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 Noel Padilla on
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Its not so much as they shouldn't processes them as learn their craft. If you don't take the time tho learn how to do them correctly, then should refer those clients to someone who does. I've had similar issues with title companies that don't understand the process and i've had to correct their goofs.
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Permalink Reply by Marti Sauers on
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You make a general statement that is, generally, irresponsible. It is these kinds of generalizations that put this industry in a position to be questioned and disrespected. Just as a real estate 'license' does not give us the right to act outside our scope, experience, and education, a law 'degree' does not give every lawyer the right to practice in areas where the individual attorney lacks expertise. If I had a heart problem, I would not go to a podiatrist -- yet, both hold Medical licenses. No company, industry segment, or practitioner can boast a general ability to sucessfully close short sales based solely on the letters behind their name or the company name on the door.
The key to the issue is education. That falls on each brokerage to train and educate each agent and ready them for each aspect of the business. This includes mentoring requirements to new agents before taking on short sales. Our brokerage is excellent with respect to this.
I have a corporate finance, investment banking and contract law background (15 years). But, when re-entering the real estate industry a few years ago, I still needed education with respect the current processes. Many aspects of short sales require more than real estate knowledge, which is why we are extrememly successful in short sales. But this success didn't come without a bit of ego-checking and a lot of listening and learning. You must also have a passion and the right attitude to be successful in this segment of our industry.
I don't care who you are, what your background, what license you hold or don't -- short sales are about more than real estate. Check your egos at the door, and if you don't know what you're doing, partner with someone who does. If you can't find a partner that can help you, refer the short sale out to someone who can do the right thing for the client.
Thank you.
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Permalink Reply by Joseph Alfe on
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Agree with Marti 100%
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Permalink Reply by Sheila Vardakis on
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As a title company, you have the responsibility of reviewing the title work and insuring that all the liens are removed and any other clouds on title are released. Why you would not dot your I's and cross your T's is beyond me. I work with a title company that makes sure these things are done if I miss them. I certainly don't want a suit nor do they so we collaborate to make sure we get the job done. If your processsor misses something, then the closer should catch it and make sure it is addresses first or the deal won't close. It's that simple. Forgive me if I am being blunt but I think your subject title creates some defense when you should rather be looking at how you can do your job more efficiently.
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Permalink Reply by Jeff Payne on
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Interesting thread here. Bottom line is that there are good agents and bad agents, some great at short sales and some who are clueless. Same can be said for third party negotiators, attorneys, title companies, there are good ones and there are pathetic ones. If a title company constantly has bad experience with agents or if agents continue to have bad experience with third party negotiators, attorneys or title companies, it may be time to take a hard look at the people around you and think about finding a new set of "friends". To place a blanket over "all agents" "all third party negotiators" "all attorneys" is irresponsible to say the least.
There is a reason that 10% of the agents or 10% of the negotiators make 90% of the money and the rest are left with scraps. That is probably true for most business.
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Permalink Reply by Debbie Geavaras on
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In Illinois, we use attorneys and title companies however as the realtor, I do all the negotiating and facilitating of the paperwork though the equator system or the bank for the simple reason that they go much faster when it is done this way AND I don't want to lose a buyer and have to resell a property, repeated times.
I can understand that there would/could be some items missing, however, I have seen the same thing with "negotiators" and attorneys handling the process. Attention to detail and clear training and understanding of what lender requires, in my opinion, would help to alleviate this no matter who is doing the process.
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I think as Realtors we SHOULD really try to look at the situation from all sides. Cody has a point....the title company is ultimately responsible to make sure that the short sale approval letters are correct and valid, as well as verify that all liens are correctly dealt with prior to closing. BUT, that is really a title company's job.
The breakdown seems to be in the COMMUNICATION! I have a title company that I insist on using on EVERY short sale. I keep them updated on the progress on my negotiations, give them a heads up when I know the approval is coming, and then verify with them once they have the approval letters that everything looks good. By constantly working with my title company, TOGETHER, we make sure that the deal is comes to a smooth closing.
I want to thank Cody for bringing up this issue because so many Realtors want to depend on someone else to handle the negotiations with the bank. I admit, I negotiate my own deals but also negotiate for other Realtors. The difference is that because I am a Realtor myself I know how to handle the intricacies of the deal. Title companies should NOT be negotiating a short sale (didn't they have a notice from the insurance commission about that previously?). Most attorney's offices should NOT be negotiating short sales. Realtors SHOULD be negotiating the short sale because they are the MAIN POINT OF CONTACT for the entire transaction....who better to negotiate than the one person who knows what is going on with the deal?
