When my oldest son was a pre-schooler, he would come up with some explanations of what he was seeing that at first simply seemed to be humorous yet when we reflected on what he had said, we realized there was some real insight if we looked for it. One night we were driving on the Interstate away from the glow of city lights and it was an overcast night so the moon was not in sight. Out of the blue he said, "When it's real, real dark, you can't see the moon!"
Well, he was correct, even though the cause and effect might have been jumbled a bit. And what does that have to do with real estate or anything else in today's world? My son's words uttered over 40 years ago came to mind as I thought about how jumbled and entangled our real estate market is today. We talk about a market economy but the distortions in the marketplace have become more and more pronounced over the last decade or more. And there is plenty of blame to go around. So, this essay is not about whose fault it is, but more about what went wrong and where do we go from here.
When owning a home became more important than being able to afford it -- and I'm not just talking about individuals or families with low income. I'm talking about the effort on the part of the Yuppies -- remember them? -- to demonstrate how upwardly mobile they were by buying a home well beyond their means believing it would impress their friends and give them the appearance of greater success than they had yet achieved. I am talking about anyone who purchased a home without thinking about what if my income goes down, or I or a family member becomes seriously ill, or the economy goes south. I am talking about those who bought homes with interest only loans, or ARM's that would be well beyond their ability to pay in 5 years. Need I go on? You get the picture.
When it's real, real dark you can't see the moon. How about when new foreclosures are being filed at the rate of 100,000 per month, it's hard to see a future when the laws of supply and demand drive a stable market. When Short Sales are flooding the market as homeowners who are in financial distress find that the equity they expected to have in their home has been washed away or blown away by the bursting of the bubble that drove home prices way beyond reality over the past few years.
The housing market has had its ups and downs over the years and the sages of the business tell us confidently that this is the third or fourth downturn in the market during their career and they weathered all of them. I am the eternal optimist and I believe we will weather this one as well. But I am also enough of a realist to know that until the glut of properties on the market at non-market- driven prices is dealt with, a stable market will be hard to achieve.
The old adage, 'the hurrieder I go, the behinder I get', seems relevant. As more agents begin to focus on short sales and foreclosures, the supply of short sale and foreclosure property seems to increase so that the net effect is that we have more distressed properties on the market today than we did yesterday. It seems obvious to me that it is imperative that we focus on the source of the problem rather than the results alone. We must reduce the supply of new foreclosures and short sale listings if we are to ever catch up and get back to some approximation of equilibrium in the marketplace.
I believe EVERY REALTOR® who intends to stay in this business owes it to themselves and to their colleagues to become an expert on Loan Modification. Not as a source of income but as a value added service to our communities and to our profession. Let the word go out in every community that we as REALTORS® are willing to pay it forward by providing any homeowner in trouble with their mortgage sound advice and guidance about how they can stay in their home. That may only consist of giving them a link to the Making Home Affordable website . Hopefully it will be more robust than a simple referral. Of course we should not go beyond our knowledge and expertise or provide legal or tax advice. But we can help them to believe that help is available. Tell them they can call 888-995-HOPE and ask for help. Tell them they don't need to pay big retainers to someone to do it for them.
When it's real, real dark you can't see the moon. But if we do our part to clear the clouds of confusion that exist we may collectively begin to reduce the supply of foreclosures and short sale listings and thus make room for the market to achieve some degree of stability.
Judging by the lack of news coverage and thus the lack of public outrage it seems that the unfortunate homeowners who are faced with the loss of their home due to loss of a job, medical emergency, family issues ranging from the death of a spouse to divorce are no big deal. But I refuse to accept that verdict as being the one the public would reach were they aware of the travesty that is being carried out by anonymous bank employees every day.
