I came across a blog on another networking site and got into a bit of a debate as to what exactly a Short Sale is and isn't.

I need to explain that I am a HRC (Housing Retention Consultant) with Titanium and I have the RDCPro (REO Default Certified Professional) Designation through RealEstateEducate.com lastly, I am working on a Short Sale training program I hope to present to NAR (National Association of Realtors) for acceptance in their Continuing Education Program. In other words, I kind of know what I am talking about, just a bit.

Ok, so back on topic, what is a Short Sale?

Per Wikipedia a Short Sale is defined as...,

"a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold."

The above definition is absolutely correct however, I have heard, read, and had described to me that a Short Sale is more than as described above by Wikipedia.

Some define a Short Sale as...,

a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold and, where the bank forgives the remaining debt.

Let me be very clear, a Short Sale is no promise that a bank will forgive the remaining debt!

I wrote a blog back on 9/8/08 on REOPro.NING.com that highlighted the use of unsecured promissory notes by banks to secure future payment of the remaining debt before they offer an approval for the short sale. In that blog, I made it clear that some banks are using the unsecured promissory note while others aren't.

In closing, a Short Sale approval doesn't guarantee a forgiven debt so be careful when you discuss what a Short Sale is so that you don't set an expectation that you simply can't fulfill.

My recent articles on this very subject have initiated a firestorm and, I am sure this next article will only throw nitro glycerin on the flames.

Before you read this blog, understand that I have not been appointed as some ethical, moral guardian and, I know that. By no means, do I believe I am going to change your opinion or win you over, that is not my intention. Take what I have written and do with it as you please, I really don't care if you think I am wrong, right or anything else for that matter. This is my opinion and if you don't want to know it, then stop now and don't read any further.

Know this, I feel I am right not because of some statutory legislation or common practice but because I believe in a certain way of doing business and that is what I hope is exemplified in this blog.

First let me explain what I believe a lie is. This will be important to keep in mind when you read the rest of this article. I believe a lie is when someone makes a statement or presentation that they know is false with the intent to deceive.

I believe a lie takes place when an "investor"; as it pertains to Short Sale Option Contracts, tells the bank they will offer them "X" amount of dollars for a property, passing it off as true market value, when they are holding behind their backs higher and better offers with no intention to disclose them to the bank.

I have heard others contend, that as long as you disclose the fact that the "investor" is going to resell the property expeditiously after the closing with the bank, then it's not a lie but, in fact it's full disclosure.

My problem with this argument is that it's based on the premise that the bank knows and agrees to the investor promptly selling the property for a profit from bids that were legitimately the banks but, the bank never had the option to consider. The bank was never able to consider the other higher and better offers because the investor intentionally withheld them. In many ways, I see this as equivalent to a bank heist.

The investor stole money directly from the bank not because of what he said however, because of what he intentionally failed to mention. The investor engages in deception when he misleads the bank into believing the only offer on the table is the investor's offer and it was the only offer received therefore it must be true market value.

This is a lie of omission. Let me explain, for the investor to remain silent and withhold from the bank vital information such as the additional higher better offers, is deceptive in that it gives a false impression to the bank. Basically, this lie subverts the truth with the hope to manipulate the banks decision to the benefit of the investor and not the bank who is already coming up short on the sale of the home.

If we really wanted to have a serious moral and ethical discussion about this type of lie, we need to understand that a lie of omission infringes or maybe even violates the banks right to self determination but, that is a totally different conversation for a different time.

This is also a lie based on misinformation or in other words, the investor is perpetuating a falsehood with the intent to mislead the bank into believing something that just isn't true. The investor is misinforming the bank by claiming they only received one offer and that offer is the one presented by the "investor". This is a falsehood because the investor knows he has higher and better offers but is concealing them.

In closing, I think I have made my points loud and clear. I really don't think any educated counter argument can be presented. I do believe however many "spin doctors" or "investors" are going to come out of the wood work and speak only on bits and pieces of the truth with the purpose to get support for their seriously questionable and in my opinion illegal business practice however, be that as it may.

The truth is, each and every one of you reading this far have to make a decision. I only hope that each of you make the right decision.

I recently wrote a blog titled, "Short Sale Scams Dupes Un-Suspecting Realtor...Are You One?" which created such a stir that now I am prompted to write this blog specifically concerning Short Sale Option Contracts.

So, here is how this happens.

You're in the office making calls or whatever else you do and you get a call from a "investor" who sees you have that short sale listed on 666 Money Pitt Lane and, wants to know if you would write up his Option Offer with no terms or conditions.

You're all excited because by all intents and purposes this is a really good offer, no conditions, no terms, no contingencies.....right,......wrong!

