Home : Blogs : Judy Chapman, REALTOR® ~ Homes of Distinction & Short Sales : Orlando for Sale

People Facing Foreclosure Don’t Have Time to Wait

So why do some real estate agents allow Short Sale listings to hang in limbo with little or no adjustments to listing price?

On a daily basis, I study listings in the Orlando area. Every day I see Short Sale listings being served poorly by their listing agents. So poorly and so ... okay, I’m going to say it ... unprofessionally ... it makes me want to do two things.

Bang a fist on my desk in anger.
Cry tears at the utter sadness of it all.

A listing agent MUST understand that when it comes to the threat of foreclosure, time is of the essence. Let me repeat that. TIME IS OF THE ESSENCE. And one more time ...

If a Short Sale absolutely positively has to sell before the gavel comes down on foreclosure -- and it does -- the short-sale-challenged listing agent has only 2 options:

Refer the listing out to someone who understands Short Sales
Read up or get advice on how to do a Short Sale, and then do it right

Obtaining a strong contract on a Short Sale within a few weeks isn’t difficult. It’s easy. Easier, in fact, than getting a contract on a regular listing.

Getting a contract to the closing table isn’t quite as easy, but it must not be that diffcult, because in June of 2009, over 400 homes in Orlando, FL, were sold as Short Sales!

Granted, agents have to learn a new set of rules. They have to jump through a few extra hoops. They have to learn new terminology. Commissions can be at risk. There’s more work involved. There’s a time element to consider. Lenders throw up obstacles and hazards and traps. However, none of these problems are beyond any agent’s ability.

At the end of the journey, guess what. You did more than help facilitate the sale of a house from a seller to a buyer. You saved the homeowner years of heartache and financial ruin.

Do you think that isn’t worth a little extra work?

Do you think it doesn’t add another dimension to an agent’s profession, something close to philanthropy?

Do you think it doesn’t give an agent a deep sense of satisfaction?

Do you think it doesn’t matter that you established a special connection with someone who desperately needed your services?

Do you think it doesn’t count that you helped people through one of the most difficult times of their lives?

You bet it does.

* * * * * *

WINTER PARK · WINTER SPRINGS · OVIEDO

MAITLAND · LAKE MARY · SANFORD · LONGWOOD

CENTRAL ORLANDO · EAST ORLANDO

Baldwin Park · Delaney Park · Lake Eola

Orwin Manor · College Park · Thornton Park

Stoneybrook · Avalon Park · Lake Nona

Judy Chapman

Florida Licensed Sales Associate, REALTOR®

Coldwell Banker Residential Real Estate

521 E Mitchell Hammock Road

Oviedo, FL 32765

Judy@OrlandoHouseSales.com

(407) 227-7763

Posted by Judy Chapman, REALTOR® ~ Homes of Distinction & Short Sales on 07/04/2009 08:08 AM

Comments (105)

Short Sales in the Home Selling Channel

short sales

This post has been included in Florida Information Orange County, FL Information Orlando, FL Information

105 Comments on People Facing Foreclosure Don’t Have Time to Wait

JUL

Judy so true. Once I lowered the price on a short sale it sold for that FULL price.

Excellent post this morning. Thanks for the update.

We are seeing a lot of short sales listings, many under contract, advertised for trustee sales. Families are losing their homes. Too many bad decisions.

Janice - It's not difficult at all to lower the price until a buyer comes a-calling!

Roy - Families are losing their homes, their credit, and their futures. It's too sad for words.

Katiejo - Individually we can help only one homeowner at a time, but together we can help a whole bunch!

Judy...

Wonderful post. Just wonderful. I have one question for you though. Why do you believe a Salespersons paycheck may be at risk?

TLW...ROAR!

Unfortuantely, I see too many agents take short sales listings and they don't have a clue what to do! I think the managing brokers should prohibit agents who have no expertise from handling these listings... they should refer them to someone more knowledgable in their firm.

TLW - My very first Short Sale on the buyer's side went down like this. After the contract was approved by the lender, listing agent told me the commission wouldn't be the 3% stated in the MLS but less than .5%. You read that right. Hardly more than cab fare. Of course I complained and whooped and hollered. Asked for advice from my broker. Felt helpless. Until I noticed there was no "Listing price may be subject to ..." language in the MLS. I mentioned this oh-so-innocently to the listing agent. Five minutes later (maybe less), the full 3% magically returned. I'm not sure what was happening on the other side, and I will say no more except to say that's the worst-case scenario.

Other than that, lender negotiators often shave a point off commission. We are now protected for Fannie Mae underwritten loans but may still be vulnerable for others. I'm waiting for Broker Bryant and Broker Wendy -- in their fabulous Short Sale Basics Webinar -- to tell us how to get around that.

