Replies to This Discussion

Permalink Reply by Steele V. Propp on February 17, 2011 at 4:42am

Mike, you have to follow your own moral and ethical compass.  I think most would say to stay away from any kind of fraud on the sellers part, but if the seller will be honest with both you and the bank, consider taking it.  The banks are becoming more lenient on hardships.  Particularly in the so-called "non-recourse" states. A short sale may make the most sense to a lender from a bottom line position even if there is no real hardship.  Going after a strategic walkaway often costs more than it is worth.

 

Contributions by sellers are a fact of life right now.  I prepare everyone for the possibility.  The bigger problem I see is agents telling sellers that they get off without any cost.  Sure, you win some of the time but not all of the time.

 

Hey, worst case scenario, the bank can say "no".

 

Steele

Permalink Reply by Mike Sher on February 17, 2011 at 4:52am

Thanks steele,

 

The next issue is the amount of work we put in is so great and with the FTC's rule eliminating the ability to charge the seller at all in the front.  It becomes cost prohibitive to take these long shots. Sure the worse thing that happens to the seller is no but the Realtor will never get those 20-40 hours spent calling the banks, working on hardship docs, meeting the bpo agent, showing the home and etc.  I am not trying to complain.  Just working on making good fiscal decisions.

Permalink Reply by Tni LeBlanc (805) 878-9879 on February 17, 2011 at 4:58am

Dear Mike,

 

I think you should stop judging and start selling houses.  It's the banks call on whether people qualify.  They can decide to give a short where there is no real hardship, and then what?  Is the bank wrong?  Being 50% underwater is a hardship in my opinion and tax forgiveness will not last forever.  Many of these people who have no "real" hardship in some people's view would be eligible for bankruptcy due to their debt load.  If I can help someone avoid a bankruptcy or a foreclosure through a short sale I think I am doing a good thing.  A seller that refuses to contribute anything can be a business call -- but even those can be negotiated out.  I consider myself a very honest person as well, which is why I look at the situations many of my clients are in honestly.  They could continue to pay, but they have usually been in financial distress for years, have postponed life decisions, will need to retire in ten years, etc. etc. etc.  I had one client who had a heart attack due to the pressure of the situation -- he definitely had a hardship AFTER that -- but didn't he before as well?  Do we all need to have heart attacks first?  I don't think so. 

 

I hear people rail all day long about how people don't have hardship but I have not had one person approach me about a short sale where I could not see hardship.  Being severely underwater is a hardship in my opinion.  I have people in their 50's who are down 50% on their homes.  They will never make it back.  Never.  In ten years, when they go to retire they will still be underwater and there is no guarantee that there will be tax forgiveness at that time.  Now what? I also have not had ONE file where I did not get an offer from the bank.  So, stop judging these folks and take the work.  Change your outlook, and make sure your interview touches ALL aspects of their financial life -- it could be that if they don't fit in your box you can't see their hardship.  If the bank thinks they have no hardship they will turn the file down.  It is my job to argue their hardship to the bank, I am their advocate  - and even where I have had files that may have been marginal -- it still was a bad business decision for the person to continue to pay.  I don't think real estate agents are supposed to be the gate keeper on this.  Just my opinion, friend!  I do respect anyone who makes an attempt to act with integrity in this world, there are so few, and I hold myself to some high standards as well -- but I think you should adjust your outlook on this one.

 

Sincerely,

 

Tni LeBlanc

Permalink Reply by Marcy Moyer on February 17, 2011 at 5:07am

I agree with Tri,

We are not gate keepers. If someone wants to do a short sale then why not ry. As far as the wasted time goes,how many hours have you spent dealing with buyers who never bought? Plus a listing is great exposure so I say take the ones with people you can stand to spend time with.

Permalink Reply by Mike Sher on February 17, 2011 at 5:22am

Dear Tni,

You make some very valid points.  I guess I struggle because I have 4 homes that are grossly underwater and I do not feel that I am a short sale candidate.   I agree the bank is the overall decider of who is  or who is not a short sale candidate.  I just wonder if by taking on the marginal short sales and flooding the banks with these deals, we are hurting the process and delaying the real hardship cases who need to get a short sale or they will be foreclosed on.  I think a lot of questionable short sales are out their and just because the agent can get in through does not make it right.  These files slow the process for the true hardship candidates where time is of the essence since they are broke and loosing their homes.

 

As for judging, maybe if we Realtors were making some judgment calls when the banks were giving loans to everyone with a heart beat with many of the buyers having no means to afford these mortgages, perhaps we could have avoided some of the fall out of the mortgage crises.   Not sure if the see no evil, hear no  evil and speak no evil is the best.