He has one condition and that is, he has the "option" to purchase the home at any time before the foreclosure sale date. He doesn't outline any price or contingencies at this time but, who cares....your seller surely isn't going to mind because they really don't have any skin in the game because they aren't getting any money in return for the sale anyways.

Now, here is where it gets even more interesting. As a part of the investors "option" to buy he mandates that he negotiate the Short Sale with the bank. He makes it all sound great because he has a guy who is on hold with the bank right now just waiting to get this negotiated and sealed for you, because he wants to make you BIG money on the deal. In fact, he has such good relationships with this bank he promises you (the Realtor) don't have to do anything, he can do it all for you! To make you more confident that this is good for you, he offers you a cooperative agreement for both the Listing Side Commission on your original listing and the Buyer's Side Commission when he turns right around and re-sells it to his "firm"....DOUBLE COMMISSION...WOO HOO!!

All he needs is your client to withdraw their listing from you, agree to have him (the investor) represent them, list the property with his firm and, sign a limited Power of Attorney saying that he (the investor) is representing them so he can negotiate with the bank.

Once all this is done, the "investor" receives all the offers from the general public, negotiates all the offers and behind the scenes is negotiating a much lower sales price with the bank for the purchase of the property by his firm.

In other words, all these offers from the general public are being held back...they aren't being submitted to the bank. Instead, the "investor" is negotiating his own offer trying to get the price 20% or more less than his highest received bid from the public.

So once the "investor" gets a high enough offer to satisfy his greed he then exercises his own option to buy the property. Keep in mind, he is purchasing the property at the bargain basement price he negotiated with the lender directly.

Now he works the offer to close and, you get the commission for the listing side, your seller walks away from the home happy to be out from under the debt burden and what do you know, the investor has found a buyer who needs representation who wants to make a great offer and the investor wants you to be the selling agent, because you were so good to work with before.

The offer "your" buyer wants to make is $35,000.00 more than what you just sold it for to the "investor"....wow, he is making out like a bandit! When in actuality he is involving you in mortgage fraud!

Just to make this a bit more clear....watch the money.

1. You list the Short Sale for $50,000.00
2. Investor comes in, takes the property over and list it for $30,000.00
3. Investor negotiates with the bank and gets approval for $25,000.00
4. Investor receives an offer from general public for $55,000.00
5. Investor exercises his option to buy and closes for $25,000.00
6. Investor instantly sells the property to the general public offer for $55,000.00 making a profit of $30,000.00 off of an offer that should have gone to the bank.

In other words, the investor made off with $30,000.00 of the banks money! You profited twice from the deal so, you are involved in a scam if you knew it or not!

THIS IS MORTGAGE FRAUD AND THE FBI DOES INVESTIGATE.

Be very careful with who you do business with.

Here lately, many Realtors are be contacted by people who claim they can expedite the Short Sale process or offer you double commission on your Short Sales. Be careful!

These 3rd parties (typically investors or an investment firm) offers to negotiate the Short Sale on behalf of the homeowner and, all you (the original Realtor) have to do is set back and let them run the show. sounds great...right? Well, it's not and let me explain why.

First off, only 4 people are allowed to represent a homeowner when selling their home and they are....

1. A licensed Realtor

2. A licensed Mortgage Broker or Loan Officer (available only in some states)

3. A qualified housing counselor by a government agency

4. An Attorney

Because these "investors" are not one of the above but, you allow them to work the deal (because their recent advertisement to you said, they do it all and, well.....you let them) then you (the Realtor) just became negligent in your fiduciary duty to the client and they are involved in illegal representation.

Ok, so the Realtor (original Realtor) got the bank to agree to a price of $100,000.00 for the Short Sale. The "investor / 3^rd party ", who wants to "help" the Realtor sell those horrible Short Sales, negotiates a deal with a buyer for $125,000.00. When the buyer goes to close, the bank is shown a closed deal for only $100,000.00 and the "investor / 3^rd party" walks away with the additional $25,000.00. The really sad part is the original Realtor is none the wise and all he knows is he got double commission because the "investor / 3^rd party" offered him the buyer's side commission and he got the listing side commission from the bank. So, now the un-suspecting Realtor has broken his fiduciary responsibilities, mortgage fraud, un-ethical behavior and whatever else they can throw at you.

I am really surprised to see some of those similar companies advertising in this group but, I guess scam bags can be anywhere.

Realtors, if it sounds too good to be true, it most likely is.

Many factors go into answering this question and the truth is, I don't have the time to explain each one so, let me give you my top 3.

