Anybody for some honest discussion about this niche going forward? I am feeling very anxious as the first quarter of 2014 ends with more dismal results in the short sale arena than I am accustomed to. By my calculations, at the rate my Atlanta area short sales have been getting foreclosed with viable offers on the table, it will take 2 - 3 times as many short sale listings to match the closed production of previous years. Not a promising outlook, as short sales really haven't gotten any easier in my opinion, despite all the "streamlining" and "platforming".
What are you seeing in your markets?Do you think lenders prefer hedge funds or bulk sales to one-off short sales? Will sellers short sell now that they may incur tax liability for forgiven debt? I am curious to know what others are observing; it may help me discern if it is me and something I'm doing or not doing, or is it a sign of the times for which I need to readjust my product strategy? If it is a sign of the times, what are other short sale specialists doing to address the problem or close the gap?
I am seeing this situation in many other markets. And in my Indianapolis market, where other agents are avoiding short sales, I am closing better than 90% of my short sales. Since Indiana was one of the first states to experience heavy foreclosures back in the early 2000’s,(We used to always be in the top 3 in the U.S. during that time) they were also one of the first to slow down.
So rather than triple my production to close the same number of deals, which would steal more time from my family, I jumped way outside of the box and sought a better way to present and negotiate my short sales. This new approach has pretty much been the sole reason for the increase in our short sale approvals. I have not had to call a single bank in the last 3+ years! This has allowed me to reclaim a ton of my time.
Personally, I think we can ride this short sale wave for a few more years. And even when they do drastically decline, there will still be short sales. They will not permanently go away. So I want to use this market to position myself, as the local expert, so I can be there to handle the majority of short sales in the future.
So, even though I’ve personally negotiated over 75 short sales, I have found it far more effective to remove myself from the primary role of dealing with the banks and have put that task in the hands of a firm that has dealt with banks and corporations for many years. That’s why I now leave all of my bank dealings, negotiations and communications to a top notch mediation firm, who has an extensive work history in the banking industry. In my opinion, they have a much needed backstage pass to the banking industry. They also have a thorough and comprehensive understanding of the “behind the scenes” relationships that exist between the servicers, investors, PMI companies, etc.
Of importance, this is the same style of mediation that the US State Department uses. And banks have been using this type of mediation for over 30 years. Therefore, they are very comfortable with this type of mediation.
And because banks know that listing agents are contractually bound to represent the best interest of their sellers, with the agent considering the bank’s interest as secondary, banks are more likely to view agents as adversaries and less likely to be receptive to simple “logic and reason”.
However, the mediator, per their ethics, has to maintain true neutrality as they are required to represent the best interest of ALL parties to the transaction. This leaves the banks much more relaxed and open to reason and logic, as they know they have some form of recourse if the mediator were to breach this neutrality. The mediation process goes a very long way in obtaining maximum cooperation from the bank reps. It also doesn’t hurt that the mediation firm I use is also “attorney owned”. Banks do not want to get sideways with attorneys so I find that they tend to be more responsive when an attorney is involved.
OF IMPORTANCE: Do not make the mistake in thinking that most attorneys can handle this process. Just like a real estate agent, who is fresh out of licensing school, does not yet have the experience needed to navigate a real estate transaction, likewise, even if an attorney does possess a mediation certification, unless they have sharpened their skills and established a successful mediation practice, they are unqualified to have any involvement in my short sale transactions. I’ve seen many an attorney’s ignorance sabotage a good short sale. The best mediators possess a specific body of knowledge and a very refined and unique skill set.
As for the mediator having to maintain “neutrality” as well as the best interest of all parties to the transaction, I learned a long time ago, that so long as I can convince the mediator that "my position" is what is best for all parties, then, more than likely, the mediator will ethically adopt my position. THAT'S AWESOME! And even better, I've made the mediator's fee a buyer's charge and buyers take no issue with paying it. I’ve been structuring my short sales this way for several years.
So with the mediator dealing with the banks, and not ever having to call the bank, I place my focus on procuring an offer and then “shepherding” the appraisers and BPO Brokers toward achieving realistic values. Since their fees have been cut and they now spend less time in the home, it is near impossible for them to familiarize themselves with all the factors that negatively affect value. This has become an even more obstacle to overcome, since many appraisers and BPO Brokers now say that they “Cannot accept any information, regarding value, from the listing agent.” Lacking a solution for this challenge can be a complete deal killer. Of course I can appeal the value of a bad appraisal, but the foreclosure clock is still ticking and time continues to slip away, so I find it far better to sober the appraiser up at the very beginning instead of getting him to recognize that he messed up.
I overcome this challenge by tag teaming with the mediator. After I receive my offer, I stop all access to the property. This means the appraiser must call me directly for access instructions.(As opposed to the showings desk or company). At that point, I tell the appraiser that there is an attorney involved and that I have been instructed to direct him to call the attorney before I permit access. The appraiser then calls the Mediator/Attorney where the mediator, very professionally and quickly establishes great rapport and then reminds the appraiser that this appraisal is very critical to the home seller and that it is not a ‘general REO’ appraisal. He also reminds them that accuracy is very important and that per the appraiser’s license and code of ethics AND per the federal law of Dodd-Frank, they MUST consider all material facts that do indeed affect value. They must consider these facts even if the information comes from the listing agent. At that point the appraiser usually has an “aha” moment, indicating that he understands and will cooperate. And if that wasn’t enough, the mediator then shares some case law with the appraiser where seller’s have sued appraisers for artificially inflating the appraisal and contributing to the failure of the seller’s short sale. At that point, we almost always have the appraiser’s attention and full . Can you say “AFRAID”?
The appraiser/BPO Broker, then calls me for access instructions. During our short conversation, I may discuss the top 1 or 2 negative of the home, but the real purpose of this conversation is to obtain the appraiser’s email address so I can send them my BPO package. My BPO package includes the BPO on a 2 page Freddie Mac form, an extensive photo supplement with commentary, good comps with proper adjustments, and contractor bids. Page 1 is an “At A Glance Summary” page. It is easy to follow and has sound information and I find that 75% of the time, the appraisal comes in where I need it to be.
Implementing this system has gone a long way to increasing my likelihood of short sale approval, freeing up my time, minimizing stress, being a better manager, growing my business and more importantly, giving me back valuable time to spend with my family.
Systems that leverage the resources of others are key and are the single most important factor in growing my business. This system has also allowed me to solicit short sale referrals from other agents which puts even more business in my pipeline.
I encourage you all to rise above the agent mentality and to put on your entrepreneur hats. Don’t’ be scared to test your creative and innovative systems. Some will fail and some will be wildly successful
So long as you are legally and ethically compliant, tell the world to get out of your way! NO BOUNDARIES!
That's exactly what Advocate Title Services LLC does in Illinois. They coordinate short sales for the brokers and attorney's involved. They have become exceedingly good at it.
I got a call from one of your associates, Steve. It's interesting, not a new approach, but one worth revisiting in this new market. My previous experiences with 3rd party negotiators is that they have only slowed the process, imo. Perhaps your Mastermind approach will be an improvement. Seems to be working for you, from the above account.