 

Just my thoughts and I mean no offense

Permalink Reply by Steve Early on February 17, 2011 at 5:36am

I have turned such people away in the past myself, and continue to do so. If someone else wants to do them, that is their business, but when it is obvious to me that there is no hardship, and the people are just trying to get out from under a rock they don't feel like paying for, I go the other way.

Permalink Reply by Tni LeBlanc (805) 878-9879 on February 17, 2011 at 6:03am

Hi Mike,

 

No offense taken and I think it is a great discussion.  I think if we sat down we would end up more in agreement than not.  I agree there was a lot more judgment needed when the housing boom was going on.  But again, you have to look at our role.  Those that engaged in fraud were wrong -- but if you were not handling the loan -- how could you control someone wanting to receive more for their property, or being willing to pay more for a property?  As an individual, I controlled what I did and said and what I would be involved with - but I'm not sure that real estate agents could have prevented the housing boom and bust through sheer force of will or moral fiber.  There were forces greater than real estate agents at play -- but yes certainly it is disappointing to see how our profession played a role in it all.  I never heard anyone talking about judgment during those days and I hear a lot of people talking about it now.  Judgment now strikes me very much like these regulations they are putting into place -- too much too late.  And there will be plenty of time to judge when we get out of this mess -- but right now my focus is getting people out of this mess.  There were a lot of deals I did not want to be involved with during the boom and I lost out on business because of it.  I have no regrets though. The rampant fraud that went on is now affecting even those who did not participate in it, and I think it is my job to help. 

 

I'm not sure even about the flooding part.  The banks could hire more people to process short sale files and some of the major players have gotten much better.  People do need jobs after all.  Some banks (Wells/Wachovia) are begging for shorts on some of their files.  They want to move this stuff through. Many of the smaller banks are regularly moving files through in 30 days or less.  The banks that are moving slowly on files I think have their reasons that aren't necessarily related to being flooded.  Some are just trying to time their losses.  And again, they can evaluate which files they want to act on first, etc.  I don't see it as my job to make sure someone is first in line and someone else is at the back.

 

Personally, I also think it is sad when people are in denial about their financial situation.  I see a lot of situations like that -- where they are putting household expenses on credit cards and trying to hang on to a house with negative equity.  I do believe that now is the time for people trapped in underwater homes to try a short sale. It is a business decision for the banks as they are now receiving incentives for them, and it can be a business decision for homeowners as well. 

 

So, if you won't take their file I probably will.

 

Tni

 

Permalink Reply by Steele V. Propp on February 17, 2011 at 6:09am

Interesting point.  You can refer these marginal situations out for a fee.  Personally I am also of the school that too many agents are willing to take anything.  Which is part of the reason why the real ratios of successful short sales is less than 50%.  There is still the thought that any listing is worth it if only for gathering new buyers. 

 

But the top agents do "cherry pick" their leads and refer out the rest.

 

Just a thought.

 

Steele

Permalink Reply by gwendolyn harvey on February 17, 2011 at 6:18am

If people are hiding assets from the bank and trying to do a short sale due to a hardship, they will get found out. I am quite sure the banks do a thorough background check on their financials. So, why not take the listing and let the bank make the decision to approve the short sale or not.  And while the property is on the market you may get some buyer prospects interested in purchasing a home.

Permalink Reply by Keji Ogunleye on March 4, 2011 at 2:21am

Is this hardship.. I have an older couple that have been trying to sell their property for the past 14months.. They can afford the payment, but they need to move to adult community as they cannot take care of the current house anymore.. They want to buy in the adult community but to sell the house we have to sell as short sale...

In another case I have  sellers that start building another house in 2007 , and are paying extra $1000 every month on the current house- In April 2010 we put the house in the market- sellers are willing to sell less and pay about $10K ,but market dropped more- we have to sell short sale and they contribute $5000 at closinig..the did not hide asset , they showed large amount in bank account- but they cannot afford two mortgages at the same time, they cannot pay the difference... is this hardship...So I agree with Tni .. bank do there part to see if the borrowers are hiding assets..

Permalink Reply by Steele V. Propp on March 4, 2011 at 4:45am

I would say that both cases would fit the normal definition of hardship or hardship on the way.  Lenders are not some cruel, unfeeling guys just trying to take properties back.  Most are very reasonable in their take on hardships.

 

Where they are hard case is a situation where the person can afford things just fine, has lots of assets and just decides that this is a bad business situation and the lender should pay for the lowering values.  This same person also never had a thought of sharing the profits when housing was riding high.

 

Ultimately it is a case by case situation but I think you have a good argument for hardship in both cases.

 

Steele