Why are you doing short-sales???
I'll admit, my experience is very limited in this arena - I've been a purchaser in two short-sale deals, one closed a few months ago, and the second should close soon (we'll see!?)
I have an agent's license, so I understand how the process (should) work, and I have a business background, so I understand the fundamentals of operating a business.
Both deals that I've been involved in took too long. Waaaaaay too long. Inexcusably too long.
The housing "crash" isn't new. It isn't 2008 anymore.
Based on my business experiences, when my companies had "demand" that we couldn't meet, we hired people, changed our processes, bought whatever technology we needed to get the job done.
So, that said, why is it "normal" for a short-sale to take 6 months+?
For whatever reason (the reason doesn't matter for the purposes of this discussion) the servicers have decided NOT to make any changes that would/have lead to a meaningful reduction in processing time for short sales. They've had YEARS to do it, lots of available unemployed people to pick from, plenty of time has passed so it's not like they haven't had enough time to train people...
I know, some of you have "secret-super-connections" that allow you to close some deals in a couple of weeks, but, by and large - from what I've seen on this very board - it isn't unusual at all for a deal to take at least six months to close.
During that time, whether you're the listing agent, or the selling agent, YOU are always the "patsy" - YOU are the "face of the deal" to your customer, whether you like it or not.
Every time a packet is "lost", a fax "isn't received", "we need another BPO", or whatever other nonsensical B.S. the servicer can come up with - it's you that gets to deliver bad news to YOUR CLIENT.
I know, some agents like to think they're "helping" the short-seller "preserve" their credit, but in most cases, the seller is getting "dinged" every month with an unpaid mortgage on their credit, and the clock for repairing their credit doesn't even START ticking until the deal is closed,
Which could be a year or more.
Added to the two years minimum "penance" required by the GSE lenders.
I also know, some of you claim to get things done super-duper quick - which could be awesome, except, if you do a short-sale super-duper quick, the seller doesn't get any "free housing" - which, if you're truly looking out for their best interests, might be the only "positive" thing to come out of a short sale for a seller.
In my old home state, there was a one-year "right-of-redemption", after a foreclosure in which the person who lost the house normally gets to stay, rent/mortgage free. A whole year with $0 housing expense could be a significant "fresh start" for someone "on the ropes financially" - selling the house in a quick short-sale just makes them renters with bad credit and no reserves, one step closer to sleeping in a car.
And what about self-interest?
Being an agent is all about service.
It doesn't matter to the clients how well-organized YOU are, the people you're doing business with aren't well-organized, and the stink clings to everyone who gets too close. The servicers make you look bad. They actively lie about what you've done when the seller calls, claiming you forgot things, didn't send this, etc - whatever it takes to get the seller off the phone with them, and mad at you.
So, in short, here's my "thesis" - please tell me where I'm wrong.
1:) The servicers don't want to do short sales. If they did, they would add staff/training/technology and actually make it happen.
2:) Short-sales don't always help a seller - in some cases, it may not be in their best interest to do one.
3:) Short-sales are frustrating your buyers. Even if the buyer says "they understand" it's a long process, they don't. It's human nature & capitalism 101. There's a reason a car dealer tries to send you home in your new car - you want it! NOW!
4:) Real-estate is a service business, and it's based on reputation. The servicers that you are forced to deal with in a short-sale actively and passively work against your reputation, sometimes outright lying to your seller about things that you have done. The incompetence and arrogance of the servicers comes through to your buyers as well, further smearing your reputation, and damaging your business.
I don't see a benefit for anyone involved except the servicers, who seem to be getting paid "full-pop" for a half-a$$ed job.
From the agent's perspective, isn't it much simpler for everyone involved to make the bank take their house back and list it as bank owned?
Replies to This Discussion
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Permalink Reply by Mike Rizzo on
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Here's why I them...
"What we have done for ourselves alone dies with us; what we have done for others remains and is immortal." Albert Pike
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Permalink Reply by Tni LeBlanc (805) 878-9879 on
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Hi Mark,
Well I guess if you wanted answers you got them. :-)
I think you have to do them all the time to 1) be really good at them 2) prepare the buyer and seller well, and 3) preserve your reputation during the process. Definitely, they have improved. Some short sales still take 6 months regularly, for example, if there are two slow servicers and mortgage insurance. But, I am regularly getting approvals on most short sales in 5 - 8 weeks. I even had a Fannie Mae streamlined approved in 22 days recently.
That said, I know of what you type. Yes, many times organization does not pay off in short sales. But more often than not, it does. It is difficult when good effort is disregarded or ignored and that does happen with short sales. But again, most people that do them regularly are ready for that and factor a certain amount of that into the process.