1. REO Experience = REO Listings; I know for many of you, this fact is frustrating but, it's a fact none the less. Why is this the case, you may ask? It boils down to what "Experience" really represents. In other words, if you have REO Experience then you have a direct knowledge through direct exposure to REO and, therefore you have the "know how" or "procedural knowledge" it takes to get the job done. Keep in mind that the rule isn't REO Training = REO Listings, it is REO Experience = REO Listings.
2. A Proven Track Record of Sales: It may be hard to believe, because your calls never get returned by that power house REO listing agent but, a REO Agent with a large number of listings has a proven track record of sales. This proven track record establishes confidence on behalf of the lender providing the listings and as long as the sales are occurring with little to no problems, that agent will continue to be given the opportunity to do so.
3. The Asset Managers are Graded as Well: Just like a REO Agent has a performance evaluation, so do the Asset Managers. If an Asset Manager is performing poorly because they have a poor Realtor in the field, it's the Asset Manager who is held liable and risking their job. The banks consider the Asset Managers ability to choose high quality, high performing Realtors as a part of their job and if they can't do that, they don't keep that job for long. This is why points 1 and 2 are critical and most Asset Managers will not budge off them.

I hope this has given you a different prospective, if you have questions, comments or concerns I would be happy to help out.

I get asked a lot about what advice I can give a new REO agent. Many times those conversations revolve around how I can help them get into the business.

When this comes up I always stop and ask myself, "Do you think they read your blogs?" and typically the answer is no, they just simply asked me before even trying to get to know who or what I am all about.

Well, that brings me to my top 8 blogs for new REO Agents (See Below, not in any particular order). If you are a new REO agent and looking to get in this business, instead of just asking straight out, "can you help me get a REO listing", which...by the way...is a bit presumptive and rude, first read my top 8 Beginner REO Agent blogs below.

Once you have read over them and, you still have a question, I would be more than happy to help you. Chances are however, after reading over them, you may find the caliber of your questions will change from a "help me" style question to a "how to" style question and those I am much more comfortable with.

1. Apprenticeship, Experience and Referral
2. BPO's = REO's Myth
3. Don't take my word for it.
4. Importance of Blogging
5. REO's become extinct
6. What you don't know is what you don't know
7. REO Schemes you should watch out for.
8. How to start doing your first REO.

Because I have seen several recent post about OCWEN no longer taking on Listing Agents in CA. FL and, NV I decided to blog on a this recent trend of doing away with the Listing Agent.

Now, before I get started in on this topic, let me make something very clear, I have no first hand knowledge on these situations I will be discussing. I am simply putting together what I have heard, read and understood about the REO industries changing dynamics and how it might effect me or you.

Ok, so, OCWEN is no longer taking on Listing Agents for their properties in CA, FL and NV so, how is that possible?

First off, you need to understand that many of these disposition companies are trying their hardest to figure out how they can grab more and more of the listing agent commissions on these properties. Many companies are notorious for reducing commission, attaching high split percentages or adding un-necessary fees due from the listing agent. The terribly sad part of all this is, many listing agents have folded to these claims on their commission in order to simply close the deal and make something vs. nothing.

Well, these practices have led many companies to logically pursue these commission grabs to their conclusion by asking a simple but, dangerous question and that is, "How can we keep all the commission for ourselves?"

The natural answer to this is to do away with the Listing Agent and keeping the 3% average commission on that side of the transaction. So how can they do this?

Well, they aren't really getting completely rid of the Listing Agent. You see, instead of having 50 agents to cover a particular county, they reduce their agents down to 3 and then offer them a job to act as their agent, with a steady income and benefits like, retirement, health, dental, vision, paid vacation and more.

So how is this even possible, you may ask. I have one word for you and that is TECHNOLOGY! These companies invest lots of money in developing specific software that can almost manage the entire listing from birth to grave. This software is so highly developed that it can dramatically reduce the number of required agents to work the same, if not more workload than before.

Many REO agents are already using some of this software when you log into your Asset Managers Back Office and input your forms, update your work flows, etc.... All the company has done is taking that software and perfected over the years of use that you as a REO agent helped with.

Now, you're thinking, "What kind of Realtor would do this?" Well, I can assure you, plenty of Realtors are out there that would give up their commission and work for a company just to do the same job but have, regular income and all the benefits.

So....I know I probably just rained on your REO parade but, it's important for you to know this industry is changing. REO will not be the same when we end 2009 as it was when we ended 2008.

Good luck, stay safe and hopefully I will see ya on the flip side.

Last night, Jennifer Kraus with my local news, NewsChannel5 did a story on a company called dont4close.com. As a part of the NC5 Investigates report Mrs. Kraus chronicled a very depressing story about a family who is loosing their home due to mortgage arrearages and were taken advantage of by a less than scrupulous man who guaranteed he could save their home from foreclosure.