Joan - I absolutely agree. Newbie short sale listing agents should be given the benefit of the doubt. However, if managing brokers monitor progress, they will see fairly quickly that a Short Sale isn't getting the proper attention. Trouble is, many managers aren't up-to-snuff on Short Sales, either.

You are absolutely right in everything you say. Sometimes we need to lower prices to get offers quickly then the BPO comes back too high. Then you are faced with the challenge of explaining to the bank that their BPO is bad, (which isn't always easy).

It's not always easy getting a contract on a short sale if the lender isn't willing to pay any closing costs of any kind. Most buyers out there today still need/want closing costs paid for by the seller (rolled into their financing), but many lenders will not approve this within a short sale.

Excellent post! Get that price to a point where you get a legitimate offer. So So True! As a listing agent , send in the listing history with your package. Let the bank know that no one bit at a higher price but don't let it sit at that higher price. Price aggressively. I get such satisfaction when a short sale closes, knowing that the family served has dodged the bullet of foreclosure. Yes it is alot more work, but that is what we do. WORK. The days of easy money are gone, but the satisfaction is higher. The only issue are lenders or PMI that will not accept market value.

Melissa - Pretty amazing, doncha think? The seller's lender wants the highest price possible. The buyer's lender wants the lowest price possible, and the HVCC appraisal system supports this. Talk about homeowners being between a rock and a hard place!

Donna - For first-time buyers, this is so true. But the cleaner the contract, the faster and more sure the approval. And so it goes.

Dick & Dixie - The short sale package very much needs a full market report from the listing agent, including pricing history.

Great post Judy!! I see short sale listings expiring in the MLS all the time. And I always wonder why? Why not just keep reducing the price until you get a contract? Doesn't make any sense to me. Time is certainly of the essense.

Bryant - Exactly! I also scratch my head when I see listings that have come off the MLS almost immediately after foreclosure proceedings have been filed. The homeowner still has several months before Final Judgment and actual foreclosure ... time enough to get a contract. They've either gotten no advice or the wrong advice.

I too have seen this and the only explanation I can come up with is pure laziness on the listing agents part. As Broker Bryant commented, "Why not just keep reducing the price until you get a contract?" Even if the agent didn't put pictures or a description in, based on price the house should sell. There are plenty of educated buyer's out there that know what a "good deal" is with or without pictures.

Michelle - Too right. And yes, you hit a sore point with me. 1 photo and no description is just pure laziness. But you're also right about the 'good deal' part. Some houses are being sold without kitchens or floors. That's because the buyers know a good thing when they see it. As long as the house is still standing, the foundation isn't sitting on a sinkhole, and mold or termites aren't a major problem, any house will sell ... provided the price is right!

Michelle,

Getting an offer on the short sale is an essential first step to engaging in the negotiation process. Lowering the price, or better yet pricing right from the start, gets the property positioned for a successful negotiation. I too have seen many properties get listed and then sit and sit while the foreclosure clock ticks down until the property goes to auction. I specialize in short sale and pre-foreclosure properties in King County Washington and see this happen all the time. Our short sale clients are in desperate need of an agent who understands the process and has the resources to complete the transaction.

I feel that short sales fall into a specialty field and agents who engage in them without training or experience are violating the Realtor Code of Ethics Standards of Practice 11 "Realtors^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client.".

I guess they just don't really understand. Like all things real estate and in life, if you don't know how, either learn or leave it to some-one who does know. BTW-Love your blog header!

Hi Judy, Handling a short sale listing does require a special set of skills. Many agents treat them prtetty much the same as a regular listing ! Happy 4th to you !

Sadly, too many agents take on short sale listings and they have no business doing so. They have no clue how to handle it or navigate it and they often times lead a buyer agent into losing money in the end. Only agents who have the knowledge to handle a short sale listing should take one and in my humble little opinion...any agent who takes one on and isn't knowledgable about the process is acting unethically. I agree with your post and it is others who pay the price when inexperience and short sales cross paths.

Jeani

Judy - I couldn't believe it when an expired seller called me- his listing was $200,000 overpriced. When I told him what the comps were the man was in shock. And his former agent had marketed it as a "short sale". Thanks for bringing up your points.