I am talking about the irrational and indefensible way in which Short Sales are handled by the major banks. Properties offered as a Short Sale range from some that have a single mortgage that is only a few thousand dollars greater than the price at which the property can be sold to those with two or more liens with a total payoff balance more than twice the market value of the property. I will stipulate at the outset that I am not talking about the homeowner who has adequate resources, maybe owns a second home, has not lost a job, or encountered other hardship but just wants to unload a bad investment. Rather I am talking about true hardship where the homeowner has run out of options.
For their part, hundreds of concerned REALTORS® have invested many hours of time and their own personal funds educating themselves and learning about best practices so they can assist these unfortunate homeowners survive the ordeal. Yet no matter how carefully the agent handles the details of the short sale listing and no matter how diligently the materials documenting the sale are prepared and submitted, the seller and the prospective buyer plus their agents are being subjected to a cruel game of wait, wait, wait, and then wait some more. After weeks and even months of waiting they may be informed that the deal has been denied with no plausible explanation. Or they are told that certain documents have been lost, or any number of excuses that follow no pattern and defy the efforts of the agents to anticipate and avoid.
Losing your home with nothing more than a bad memory to show for it is bad enough. But the poor folks who are already facing an ordeal they never dreamed would happen to them, are being forced to dangle in the wind for months on end, never being sure if the short sale will be concluded before the bank decides to push them over the cliff and foreclose on their property. This is a national scandal!
It's time that the truth be spread across the media; it's time for congressional hearings; it's time that the victims be given a voice.
The sad thing is that as far as I can discern there are no winners in this brutal game. The banks are not winning, the homeowners are not winning, the agents are not winning, the buyers are not winning. If it is incompetence on the part of the bank employees, it is the responsibility of the banks to provide better training. Many excuses are given, but no excuse can hold up to the reality that the unfortunate homeowners and the buyers who are offering to help by purchasing the property are being held in limbo for weeks and months which often results in the buyers losing interest and the seller's hardship becoming unbearable. This need not happen.
I would welcome an attempt by someone representing the banking industry to explain the cavalier and inhumane manner in which thousands of American homeowners are being treated. I would also welcome comments from agents representing buyers or sellers who have had a good experience in dealing with the banks on a short sale. But I don't really expect anyone to step forward and defend the indefensible.
For my part this is a national scandal and it is a BIG DEAL!
A couple of years ago I was approached by a homeowner who had a problem with a small house on which she owed over $100,000 (1st and 2nd) and realistically the market value of the home was under $40,000. At that time I had never listed a short sale but thought I knew what it was and assumed I could figure it out along the way.
For starters, I listed the property at $75,000 (my first mistake) and predictably had only a few lookers and no one close to making an offer. We even tried advertising an auction and no buyers showed up for the sale. I kept trying to contact the 1st lender (buyer had already decided she would borrow money from her parents and pay the 2nd mortgage so I was focusing on the 1st. I could go on with a blow by blow of how I kept making mistakes due to my complete lack of experience and expertise. The seller was great -- she knew I was working hard (but unfortunately not working very smart). When the listing expired I advised her to notify the lender that she could not make her payments and would not make any defense of a foreclosure proceeding.
In the two intervening years, I have made it a point to attend every seminar and workshop, search the Internet for everything I could find relating to short sales and turn my weakness into a strength. I partipate in the RealTown Short Sales Strategies Group which includes some of the most experienced and capable agents in the country who are always available to lend support, encouragement, and information when anyone in the group needs help. Whether this makes me an expert I leave to others. All I know is that I now approach a Short Sale listing with confidence that I at least know how to do it right. I don't promise the seller success because that depends on two elements out of control -- the lender and a buyer.
Generally the training programs that exist and the available literature focuses primarily on the listing agent and the process one should follow in listing a short sale property. By now there is a general consensus that the process is driven by the lender(s) and we have simply accepted that each lender will have their own set of procedures, timelines, communication style, etc. Even though there are common elements in all -- hardship letter, financial worksheet, etc. -- each lender has a different requirement about when to send these documents and how much time they allow themselves before responding.
