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Short Sale Negotiation: Is There a Fox In Your Henhouse?

By
Real Estate Agent with Homesmart

There is always opportunity in the margins.  Unfortunately, margins tend to attract the marginal.

The latest water cooler rumbling to emerge from a recent tour group meeting centered on a purported professional short sale negotiation company.  Here in the Valley, short sale negotiation has become its own cottage industry in the past year and a half, and for good reason.  Most Realtors had never encountered a short sale before the recent woes in the market.  You can include me among those ranks.  As such, there has been great demand recently for third party professionals who know the drill and have contacts within the various institutions for expediting the process.  While the skill-set required to negotiate with the bank is really little more than gumption, persistence and know-how, the learning curve can be steep, and the time commitment impractical.  Many agents would rather enlist the help of a specialist to handle this critical portion of the transaction than practice on their first few short sale clients.  The stakes are too high for an erstwhile, but bumbling rube to fumble it all away.  For many of us, it just makes good, practical sense for all parties involved.

Now comes the “but.”

Back to the recent tour meeting of which I mentioned, the latest scuttlebutt is that at least one major short sale negotiation company is the focus of an open investigation.  It seems there is some question as to whether this outfit was utilizing fraudulent measures to cash in on a much grander scale than the stated fee of their services.  Nothing has been proven, and no charges have been filed to my knowledge (hence the glaring omission of the company name here), but the concern is that this company might have engaged in the “double escrowing” of the short sales they were hired to negotiate.  Plainly stated, upon receiving an offer that both buyer and seller had executed and forwarded to the negotiator to submit to the bank for review/approval, this company is thought to have tabled said offer and worked to negotiate an even lower sale of their own with the bank.  Once accepted, they would orchestrate the virtual simultaneous closings in which they bought the property from the bank and turned around and sold it to the buyers at the higher price.  Neither the buyer nor seller would ever know that there were actually two transactions taking place concurrently.

Of course, if the negotiation with the bank failed, the buyer and seller would simply be informed that the offer had been rejected … eventually.  Even though the bank never saw it.  The buyer wouldn’t be overly thrilled to learn of this, of course, but the seller is the one who really stands to lose in such a scenario.  He is the one with the imminent foreclosure and interminable credit limbo on the line while the entity hired to negotiate on his behalf plays Russian roulette with his financial well being.

So while nothing is proven in this instance as of yet, it serves as a consumer alert.  While I was careful in the selection of the professional I have enlisted to negotiate with the various banks on my sellers’ behalf, some might mistakenly believe that any fly-by-night company that has branded itself as a “short sale negotiation specialist” is reputable.  Just as you would exercise diligence and perform your own investigations in the selection of your Realtor, don’t let your guard down when settling upon the service enlisted to actually talk to the bank.  Find out how long they have been in operation.  Are there any complaints lodged with the Better Business Bureau (though some may be such neophytes that they haven’t been around long enough to incur complaints)?  How long has your specific negotiator been involved in either the Real Estate or banking industry prior to their current position?

Maybe I’m just jumping at shadows, but I can’t help but wonder if this is a niche that won’t prove to be populated by failed Realtors, loan officers, car salesmen, financial advisers, taxidermists, Maytag men and arthritic slow-pitch softball umpires in hindsight.  There are some good ones out there who are absolutely invaluable to the busy Realtor and desperate seller alike, but I am under no illusion that there aren’t more than a few soulless chasms of dollars and teeth hiding behind the polished veneer of a snappy tagline as well.

When dealing with a property that you are trying desperately to sell before the bank forecloses, the stakes are elevated to financial Thunderdome proportions.  If your short sale survives the fight, you will walk away with a limp (credit damage, possible tax ramification, etc), but at least you walk away.  A foreclosure will effectively kill your aspirations of future home ownership for the next 5 years.

Choose your weapon wisely.

 

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Comments (22)

Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Hi Sheldon:  While it is a necessary niche to fill at present, I do wonder what the life expectancy of these outfits will be once the market regains some vitality and the preforeclosure tide abates.  On to the next pursuit or specialty, I suppose.