As for "free housing," there are some that want that. Some people have no funds and need a place to live and some are just emotionally attached to the home. Credit wise it is expensive to sit around in a home you're not paying for and emotionally most report it as a very draining experience. I know the media talks about how gleeful some people are about not having paid their mortgage for a number of years. However, most people I've dealt with hate the experience. So, it may be glorious for some in retrospect -- but thinking that you might have to move in 3 weeks at any given point is tough. And, the sooner the short sale is complete the sooner they can begin rebuilding credit (and their life). You get a lot more from completing a short sale than "free housing." You get peace of mind.
As for reputation, I just don't see this one. At this point buyers and sellers in my market are very educated about short sale wait times. Now what you've said is true, buying is often an emotional experience, so even a well educated buyer can want to bail. Again, experience can help when dealing with these issues. I keep those involved informed and when the bank tells my seller something that isn't accurate, nine times out of ten they know it isn't accurate.
The biggest issue seems to be that short sales may not be for you. You've had a small taste, and you may want to just leave short sales to the agents that choose to specialize in it, because they are not easy and they are very different than other transactions. I have a good friend that is an agent who is very successful and he will not touch short sales and I really respect him for knowing that about himself and what he wants for his business. In his market he can also get away with it. Since it is 2011 (last day!) and you have only done 2 short sales, you may be able to get away with it in your market too.
As for me, I have gotten to the point that I enjoy them. :-) I love the feeling of relief for sellers when it is finally over. And, persistence always pays off in short sales. I have that in abundance, so it suits me. Short sales are a marathon, not a sprint, so the hare doesn't often beat the tortoise in this game...
Hope this helps,
Tni
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Permalink Reply by Sue Irwin on
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From my perspective as someone who represents both buyers and sellers in short sales, they do have their place.
There are definitely benefits to short sale over foreclosure for a lot of people. I've noticed that for sellers it sometimes comes down to them feeling better about making a deal with the bank instead of having a legal proceeding against them. For some, security clearance for their jobs is a big issue. For other sellers, if they have a chance to keep their credit rating a bit higher and cleaner, and that is important to them, they often choose a short sale.
I agree this is a service industry, so providing the service of going over options from loan mods to foreclosure is huge. This past year several of my potential short sale clients were able to get loan mods after speaking with me, and they very much wanted to keep their homes. I call that service, and I will get referrals. The rest had successful short sales that weren't too stressful on them. The system is getting more streamlined.
For buyers in my area, where we often have multiple offers on both short sales and foreclosures and the median price for houses is nearly $800,000 (condos $415k), short sales are a chance to get a better deal than a foreclosure, with more disclosures from the selling entity and a lot less competition from cash investors (foreclosures). By representing buyers, we are providing a service to the buyers... especially if we prepare them for the typical sorts of issues encountered along the way.
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Permalink Reply by Jennifer Luna SFR on
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Many take over a year...if you are dealing with an agent who is unexperienced in short sales. Short sales are not for everyone. We can all agree (even Mark) they aren't for Mark. Mark if you hear of any short sale situations from friends/co-workers for the Milwaukee, WI area, you can refer them to me @ [email protected]!
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Permalink Reply by Laura Rivera on
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Mark, I can't help but send in my reason(s). My closed short sale listings gave me a paycheck in 2011, they averaged 2-4 months to close from offer submission, I was fortunate to have worked with very professional buyer's agent who had educated their buyers about buying short sale properties from the get go. Their buyers got good deals, and my sellers were happy to move on with their lives.
In March 2009, I had sellers who were current until their short sale got approved and closed and were able to buy a new home using FHA loan, six months later (theirs was an exceptional hardship case). Also, I had a seller who was pressured by her company to do a short sale on her home IF she wants to keep her job. I got her house sold on a short sale and next year, she will be buying again, as she just got a job promotion...
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Permalink Reply by Kathleen Couch on
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Mark,
I will do your short sales for you. Just list them. The majority will qualify for a short sale. I will communicate directly with your client, and help them and you through the process. I will be authorized by them to work the short sale. You will close more real estate transactions, and they will love me and you in the end. Short sale facilitation is not for you. No more discussion needed.
I have many short sales under my belt, and I am writing an educational course for our local real estate board, that will be presented by a broker.