But there is another critically important issue that if not handled properly may diminish the chances of successful conclusion of the short sale. As a Buyer's Agent, I will discourage my buyers from considering your short sales if your answer to the question: What is the proper course of action for the seller's agent when an offer is received? is unsatisfactory!
The correct answer is simply, You handle an offer on a short sale listing the same way you handle an offer on any other sale, EXCEPT that if the Seller accepts the offer, you then forward the offer to the lender(s) following the stated procedures of the lender. That means you review the offer with the seller; you make sure they understand what happens if they do, or do not, sign it; and if they sign it (which they should since the only impact on the seller will be the possible request by the lender for the seller to sign a promissory note for the difference between the offer and the mortgage) you forward it to the lender for approval. If the seller signs the offer you MUST change the MLS status of the property from ACTIVE to CONTINGENT or SHOW FOR BACKUPS or whatever local MLS guidelines permit.Failure to change the status is grossly unfair to buyers and buying agents who have a right to know whether their offer will be considered immediately or will simply be placed in a file to be considered only if other offers are denied approval by the lender.
I owe it to my buyer clients to perform due diligence on any property they are considering. Before they submit an offer I want them to know what similar properties in the area have sold for recently, what changes may be expected in the neighborhood in the future, etc. I also want them to know if there are any other offers pending on the property. I should be able to rely on the MLS status for this information. If I learn after submitting an offer on your short sale property that you already have 3 other offers awaiting approval by the lender, I will courteously inform you that a) your seller cannot legally enter into a sales contract with 3 buyers simultaneously; or b) only one offer should be submitted to a lender at a time and only if the seller has signed and accepted the offer; c) I am immediately withdrawing our offer which was submitted under false assumptions about the property; and d) unless I have assurance that the status of your short sale listings will be changed in the future to reflect offers received, I will not submit any offers in the future for your listings.
If you are the Listing Agent for a short sale property, you are short changing your clients when you fail to handle their listing properly. You not only short change the seller for a single property; you short change all future sellers who may entrust you with the listing of their short sale property.
But Buyer's Agents are not without blame. Showing and preparing offers for short sale properties is different than showing and making an offer on other properties. Before showing a short sale property you should attempt to learn which lender is involved; whether there is a 2nd mortgage; has a BPO or appraisal been completed, and are there any pending offers on the property. I don't hesitate to send an email to the listing agent stating that I have a buyer who may decide to submit an offer for this property but I need some information before I can proceed. I am not asking the seller's agent to violate any confidential information. I simply want to know what I could learn by going to the courthouse or what should already be a matter of record on the MLS.
As a Buyer's Agent I may short change my buyers in another way with regard to short sales. I spend time informing them in considerable detail exactly what a short sale is, the procedure involved, the time it may take, and help them to understand how this impacts them. I make sure that the offer we submit includes an exit strategy at reasonable points along the way. For example, we always include a provision that the buyer may withdraw the offer if the lender has not accepted the offer by a specified date.
Finally, if you are the Seller's agent in a short sale, you will short change your clients if you are unclear regarding the commissions offered. Whether requested by the lender or not, you should always submit a preliminary HUD 1 with your offer. In that settlement statement you should show the commission for both agents. Frequently the lender may attempt to reduce the commission. And too often the Seller's agent, makes no attempt to defend the commission in the contract. You should know when you submit an offer to a lender whether the loan is a Freddie Mac or Fannie Mae loan (or an FHA loan). When the lender suggests that approval will not be forthcoming until the commission is reduced, the proper response is: NO. Ask them have they cleared their request with Freddie or Fannie or FHA. Some will not know of the rules laid down by these agencies; or they will claim this is not a Freddie or Fannie loan (call them on this), or they will back off and not raise the issue again. If you negotiate down my buyer's agent commission (even if you have warned me in advance that any reduction will be shared by both agents) I may have little recourse on this sale, but don't expect any future offers from my buyers on your listings.