Kate:  You can't throw a rock in any direction out here without hitting 5 of them.  We are ground zero (in addition to Vegas, Florida, CA).  They make sense for the agent who does not specialize in short sales (Realtors who choose to specialize in short sales may also nichify themselves into a spot of trouble once the market turns IMO).  If I were on the phone with the bank all day, refaxing the same documents to different departments, etc, I wouldn't be able to serve the rest of my client base effectively.  I work with traditional buyers and sellers primarily.  As such, I prefer to enlist help if I am to take on a short sale listing (only 1 to date) rather than experiment on my clients.  As such, it is paramount that I work with a third party that is beyond reproach.

May 16, 2009 07:50 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Paul, I negotiate my own short sales. However I was just hired by a 3rd party negotiator to list their properties. So we'll seee how that works out.

I completely agree the consumer needs to beware.

May 16, 2009 10:07 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Hi Bryant, as one who specializes in the short sale arena, I think you have made the right decision to negotiate them yourself.  In my case, I am familiar with the pricess, but do not do it on a regular basis, so I enlist a specialist who does.  It definitely requires a vetting process.  It amazes me how many agents and/or sellers will simply sign on with the first self-proclaimed "short sale negotiation expert" they come across by happenstance. 

Good luck with the new opportunity.

 

May 16, 2009 10:34 AM
Valerie Spaulding
Windermere Peninsula Properties~Allyn~Belfair~WA - Belfair, WA
Allyn-Belfair-Hood Canal-Local Expertise!

I have no problem dealing with the banks hired negotiators but we have run across one company that was working for the seller (but not charging him anything - first red flag) and tried to do exactly as you stated -we signed around an offer with the seller after much issue with the sellers negotiator and agent (who had never done a short sale)..and shortly thereafter up pops up an "option to purchase" already in place by an investor...hmmm 2nd flag... and they then COUNTERED - countered an already signed around contract - telling the buyer the investor was exercising his option to purchase and would be the seller to the buyer in a simultaneously closing 3rd flag... we run - fast and hard we run.... They also stated after they knew our buyer was FHA qualified only - that no FHA financing (hence the 90 day flip rule) in this same counter.... tell me they weren;t using our buyers money on an already Undisclosed shortsale acceptance on their part to purchase and then resell that same day.....  I am still looking for who to turn them into....  it is a mess and the seller has no idea. Now the property is re-listed same day as we back out - get this with the seller now listed as the investment company w/the statement that it is already short sale approved... .sure smells fishy too me. I haven't been able to find the right person to talk to to get someone  to look into it... it is extremely sad... They also sat for anothe rmont on the market and had to reduce the price 20k below our accepted offer!  ridiculous, sad and totally unethical if you ask me.... Sorry for ranting here Paul.... continue on please...

May 16, 2009 11:58 AM
William Johnson
Retired - La Jolla, CA
Retired

HI Paul, Been a while. This is a very insightful post and one that many would benefit reading. There are all sorts out there seizing the day and many at the expense of the unenlightened consumer. Sad that some see taking advantage of the distressed as an opportunity.

May 16, 2009 02:12 PM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Valerie ... my head hurts just trying to untangle that web.  For the proper reporting authorities, you might have to call an exorcist.

William:  It has been awhile, hasn't it?  I've been slaving away on my new WP blog, trying to get it up and running, much to the detriment of this one.  There is always someone ready to take a buck from an unsuspecting public, and it seems even more insidious and unseemly when the target is someone already on the verge of financial collapse.  Truly deplorable if these allegations turn out to be well founded.

May 16, 2009 02:48 PM
Steve Shatsky
Dallas, TX

Hi Paul... I have been approached by no fewer than 6 people with similar scenarios to what you describe.  It may be the right scenario for some people, but the expression "Caveat Emptor" also springs to mind. 