Great post. Proper pricing is one of the most critical items is a successful closed Short Sale . Usually the listing agent under prices the listing below the current REO listing and Comps to try and attract attention and buyers to the listing. This major pricing strategy error usually brings in multiple offers at a price far below what the lender will accept. The listing agent seems to disregard the fact that the lenders alternative is to foreclose and sell the property at the higher REO value. This pricing strategy burns up critical time, creates the illusion that home values are lower that reality and typically puts the home into foreclosure. Important to price a short sale neither to high or to low to make it work. Most lenders seem to prefer a slightly over priced listing to start follow up by a series of rapid and rational step down price reductions until you start getting offers

Ken - Nothing can replace experience, but ... shh, don't tell anybody ... agents can learn pretty much everything they need to know about Short Sales from folks right here on ActiveRain.

Corinne - <... either learn or leave it to someone who does know.> Couldn't agree with you more.

<BTW-Love your blog header!> Many thanks. It's my own design. :-)

Bill - <Many agents treat them prtetty much the same as a regular listing!> Isn't that the sad, sad truth.

Jeani - Can't argue with anything. You are SO right.

Wendy - I see 2007 pricing all the time. For a regular house sale, it's inexcusable. For a Short Sale, it's criminal.

Seems, Judy, that I am the only non-lazy agent who has had a seller refuse to sign a price reduction. Without their signature, I am legally unable to drop the price. A couple real scenarios:

Seller was about to move into the home her honey was buying. I faxed the MLS change form for her signature. His deal fell apart and she ain't moving now. No longer in such a hurry to vacate and won't sign the price reduction.
Bank said no to the first contract. Sellers aren't pleased. "Let them foreclose since they're unreasonable."

Hard to imagine that only in NJ do we need the seller to agree to a price reduction - even if the bank is in favor of it! Will I overcome these? Probably but not to the point of forging signatures...

Fred - You're bang-on about the underpricing. Early in the game, agents did this all the time, and for most, it got them nowhere. The only time to do it now is to solicit a bidding war, which works best in an extremely popular neighborhood. One of those neighborhoods is very close to me, and competition there is fierce. One subdivision over ... not so great.

Irene - There's no logical reason for a seller in a Short Sale position to not agree to a price reduction. They're not pulling a dime out of the deal anyway. It's just pure stubbornness on their part.

I have my short sellers sign a Price Reduction form as part of the listing agreement. It shows the original listing price and the scheduled reductions. So there's no misunderstanding, I also let them know when it's time for the next scheduled price adjustment and ask them to confirm via return e-mail. They actually LOOK FORWARD to the next price reduction. They want a contract as much as I do!

Judy, it is amazing to watch a short sale not be reduced in price but we see it up here also. Time is definitely of the essence!

Sharon

Sharon - I noticed a listing just the other day. The house has a Final Judgment against it. Only 2 or 3 weeks are left before auctioning. And the price hasn't been lowered!

We hear you....wish there was a separate license category for Short Sale agents...or the brokers were bright enough to realize how potentially dangerous it is for agents without training to do short sales...so far no good...a few expensive lawsuits should change that.

Hi Judy. I work with short sales too though in the Tampa Bay and I have seen short sales on the market without any price reductions. It is amazing and troubling. Aloha, Lana

Short sales here are often selling for more than listing with multiple offers. The problem lies with the agents who don't bother returning phone calls to answer questions and cooperating. I have tried to make several offers at least 10 and never could get calls back from agents. Truly not in the best interest of their clients.

The agent can work very diligent and hard -- but it is the banks who are dragging their feet . All the best with your short sales.

Hi Judy -- Short sales are serious business and when well handled, can help both sides immensely.

Judy.. great post and you are so right.. these homeowners need their homes sold. It's good to build a report with the lender as well. I always get a Authorization of Release signed by my sellers. This is useful in the Short Sale market.

Definitely good advice. Too late for me to capitalize on it for myself and one of my sellers, but I can keep this in my memory bank for a quick reference should I need it again.

JUL

Great Advise. We see the same thing all the time. It's unfortunate that homeowners do not always choose the right agent for the job.

I hope everyone reads this. It is so important to understand the disservice you can do to a client by taking on a short sale listing and truly have no idea how to handle it. I have been involved in several SS transactions this year, on both sides, and have found that my personal listings are closing in about 60 days where as when I represent the buyer, the transactions are taking 4 months or never closing.

If we go back to the basics in REAL ESTATE-ALWAYS KEEP YOUR CLIENTS IN MIND IN ANY PART OF THE TRANSACTION. Sometimes this means referring the deal to a more highly trained, specialty agent. Thanks for a great post

I love all your comments, and i'm doing several short sales now, i have sucess with lenders,, sending Full packages, but my hightest difficult is when i call to teh owners of the property asking for income docs, and others papers needed for the package, most of them ask same question:

If I'm loosing my home, why i need to send them my financials?