I doubt I am the only REALTOR® who creates their own narrative every time they show a home, especially a foreclosure or short sale property. As I approach the house I observe the attention to detail reflected in the maintenance or lack of maintenance visible from a distance. As I fumble with the lockbox I notice the little things, the polished doorknob or the broken screen on the front of the house.
Opening the door I am immediately hit with an assault on my olfactory sense and find the musty smell of mold a tell-tale sign that the former owners reached a point of desperation before moving out and either deliberately or inadvertently allowed the commodes to overflow or the shower to overspray onto the bathroom floor and soak through the floor and into the drywall ceiling below.
As I lead the wary buyers down the stairs to the partially finished basement I am overwhelmed by the stack of building materials waiting for the owners to finish what they have started and I realize that they had good intentions. They had dreams of a home for their family when they realized that the sky really was falling and they would be forced to retreat to a small decrepit rental unit or single-wide perhaps never to dare dreaming again.
As I share the excitement of the young first-time buyers who tell me how they are going to finish the basement, mitigate the mold, trim the lawn and create their own American Dream, I can't help shedding a tear for the family that a year or so earlier had similar dreams.
Our business is not about numbers and square feet and interest rates and short sales. It is about people, about families, about dreams and shattered dreams. Unless you are willing to let the narratives of the families you serve connect with your emotional inner being, you will miss the greatest reward of being a REALTOR®. If we are afraid of being hurt when we share the broken dreams of one family, we will not have the joy of sharing the budding dreams of another.
It has been more than half a century since I was an undergraduate in Opal Cole's Speech Class in which she required everyone in her class to prepare and present a speech on the same topic: Your Attitude Determines Your Altitude! I don't remember what I said but I will never forget the topic. There is no doubt in my mind that our attitudes are a major determinant of our success.
Of course skill and knowledge are essential if we are to perform well but competence alone is insufficient as a springboard for successful sustained performance. And the more challenging the business environment becomes, the greater the importance of attitude becomes. Listening to some agents talk, you would think that there is no alternative but for all of us to throw in the towel and close up shop.
Why would anyone want to do business with a REALTOR® who exudes pessimism and defeatism? How's the Real Estate Business? Terrible! Sound familiar? If that is our attitude we have already lost the battle. Are some niches and markets for real estate in shambles. Of course they are. But that does not mean that all niches and markets are in shambles.
With record low interest rates and real estate prices the lowest in recent memory, this may be the best opportunity first-time home buyers will every see. Add to the mix, an $8,000 tax credit and what is a surprise to me is that there is not a stampede among eligible buyers to take advantage of these highly favorable conditions. How's the real estate market? It has never been better! There are some incredible opportunities in the market! Those are the messages we should be sending in these troubled times.
Yes, our attitude may well determine our altitude!
Whether the present programs intended to help embattled home owners get control of mortgage payments and keep their homes go far enough is debatable. What is not debatable is that millions of Americans are still facing difficult odds with more expenses than income. And one of the biggest, in most cases THE biggest, expense items is the monthly mortgage payment.
Hearing the good news that programs are in place to assist you with loan modification, i.e., restructuring your mortgage so as to bring your payments down to where you can more easily pay them without neglecting other bills or daily expenses, may sound enticingly simple. But the reality is that there is still a distance between the promise and the reality. It is not a simple matter to qualify for and achieve modification of your mortgage. It is possible, but it will take some determination and patience. The demand clearly exceeds the human capacity of the system to respond in a timely fashion.
One of the first places to look for him is a special government website found at <http://www.makinghomeaffordable.gov> . Be sure to follow the links on this site. There is a wealth of useful information here.
Additional help can be found by reading the Bankrate.com article, Tips for Buyers: Mortgage Application 101. This article provides help for homeowners and/or buyers whose first attempt at a mortgage loan has been rejected. You can read this article by clicking on this link:
As I have previously noted, if you or someone you know, are among those who are concerned about the possibility of losing your home, take advantage of the above sources. If you need additional help, give me a call at 913-709-4423 or send me an email. I can't guarantee that I can help, but I will be glad to help whenever and wherever I can.