May 16, 2009 07:49 PM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Absolutely, Steve.  Kind of like how I never buy anything from the guy who comes to my door, I do my own research and select the individual to assist me.  Never let a service provider select you.

May 17, 2009 07:41 AM
Mara Hawks
First Realty Auburn - Auburn, AL
Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL

I read your brilliant post last night, and have surfed over here to say THANKS! (and see if you wouldn't mind me reblogging this for my local readers :-) I'm just now working with my first short sale...I guess it was inevitable. I've been avoiding it like a roller coaster, hoping I'd be too short for the ride.

May 17, 2009 11:57 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

You never need to ask my permission to reblog, Mara.  Always a nice compliment.  I have been on the unsuccessful side of three attempted short sales with buyers, but am hopefully working towards the successful resolution of my first short sale listing.  Really, the only short sale listings I want are the clients of mine who purchased at the height of the market and need help getting out.  It is not a market segment that I am looking to capture, but I do feel a certain responsibility to those who are in predicaments because of purchases I helped them make.

May 17, 2009 12:51 PM
William Johnson
Retired - La Jolla, CA
Retired

Hi Paul, I oticed when I was rereading this post that your site was listed. A very nice set p indeed and wished mine looked as good, :-). I subscribed to outside posts where in the very future I expect to be spending the majority of my blogging time.

May 17, 2009 06:04 PM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Thanks, William.  I've put a lot of time and effort into the new site over the last month, so a positive review is encouraging.  Still plenty to fix and add, but I like the way it is shaping up. 

May 18, 2009 04:00 AM
William Johnson
Retired - La Jolla, CA
Retired

Hi Paul, One of the little bonuses I got when I bought my Apple Desktop was a keyboard that often refuses to type vowels. I spend a lot of time adding in letters that are missing. I learned very quickly that a spell check doesn't recognize a single letter as a misspelling. The word to as a t, the word you as a y, etc. I mention only because as I re-read my comments, lots of letters missing. Even after a spell check, LOL.

I had a question for you. Did you have or need help putting the WordPress blog together or did you figure it out yourself? Thoughts on that? I have heard, though I haven't tried as yet to set one up myself, that it is pretty straightforward and that one doesn't need too much help in setting one up. But smeone that knows the program can be invaluable in setting t up correctly.  I am thinking of doing this and wondered if you would share a bit of your experience. Also , who do you use to host it?

May 20, 2009 03:39 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Hi William, I'll email you the dope, but my guide in the land of Wordpress is none other than the husband of our own Jessica Horton.

May 20, 2009 04:43 AM
Susan Mangigian
RE/MAX Preferred - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

Hard to understand how easily some people slip in and do the wrong thing for personal gain.  Sad.

May 20, 2009 05:56 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Same scam, different day, Susan.  I swear there are only about 3 methods employed by swindlers to swindle.  It's not the methodology that really evolves, just the application.  Even intelligent people are susceptible to being taken advantage of when unfamiliar circumstance and remorseless guile collide in the same petri dish.

May 20, 2009 04:48 PM
Susan Mangigian
RE/MAX Preferred - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

"Even intelligent people are susceptible to being taken advantage of when unfamiliar circumstance and remorseless guile collide in the same petri dish."  - Paul Slaybaugh

Paul, I don't know anyone who could have put this better.

May 22, 2009 01:13 AM
Julie Messina
CNN Mortgage - Scottsdale, AZ
CMB

Paul,

We canot allow these people to continue ruining our industry.  We need to make it clear to these scammers that this sort of thing is unacceptable.  I have not always been popular with my peer group that would rather sweep fraud under the carpet.  I am for the homebuyer  and our country who has lost much over the past few years.  http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm

Julie

 

Jun 03, 2009 02:58 AM
Anonymous
Lenza

There is a cat in my wheelhouse. 

Jun 06, 2009 05:56 AM
#21
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Tell it to the judge.  Remove that feline from your chassis, putter on over to OfficeMax and fax me the new toon!

Jun 06, 2009 04:10 PM