As a Certified Home Retention Consultant with Titanium, when I saw the story come up, I was entranced and attempted to understand every detail.

Ultimately, the family was facing foreclosure and contacted dont4close.com to help them save their home. Allegedly Charles Jones behind dont4close.com offered the homeowners, the Reynolds, a deal they couldn't refuse. He offered to pay their mortgage for 1 year and after that time, the Reynolds could start paying him back.

Well, to make a long story short, allegedly Charles Jones sold the Reynolds home to a third party, a woman named Gladiz Romano. After some investigative work by Mrs. Kraus she found Mrs. Romano who admitted she bought the house but has never made a single payment for the home or ever even visited the home.

In closing, NewsChannel5 offered up some "tips" on how to prevent other homeowners from being in this situation. One of the tips they offered was,

"If you face foreclosure, stay away from businesses that guarantee to stop the foreclosure process, require you to sign over your property deed or pressure you to sign papers you don't understand."

Web link for full story....

http://www.newschannel5.com/Global/story.asp?S=9815589&nav=menu374_2_2

As a HRC, Realtor and concerned citizen, I totally agree with the statement but, what bothered me was, the story left it there.....they didn't go further. They didn't explain that sometimes banks will send out representatives to homeowners residences because homeowners loose communication with their mortgage servicers and they (the servicers) don't have any other choice.

I am sure this oversight was simply due to a lack of knowledge that a legitimate process does exist to preserve homeownership or at the very least avoid foreclosure so, I wrote an opinion editorial to Mrs. Kraus and hopefully will be able to address my concerns with the story but, either way, it's important that those of us who work hard, legitimately, morally, ethically do what we can to create positive news worthy stories and get the message out, we are here to help!

Ok, now that I have your attention, let me share some valuable insight into the BPO = REO myth.

Not every BPO gives you the opportunity to get the REO. Truth is, it rarely does. To understand this, you need to understand the BPO process. BPO's are generally ordered after an offer has been submitted on a REO or Short Sale. That's right, after the offer so, obviously you have no chance of getting that property as a REO.

So, some argue that the BPOs get your name in front of the Asset Manager....ok, yeah it does but, how many people do you think your are competing with to get the attention of the Asset Manager by using their BPOs? Not the best way to get their attention, if you ask me.

Lastly, BPOs give you invaluable experience that REO Asset Managers require. Now this is actually very true. Most of the time, if you are lucky enough to get an interview with an Asset Manager, one of the first question you'll get is, how many BPOs do you do? This is because it tells the Asset Manager how active you are in a particular area and therefore, sheds some light on just how much "experience" you have in evaluating Fair Market Value.

Oh, I almost forgot, those pesky little Default Designations / Certifications. So do they offer anything for you....well, mostly not. Unless the Designation / Certification training is offered directly by a lender or the lenders exclusive REO outsourcer. So, that is why on our home page, you will only find an exclusive handful of designations / certification and professional membership organizations that are vouched for by our REOPro Members. So, be very careful when buying that certification / designation because, it may not do a damn thing for ya. So that reminds me, here is a great blog of mine you might want to read over, "REO Designations, what is your opinion on them, are they worth it? And REO Schemes you should watch out for.

So, how do you get that elusive REO? Well, I am going to reference one of the very first blogs I ever did here on REOPro, follow this link to learn more, How to start doing your first REO.

Hope this helps out. Good luck

You may have been all caught up in the looming "sitmulus plan" news that you may not have heard of a recent vote that took place in the House Judiciary Committee.

This vote could potentially reduce foreclosure nation wide but, at what cost?

Basically, the bill lets Bankruptcy Judges alter the term of mortgage loans. The vote passed 21-15 and now the measure is headed to the House.

Now, one thing to remember about this bill is that it only applies to mortgages that were entered into before the bill becomes law. This is important becuase opponets of this bill claim this measure would create a rash of bankruptcies and flood the courts, much like the massive bankruptcy law changes of a few years ago.

The thought is that many people would be more comfortable with pleading thier case to a Judge than to deal directly with a Loss Mitigation Officer representing the bank because they feel the Judges will be more sympathetic to thier cause.

Well, of course many lenders oppose the deal because they believe they will be big loosers if these mortgages get in the hands of liberal Judges who like to legislate from the bench. Ultimately this is the one point both the default home owners and lenders agree on and that is, if a Judge is allowed to alter the terms of these loans, most likely they will favor the default homeowners and the banks will end up loosing more than they would have by doing a Short Sale or Foreclosure.

As you can imagine, the lenders are coming out and saying that massive losses incurred from these lawsuits will be passed on to new mortgage seekers and therefore, reduce the number of people able to afford a loan all together.