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?
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Love this stream..love the Agent's responses as I too, REALLY enjoy how short sales have progressed since 2007 when I began them here in the Palm Springs Valley, Calif. It has been a rocky ride, but when I am reminded of how far the process has come, it feels good. Short Sales are not for everyone, but they do work for some..and most of us listing and closing them have an ulterior motive. We truly do like helping people.
Short-sales don't always help a seller - in some cases, it may not be in their best interest to do one. I disagree with this Strongly.
I have tremendous respect to people who choose short sale over foreclosure;
Short sale is the way the seller cooperates with the lender to give the key to the new owners in a more civilized way, opposed to abandoning , sometimes vandalizing the property.
Short sale is a harder way to walk for a seller; Lots of frustration, waiting without a response for months, sending the same papers again and again, getting foreclosure letters and calls just to get an approval letter.
It would be much easier to say "who cares , take it back, it is not worth half of what I bought for" .
That is why I have a lot of respect to sellers who chose this harder but more responsible way. It is like saying "I know something went wrong, instead of blaming you and running away, I will do my part to solve the problem"
Almost all my short sellers kept their houses in great condition until was closed, they kept the utilities on even if they were already out. Some brought cash to satisfy greedy lenders pulling money from their IRS accounts.
I have tremendous respect for them because I know it would be so easy to give up, there was every reason to do so. But they did not, they gave keys to a nice beautiful home, even if they get no checks at the table, Unlike the foreclosed homes, short sale homes are in good condition. A benefit to all of us involved.
Furthermore a Short Sale it is the best way out, because Almost all approvals wave the right to come after the seller for the deficiency. I know banks are going after people who vandalized their homes, left to be foreclosed everyday.
I wish the lenders would understand that going through a short sale is a nightmare for a seller and they start making this ethical act to be a little easier for all of us.
Again, a short dale is a debt problem not a real estate problem. No agent in my opinion can make the statement that a short sale is in the Sellers best interest without considering the total financtial and legal situation of the Seller.
If bankruptcy was truly the Seller's best interest and you compelled them to do a short sale I think there might be an issue.
http://www.bankruptcylawnetwork.com/bankruptcy-and-short-sales-cali...
I want NAR and Statewide Real Estate Associations to be more proactive in limiting our liability, redefining our fiduciary responsibilities, and protecting our licenses in regards to us performing short payoffs.
Exactly,
There is another issue that is the elephant in the room. Taxes. Not every short sale is a primary residence. Not every short sale results in protection from tax liability. It isn't Cancellation of Debt income that is the real issue, thought it is significant, it is Long Term Capital Gain on rental property that homeowners utilized the equity in to leverage their real estate investments. Big kicker, you can't discharge in Bankruptcy.
Just another reason why short sale is not just a simple moral decision.
Here in California..it doesn't have to be your primary. It's state by state, but I do agree with you. Every Seller should seek professional tax, and/or attorney council before signing on for a Short Sale.
True but the tax and legal consequences are complicated for a non primary residence. It surprises me that the CAR form library has no Seller acknowledgement and/or waiver for professional tax and legal advice before, and during a short sale. Wonder why it can't be done....
Form SSIA, 1st paragraph and several other places in that form.
Not much protection for the Agent here in fact a lot of liability especially in regards to agent fraud schemes mentioned.
Throughout the form there is no acknowledgement or waiver of the "advise" aspect of the form. Some of the following come to mind....
There should be an acknowledgement or waiver (much like CAR Form BIW); Seller has obtained legal and professional advise prior to entering into a short sale listing agreement, Seller acknowledges that debt, income and information used to obtain financing on the property was truthful and factual to the best of his knowledge, Seller to acknowledge and confim dual agency (CAR Form AD-11) if lIsting agent represents Buyer, Seller to notify listing agent of any filing of bankruptcy, Seller SHALL have any and all documents, addenda, approval letters reviewed by a attorney and tax professional prior to accepting and/or executing any required documents for the short sale, Broker may cancel listing upon; non cooperation of Seller in regards to preparing and submitting a "Short Sale Package" to all lenders and lien holders on the property within 30 days of executing a short sale listing agreement, filing any bankruptcy, leasing of the property, notice of trustee sale, upon trustee sale, unreported liens or encumbrances not acknowledge or discovered during the listing agreement, etc
There are problems in dual agency, pricing, time on market prior to offer submittal to the bank, scope of negotiations with lenders, commissions, rental agreements, back up offers, etc..not address in the Advisory either,
I'm sure I forgot something, which is the point of my response.
I see Agents on the frontline of this minefield of short sales, way too much liability and the SSIA is in my opinion worthless. Take it to a Lawyer and see what he thinks.
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.
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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