John
John E Cleek, Ph.D., e-PRO, Realtor® and Marketing Consultant The CrownPlatinum Team Crown Realty of Kansas Miami County - Linn County - Johnson County 1005 W. Amity • Louisburg, KS 66053 Licensed in Kansas and Missouri johncleek@crownplatinum.com www.crownplatinum.com Pho: 913-709-4423 • Fax: 913-837-2549 Finding the RIGHT REALTOR . . . Priceless!
The answer depends on your reason for selling and your expectations for the sale. If you have already decided to move, taken a job elsewhere, have purchased another home, or are facing mortgage payments you cannot afford any longer, then the answer is definitely, Yes. If the kids no longer living at home or you're planning to retire in the next year or so, then the answer is most likely Yes.
But, whatever your reason is for selling your home, it is more important now than ever to do your homework before you put your home on the market. There are four key elements that go into a successful home sale -- at any time -- and failure to pay attention to any of these can result in a home that stays on the market for a long time or results in a sale price below the market. Read More >>>
During the current presidential campaign the tax proposals of the candidates have come in for considerable discussion but I have not heard a strong defense of the danger concentration of wealth at the top poses for our society and the economic well-being of everyone.
Robert Reich, former Secretary of Labor in the Clinton administration and a leading economist, in an op-ed piece in today's New York Times reported on an alarming trend,
The top 1 percent now takes home about 20 percent of total national income. As recently as 1980, it took home 8 percent. Although the economy has grown considerably since 1980, the middle class’s share has shrunk. That’s a problem not just because it strikes so many as being unfair, but also because it’s starting to limit the capacity of most Americans to buy the goods and services we produce without going deep into debt. The last time the top 1 percent took home 20 percent of national income, not incidentally, was 1928.
These are difficult times for real estate professionals. If people don't have stable income and access to down payment funds they are not going to buy the houses we list. But what is true for us as realtors® is also true for virtually every sector of our economy. A healthy economy is impossible without a strong middle class.
For most of us, saving has become extremely difficult as it seems to take everything we earn to pay the bills, the mortgage, our kids college expenses, medical expenses, high gasoline and utility costs, etc., etc. However for those in the top 1 percent who now receive 20 percent of our total national income, this is not the case. Thus if we want business to be good, housing to recover, and our economy to thrive we have to find ways to direct a more reasonable portion of our national income to the other 99 percent, especially to those in the middle. They are the ones who will spend it and contribute the most to recovery.
As realtors® we need more middle class homebuyers with income and wealth sufficient to buy homes and pay their mortgages. That is why it is a matter of enlightened self-interest for those in the more affluent upper income range to do everything they can to see to it that the middle class to flourishes.
I think it was Tom Peters who first used this phrase. What he was saying was that continuing to do things the way we've always done them is not going to guarantee success in the future. Even though, or especially though, the way we've been doing things has produced success in the past.
Maybe it was also Tom Peters who said that one of the hardest things in the world to do is to stop doing things that were successful in getting us where we are today. But the truth is that where we are today is not where we were yesterday or the day before. And, if you are waiting for things "to get back to normal", I've got news for you: Things are not going to get back to normal, if by normal you mean the way they used to be.
It would be easy to blame the tough times in real estate today on the economic conditions we are all confronting. But it is only coincidental that the worst economic conditions since the Great Depression have developed at the same time that the impact of technology has changed the real estate industry forever. Sure, there are plenty of highly successful agents who have a huge referral network that will continue to work for them and insulate them from the reality that new agents have to deal with every day. New agents without an established referral network will either acquire and use the tools that didn't exist a half dozen years ago or they will have to find another way to make a living.
