contain a lot of heavy confidential information (tax returns, bank statements, etc) on several clients! (Yeh promise me you wont look at any other file!)
There are a lot of title companies, processing companies, that claim to be "able to handle your short short" and about 100 other files. So what priority would my file have with you? Well here is one from Realtor A, Realtor B sent us five, oh and Realtor C has 10 in progress with us! Let's be realistic! Who's files would get more preference in the never ending follow up? Jim's point! When you process yourself ALL clients have the same priority!
I dont let my files out of my hands! What I need is a pre-lim HUD1 from a brief title search, just like the "old
day" HOA, Condo fees, etc.! Only now it is prior to a closing. As Mike has stated, the agent should provide you with the approval letter conditions, any arm's lenght paperwork, etc. I do agree, that the agent needs to make sure, it is properly "closed" in Equator. Perhaps, maybe, this issue can be overcome eventually, as yes I dont like to take the responsibilty for closing docs either, thats what the closings companies do.
It's like everthing else, qualify your seller, qualify the buyer, qualify the AGENT!
Cody, sounds like you have had some bad experiences! We all have a lot more work and details on these transaction! Qualify the agent! Know the Servicer and Investor. You will know what is needed!
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MIke, everything you are saying is standard practice. Of course I would not schedule a closing without having both approval but I do get files into my office that are supposedly ready to close and they are missing items like 2nd lien approval. We catch them all the time and have not been hurt yet by it. It just worries me for that one time it is missed.
That of course is not to mention the annoyance of getting files in and ordering everything on it only to find out that there are other liens on the property that were not negotiated with the bank.
Maybe they just need better training....
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Permalink Reply by Chris Rollins on
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Maybe the agents you work with do need better training. My closing attorney has been doing short sale seminars in my office for years. We have built a relationship between our offices and have had many conversations about how to best communicate with each other and educated each other on best practices. We keep each other updated on changes to the process and work together to make sure packages are completed correctly. Basically you need to have a good business relationship with the agents you work with and communicate well with each other.
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Permalink Reply by Susan Uribe on
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I am with you 100%. Get it in writing. I would never schedule a closing until a written approval letter is received from all lenders involved. A copy is then provided to the seller to review and if they desire discuss it with their attorney. Prior to lenders requiring that the approval letter be signed by the sellers, I was having them initial each page and signing on the last page to verify that they received a copy and reviewed same before advising all parties that approval was received. Once the seller signed off on the approval, all other parties are advised and closing is scheduled accordingly.
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Mike,
Simple, some title companies have no business being in business as there are agents that have no business negotiating a short sale themselves. That is why I deal with an attorney owned title company.
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