Honestly, every party to the transaction should be working extra hard to make sure the deal closes....including the title company. The point of all this...COMMUNICATE WITH YOUR TITLE COMPANY TO MAKE SURE THEY HAVE WHAT THEY NEED. And if your title company is sloppy enough to not notice that you didn't get a proper approval letter then YOU need to take a few short sale classes to learn what you are doing and also find a better title company!
If you want to work on a short sale then be prepared for the extra responsibility!
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Permalink Reply by Cody Lampariello on
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I am glad this topic got a lot of response it was interesting to get peoples take on things. I think maybe the title I gave to my post was a little sensational and which I hope was the reasoning behind the negative responses that were recieved. I wasn't looking to put people on the defensive but to give thought to the idea behind the liability issues we face closing short sales and depending on others. It is an issue and its part of the business we work in.
I still would prefer to only close short sales that my office processes in house but know that there are clients out there who prefer to negotiate their own files and don't have any plans to turn them away just yet.
As for this post I appreciate the thoughtful responses by many of you and many of the points made me think. As for those who chose to go on the attack and say things about the way my company handles our business instead of understanding the issues that I posted about maybe you should reconsider why you come to a site like this. The purpose is the open trasnfer of ideas and advice of which I have given and recieved much next time think of that before you respond.
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Permalink Reply by Mark Charlesworth on
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It does not matter what we think. The market reality is that when you refuse to close them-somebody else will!
I spend plenty of time coaching my closing company on what need to happen to make a short sale work. I can not count the number of times a closing company has given me an estimated HUD1 that will not work, said HUD1 gets sent to investor and the MI company. When they approve it and we get ready to close the escrow company says oh that was an estimate-here is the real number!
It comes down to professionalism and a willingness to keep each other up to speed. Team work really. We all have to work together to make these transactions work. Keeping our clients needs at the forefront...now I need to go because I have to get an extension for the second on this deal...good thing I checked in with the first and my loan officer about this deal...see team work.
mc
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Permalink Reply by Tammy Davis on
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Cody,
I was an Escrow/Branch manager for over 20 years. I did my first "short payoff" in the late 80's..before short sales became a part of everyone's vocabulary. At that time escrow did everything..was to the only party to have contact with the lender. Remember when lender's wouldn't allow anyone to contact them other than the borrower and title company?
Now, as a licensed Realtor..most of my listings are short sales and I have a very high success rate which I believe is due to my background in escrow. But as a Realtor I work with a team of services providers that are in integral part of my business and success. I count on my escrow officer and title officer to be a part of my check and balance system. There are times that they have caught errors on the lenders approval letter or want something clarified for their file. And same on my end..I have had title reports that may show an old mortgage that I can work to get cleared.
What I am getting to is that we all work together as a team. If I had a title officer such as yourself that felt that I wasn't doing my job correctly and didn't want to be a part of my "team" then it would be time to move my business elsewhere. I am sure your upper management might have a problem with that in this economy. You talk about that you would have to take a loss on an error...but as someone who worked in the title insurance industry...losses are few and far between in title insurance. If you have suffered more than one loss the problem is on your side...not the real estate agents.
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Our company has never suffered a loss and I intend to keep it that way Tammy. I guess that was the point of my post I like having a squeaky clean record with my underwriters and I also have very solid relationships with my clients of which nearly every one that actually does short sales has our company process them for them. There are a few that do it themselves and send us the business and for the most part they are good. It's just the ones that come in screwed up every once in awhile that make me frustrated since when it comes down to it if anything goes wrong its my company that is the responsible party.
So many people on here took my post as saying realtors aren't good at short sales and so they shouldn't process them. Maybe it was my wording but that is not what it was meant to be.
As I said in the very beginning of the post it is more to do with financial responsibility than anything and the idea that really as a realtor you could do a bad job or forget to close out tasks or any number of issues and if my company doesn't catch the mistake we are at fault not you.
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Permalink Reply by Keji Ogunleye on
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I had bad experience with 3rd party company that claim to negotiate short sale,but I have to pick up the slack. The title company I use regularly refer sellers to me to negotiate their short sale.. and I have to coach them many times on what I need on the hud-1.... Stating as a matter of fact that agents should not negotiate short sale.. is just unreasonable.. just like I cannot say all 3rd party negotiate company should not touch short sale..
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