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.
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Normally I just 'lurk' in posts like this, but I think you point out a fact that is unspoken in this end of the business...
I had a friend who was a Banker involved with REO's and shorts that hated real estate agents, see where some want to blame attorneys or banks or whomever. The problem is that the process is complex with no easy and clear paths. Once burned by a <fill in the blank>, it makes everyone leery about the whole process. I'm in a lien theory state (NY), adding a whole new layer of problems into the transaction path. What I usually do, is get the attorney, local housing councillor and client together at the start, and stay on one page with one point person. I make sure that everyone is clear on what is, might or possibly happen. The councillor brings good bank contacts into the mix, the attorney reviews any legal hiccups early, leaving me the task of working with the sellers, selling agent and buyers questions. A short sale is only as good as all the parties involved. Just have to get by the preconceptions that one part of the mix is 'evil'.
If you are in the state of Arizona, you should carefully consider all of the legal boundaries you have run past to negotiate a short sale. It is also a requirement per the real estate commissioner that you must be a realtor (working on the transaction not just associated with the agency) or a licensed loan officer or an attorney (designated by contracted attorney) or the owner of the home. Now as far as negotiating with the lien holder; since you have been negotiating and identified yourself as someone else, I think you are flirting with mortgage fraud. In a recent panel of real estate attorneys I attended, they all came up and said be sure your owner has the opportunity to consult with them so you can show a standard of care. I also listened as attorneys and the state commissioner were very careful to make sure we understood that as real estate agents we are responsible for the whole transaction. So you can't just say to your client "go talk to the attorney" or "I hired a negotiator" and wash your hands as if you just put a wall up that a legal shark won't swim through during a law suit. I also heard in that meeting that their are several large law firms looking for short sale irregularities to begin class action suit. So I am going to keep control of the whole process (that which I can), check on everyone, and establish a standard of care that I can carry into the legal system if ever needed. I hope the agents that hand over their equator password have backup jobs.
As a Qualifying Broker, I've done and assisted in many short sales. The smaller banks are relatively easy but the big ones have their intermediaries that approve after many weeks (or counter) then their investor takes it for a couple weeks and if rejected, buyer, seller title company and brokers have to start over.
The big banks offer incentives to sellers if we get sellers into program but never is there a broker incentive for keeping buyers interested for 6 or eight months. Often loan programs have changed by the time approval is received from endorsing bank so buyers have to re-apply. Then there could suddenly be a realization that BMA or appraisal has expired and its back to square one.
We, Brokers, are the number one advocate for bank owned and short sale properties but they insist on assigning things that are outside our scope of licensure and have us repeat duties because of their overload without any incentives. What other industry will take on 3 or 4 times the work without additional compensation. No wonder alot of my colleagues will not work short sales depending on the investor.
As a real estate agent and attorney, I agree with you. However, most attorneys do not want the work.
Someone needs to do the work, so real estate agents negotiate short sales. That's where we are.
Mistakes will be made, even by attorney's offices.
I agree wholeheartedly!!!! I handled several short sales-successfully at a law office-the realtors were absolutely CLUELESS!! yet they were able to collect their substantial fee!!!! I understand the marketing on these is a costly PIA-but the amount of work I did and the "flat fee" ($2,000), we collected, should have been part of the 3%-3% commission the realtor collected!
I feel that all fees involved in making a short sale happen should be more negotiable like any other job. If the banks can streamline the process, they pay less if it takes 6 months to approve offer, they pay more. They need to have an incentive for uor help in clearing their mess.
Cody: As an agent and 3rd party processor I assure you not all of us who do short sales on our own or for other agents are "Incompetent"! We have been processing short sales for 8 years, add to our processing staff (not attorneys) as business dictates, continually update our training, are CDPEs, update the seller and agents on a weekly bases, and close far more than we lose. We only use title and attorneys that are in our network of providers and who understand the short sale process.
The bottom line is not all agents know how or want to spend the time processing short sales, so the competent 3rd party processors definitely have a place. The key before using one is do your homework! How long have they been in business. Are they agents who understand to entire real estate process as well as short sales short sale specialists. What is their track record and do they have referrals.
I am really happy to live and work in California. Not only because we are having such a beautiful summer when the rest of the country is burning up, literally or figuratively. In northern Ca there is one closing company, period. The buyer and seller both use the same company for title and escrow and both of those functions are with the same company. About a week before closing the buyer and seller separately go to the title/escrow company and sign their closing documents so if anything is missing there is time to rectify it before closing. On the day of closing the title company goes to the county and records the deed. There is no exchange of keys at a lawyer's office and a recording of the deed months later. Unless everything is in place with all short sale approvals, all liens ready to be released, and all funds in place there is no closing. Personally I think the fewer people involved, and the fewer locations involved the less chance there is for mistakes.
You bring up a very good point. I think as long as the title company receives the written approval, follows the lien holders directive and receives an acceptance signature from the lien holder their responsibility has been fufilled. As far as last minute glitches, it only verifies the point that not all Realtors should be negotiating short sales or accepting them.
Frank J. Helderle
REMAX Best Choice
St Louis,MO.
I think you make some very valid points in your argument. I have met many realtors who should not negotiate short sales under any circumstance. But in their defense, I have also had experiences with agents who are dilligent, skilled and do a very good job for their clients. I tend to lean towards the argument that short sales are better handled by someone other than the realtor, but to be honest and fair, I have to say that I am a professional in a law firm that handles short sale negotiations and that is my full time responsibility. If you have had instances where you can't reach the person working yor files, that simply means you are using the wrong firm. I stay in constant contact with my realtors and they receive email updartes from me weekly; more often if the situation warrants. I am constantly receiving telephone calls form agents that have been give my number by associates and sometimes realtors from the other side of a transaction that is experiencing problems. I work very closly with the closing agent and don't give up ownereship of the file until it is post closed.
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