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Permalink Reply by Daphne Nelson on
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Back in 2006, when I first got into this business, I went to a seminar about "How to Handle an Upside Down / Underwater Home Sale", given by Dennis McKenzie. I'll never forget it. What in heck was this man talking about?! This wasn't the real estate that my husband and I had signed up for. About half way through the 3-hour interactive presentation, everyone took a short break. Only half (if that) of the approximately 100-member audience returned. I stayed only because I was fascinated by what Dennis was saying. He was insisting that the real estate market was headed in this "short sale" direction and that if we didn't understand that and learn how to "do" them, our competitors would! By the end of that 3 hours, I decided that I would have no part in this 'insignificant', potentially disastrous market that was, according to Mr. McKenzie, coming at us like an out-of-control freight train. No way, no sirree! But within 6 - 8 months, over HALF of our listings (we had 16 at the time) FELL into the definition of a short sale ~ the sellers owed more on their mortgage loan than their home was worth on the open market.
I successfully negotiated my first short sale for some sellers where the wife was pregnant and ordered bed rest, so could not keep her job. The husband was in new construction, which almost ceased to exist back then, so his income deteriorated drastically. This couple had also taken an additional loan to help keep their business afloat during these tough times, but in the end, could not make their mortgage payments. The absolute relief and gratitude from both of these people, after a very long grueling 18 months (the short sale lender - Indymac Bank - was going through their own troubles back then and the file was transferred from negotiator to negotiator as employees left the company) until escrow finally closed (different buyers came and left during this long period), was a truly "joyous" time for this couple. They could finally move on without the cloud above them when they already had so many other serious issues on their plate.
My second, third, fourth, fifth, sixth and seventh short sales happened during these 18 months (2007 and 2008) - all closed successfully. The second short sale was for a couple who had built a beautiful custom home where they would retire, but the husband (who was our age) had been diagnosed with a degenerative disease, suddenly ending his ability to work at all, leaving them having to either bail and allow the bank to foreclose, or try to do a short sale. I obviously would not be talking about this if the short sale had not closed successfully. The husband was the same age as my husband and I ~ late 40's ~ and we literally watched his body slowly deteriorate in front of us while we negotiated with their lenders (multiple). It was a painful experience, but again, the gratitude from them both was overwhelming.
I am in California and our average time period in receiving full written short sale approval (including multiple lenders) is between 30 and 60 days, with 6 days being our fastest (Chase).
I can't even begin to put into words what it feels like to successfully help sellers who are in need. It has been an amazing experience.
Mark, is my answer about why I do short sales, along with the countless others, full of bluster too? I don't believe you'll find more "insight" and "facts" than in the answers that you've been given by these people in this string of posts. Each response has been written from the heart and clearly answers your question about “why” these particular agents have chosen to do short sales. Given your seemingly innocent question, I am surprised at your vehemently hostile display in 'disagreeing' with someone else's thoughts and feelings. Seems odd.
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Permalink Reply by Kevin Hardin on
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My two cents worth.
My practice group here at the law firm has been negotiating short sales since late 2008 here in AZ. Though there were a rare short sale in the previous years, our real estate market peaked in later summer of 2007 so, there was little "Need" for a short sale person. We are not a small practice. I don't offer these number to impress or sell, I offer them to impress upon the reader the lessons we learned and our experience. After over 10,000 homeowners inquired or referred by other real estate agents about help with their mortgage, just over 2,300 of them retained us to assist them. Here is what we found.
1) Being underwater in a home is not a real estate problem, It is a debt problem.
2) Deciding to short sale your home is not real estate decision, it is a contemplation of default on a debt obligation.
3) NO real estate agent should be advising a homeowner to do a short sale i.e default on their mortgage. It is not a real estate issue. You have someone who either is contemplating or has already stopped making their mortgage payment moving toward or are in default of a contract (mortgage). Especially in a Judicial Foreclosure State, this is the most important. A legal professional should be doing an analysis of that mortgage, what type of loan, is there deficiency if foreclosed, financial benefit of non payment, credit damage if default, etc etc. BEFORE that house is listed. Then and only then, if a short sale is in fact in the mortgagor's best interest then DO A SHORT SALE.
4) Short Sale "Negotiation" is not a legal service as many law firms would like to characterize it as. It is relationship management. It does not matter how intelligent on debt, law, etc the "negotiator" has, if they cannot manage the relationship with the servicer and their purported "process" they will fail.
5) An Attorney will not get any better result in a successful short sale than other successful "negotiator". The $20 an hour, rivet faced, tatooed asssed kid on the other end of equator or phone does NOT care if it is an attorney, paralegal or top producing real estate agent. If you don't understand the servicer's process and know who to be dealing with, you will fail. Now, when that short sale goes sideways and the foreclosure needs to be stopped, MI company needs a spanking for demanding a cash contribution on an otherwise non recourse loan, then get your attorney reinvolved.