I know successful agents who refuse to use e-mail much less market their services on the Internet. I also know a lot of agents who are struggling trying to replicate the success of experienced agents. It is not necessary to spend a fortune on technology, be a computer nerd, or hire expensive consultants to succeed in the new world of real estate. It is necessary however to be open to what technology has to offer and develop a plan for using those tools that are suited to your style and, more importantly, to the style of the clients you seek to serve.
I don't think it is a purely academic question to ask whether "listing agent" or "listing broker" is the best way to refer to the agent representing the Seller. The clear implication is that the primary task of this agent is to "list the seller's property on MLS." Sure that is an important reason why sellers come to us -- they want us to list their property for sale by other agents in the network. But the agent representing the seller cannot earn their commission simply by listing the property for sale.
A recent blog posted by Bryant Tutas Broker/REALTOR(R),Tutas Towne Realty, Inc, Poinciana, FL made some very important points regarding the role of the agent representing the seller. My first reaction to his blog was the way he uses the term "marketing". He wrote, "In this day, of disintermediation and transparency, I truly believe that it is the intangibles that will make or break us. There is no doubt that Sellers can find everything they need, to sell their property on their own, online. Heck, they can even get their property placed in the MLS for just a few hundred bucks. And the reality is MOST properties, by far, sell through the MLS. I think the figure is about 85%." Okay so far, but then he says, "They do not need me to "market" their property and that's a fact."
My problem is that this is not what marketing means to me. Marketing is not the listing of property on the Internet -- at best, that is a part of selling, not marketing. Marketing is the total process involving the "product, price, placement, and promotion." It involves doing whatever it takes to help our clients sell their property at the highest price, in the shortest possible time, with the least amount of inconvenience and stress on their part.
Broker/Realtor® Tutas pushed my hot button again when he continued, "So why pay me x% to market their property? They shouldn't. If all they needed me for was marketing their property then I agree completely they are wasting their money. Hire a marketing company like "For Sale by Owner" and have at it." No, no, no! Companies like "For Sale by Owner" are not "marketing companies." They are companies that sell services to homeowners that assist them in attempting to do their own marketing. There is a world of difference between companies that do this and professional realtors® who engage in the total marketing function on behalf of their clients.
But before I had time to react further I read on, and realized that my differences with Tutas were more a matter of semantics than substance. I totally agreed with him when he said that if the owner wants to handle their own marketing they should …
Be prepared to pay them [companies that offer "For Sale by Owner" tools] upfront. Be prepared to arrive at your own pricing. Be prepared to arrange all of you own showings. Be prepared to screen potential Buyers. Be prepared to negotiate your own deal. Be prepared to complete all contracts and disclosures required by law. Be prepared to deal with inspection issues. Be prepared to deal with unscrupulous REALTORS®, lenders and Buyers. Be prepared to deal with your own emotional issues with no one to turn to for advice and comfort. Be prepared to dispute a bad appraisal. Be prepared to find another Buyer when yours decides to walk at the last minute because you lost your temper with them over a $100 washing machine.
Yes, yes, yes! That's what I'm talking about. Marketing is to total process involving pricing to market; making sure the property is market ready; preparing a special website to promote the product (the property) effectively; making sure that agents who may represent buyers who are looking for properties like this one know it is on the market; negotiating a contract that is a good deal for both parties; following the transaction to closing making sure that a good deal doesn't go south before closing; etc., etc., etc.
Although Tutas and I may continue to differ over semantics, we have no disagreement when it comes to substance. As the listing agent/marketing agent it is my responsibility to provide total marketing service to my clients. If I do this well, you won't hear them asking, "How do you justify your commission?" Instead, they will lavish praise to the point of embarrassment sometimes because of the way you have helped them accomplish their goals. And they will do this even when their property sells the first weekend it is listed!
John Cleek has been an active participant in public policy formulation and implementation for over 40 years. In his blogs he shares the insights drawn from his wide ranging interests and applies them to current issues facing real estate professionals.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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