6) When the short sale approval is issued a real estate agent should NOT be giving an opinion about the language. It is NOT a real estate issue. It is a debt settlement and should only be done by a legal professional competent to opine on that language, but once that opinion is given and the mortgagor understands the results of either foreclosure or closing on the short sale, the attorney needs to get out of the way.
A real estate agent would not appraise their own transaction, inspect their own transaction, insure their own transaction, issue title or handle escrow on their own transaction in very rare occasions lend on their own transaction. So, why do real estate agents see that they should be advising homeowners on whether to default or navigate a debt obligation?
I have learned in 24 years of real estate and 19 year of mortgage regulatory and statutory work that the best producers have the best "teams" From Title, Escrow, Attorney Loan Officer etc. This practice should not be abandoned in a short sale either.
Mark, if you are going to do Short Sales, understand 1) No, the servicer does not want to do short sales, they want the homeowner to pay their mortgage. If the mortgagor is not going to pay, they are not going to make it easy. 2) No, not every short sale is in the best interest of the mortgagor, but in MOST of them are. Get a good attorney to assist you in determining that so that you don't put your reputation and license on the line. 3) After 3 - 5 years of this short sale mess, depending on region of country, a buyer and buyers agent would have to have been sleeping under a rock to not understand that a Short Sale is not a guarantee or perfect transaction and depending on market 30% to over 50% of them, Don't Close. Get over it. If you list a short sale, qualify, by disclosure, the buyer and their understanding of how it works. 4) Stop taking the actions of the lender on to your reputation. Disclose, Disclose, Disclose. Set the proper expectation and educate the buyer as well as seller upfront.
Lastly, education is missing in your last comment. Over 85% of all 1st mortgages outstanding are securitized. Meaning that the servicer is doing so for another party (Investor) and over 30% are also covered by a Mortgage Insurer. A servicer will actually get compensated greater for a foreclosure once the foreclosure is actually concluded and they are reimbursed by the investor than they do in any other option including a loan mod. If you understand that, you realize that you are NOT talking to the true decision maker. There are too many great "negotiators" in the business now, use them.Now is the time to list them, but find good help.Yes, it is simpler to just let the home go back to the lender. But, it is NOT best. Those working in this particular aspect of the industry do so, because, speaking for myself, want to protect the greater market for a long term career. Foreclosures destroy families and destroy neighborhoods. Be a part of the solution.
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Well said, Mr.Hardin. I couldn't agree with you more. As a real estate agent in one of the hardest hit areas in the country (Phx), the path of short sales is riddled with land mines. The next greatest money maker in this whole mess will be for lawyers helping prior short sale clients sue real estate agents. Although, I negotiate my own short sales, I have my sellers see an attorney before putting the house on the market. You're right that short sales are not for everyone. After getting the approval letter, I tell the sellers to bring it to an attorney for review. Most attorneys don't charge very much for the review because in most cases the letters are clear-cut and meet the needs of the sellers. If the sellers decide that they don't want to go to an attorney, I make them sign a form that says that I recommended they see an attorney and they chose not to. I do a very good job in helping people with short sales, but I not stupid in thinking that if things go south, most people look for someone to blame besides themselves. Having a good relationship with an attorney, escrow company, etc. etc. only makes sense since no one is an expert on everything. Again, well said.
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Can't agree more with your comments. Plus you need to investigate whether the Borrower was truthful in the loan process on the loan in default; comparing loan application to income tax returns, debt, etc. The timing of the listing can be a liability as stated.
I use an Attorney and a CPA in every short sale transaction. Its not a business for me its a service for clients, the commission isn't worth a DRE complaint or lawsuit.
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All of your points are valid, but it's been my experience that in our area, short sales sell for much more than foreclosures which help preserve the values of non-distressed properties. So I guess the short answer for me is... I do short sales to protect the integrity of the values of surrounding properties. The other answer is... I love the challenge! :-)
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Mark:
As you can see by some of the replies there are many qualified folks that can take that negotiation process and many of the headaches associated with that out of your hands so you can focus on what most agents prefer to do: list, show, and sell properties. I don’t know what their fee structures are but it may well be worth it.
I work with an investor looking to buy listed properties that are short sale candidates just about anywhere in the country including Hawaii. (I’m hoping he will have to send me there on a recon mission. Somebody has to do it, you know, and I'm willing to go.)
Anyway, this investor will handle all the short sale negotiation headaches and will pay you a 7% commission even if the foreclosing lender pays less.
Let me know if this is of any interest to you.
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