Why, if the lender donest want to hear about me?

I'm tired explaning that, there is a way to save their credit from a foreclosure; but, the answer that tney dont care no more about the credit because is already affected for late payments.

It os a really bad situation for everybody.

Great procedure on the planned, programmed, pre-agreed price adjustments. I've considered doing this for regular listings. Seems like an absolute necessity for short sales. This is a great post on an imprortant topic.

Wayne - I've tried a similar approach with regular sales, but homeowners are always reluctant to move forward with price reductions. You're re right about it being an absolute necessity for Short Sales.

The frustration with short sales is the lender accepting an offer. I have a buyer who is being told their offer will be accepted but we are in our 4th month of waitng for the executed contract. I am not motivated to even show short sales to my clients because of the wait.

Deanne - I hear you. Some banks are starting to hear the call. I've heard that Wells Fargo has a pilot program to expedite Short Sales. The quicker banks get it together, the better off the economy.

Aida - If buyers have to put together a whole bunch of paperwork to prove they can afford the mortgage payments, they ought to realize it takes the same effort to prove to the lender they can't afford the paymens anymore.

I don't wish to be seen as a shill but many on this thread should consider taking the two day course and get your CDPE (Certified Distressed Property Expert) training. You can go to htttp://www.CDPE.com for class schedules near you. What this industry need NOW is a constant, thorough, standardized set of practices on Short-Sales. Those at CDPE are attempting to do this. They have a plan and "system" which cuts the time for marketing of short sales dramatically because it treats all parties to the transaction as a NORMAL and REAL DEAL!

The numbers are absolutely NUMBING when you look at the default rates and realize the BANKS cannot keep on foreclosing! They are already carrying huge reserves at historic highs as they take back properties and lay away reserves in light of ANOTHER foreclosure-you can't make loans when your money is tied up in reserves because of MORE foreclosures--the way out will be to limit the REO's to a trickle--keeping values up, and to encourage and get DONE more short-sales.

However, NOT in the way some of you have been discussing. You need to LIST Short-Sales like you would ANY Transaction. If your Seller is NOT motivated then either let them go (and I mean this in a spiritual sense as well!!) as foreclosure may be their only way out or a restructuring under Bankruptcy rules (they should seek out this on their own accord!). If they do not wish to keep the house staged, provide all documentation to you AND the lender, and won't price it to sell then get rid of them! I read a post which was heart wrenching because the Realtor/Agent was just holding onto failed homes way too tight!

I had a property just prime for a short-sale but my attorney client stated he would NOT give any personal financial information to the lender. No persuading on my part could convince him to do so. He felt, at his old age, he was NOT going to be making anymore substantial purchases and a foreclosure on his record was the least of his worries--SO WHY would I even attempt to try a short-sale with this mindset? Of course I wouldn't! Just because a short-sale is the right thing to do in your eye doesn't mean your CLIENT wants this. As Zig Ziglar once quipped, "Before you become the answer to their Prayers--learn what they are praying for!"

And those of you who are wringing their hands over the plight of folks loosing their homes remember we have NEW families equally excited about purchasing that property! We have little girls and boys saying, "This is my room Mommy"! This is the way it is and has been for years. When you beat out another agent in a bidding war during the heyday I didn't read posts about Realtors/Agents sobbing over the lost opportunity of the OTHER family who lost out on what might have been THEIR dream home. Get over it! Stay compassionate, have empathy but don't allow gross sentimentality to distort your Fiduciary to your clients!

Stephen - Short Sales are a mystery to some agents. At one time, they were a mystery to me. But since I realized Short Sales are a BIG part of the real estate market -- around here they account for 60% of sales! -- I'd better unravel the mystery and learn all I can.

Great post Judy, You do have some great blogs! thank you for sharing this relevant information with us, at this time. There are so many short sales right now. thx again!!

Remo - Just because an agent has a proven track record on regular sales doesn't necessarily mean they can handle Short Sales.

William - In Orlando, a real estate agent had better understand what Short Sales are all about and decide they're either going to take them on and do the best job possible ... or ... they're not going to touch them. Nothing wrong with the second option.

Roland - To support the contract, I include a comprehensive Marketing Report with the Short Sale package.

Chris - If a successful Short Sale can keep someone's financial future intact, it's worth doing right.

Bob and Carolin - Ah, the banks. You'd think they would have gotten it together by now.

Great thread, Judy.

Aida, from now on I'm pre-qualifying any short sale listings I take. If the listing is even close to being a short sale, I've adapted a financial form asking about income, expenses, debt, hardship. I also want the financial docs up front - Bank Statements, pay stubs, tax returns, W-2s, and I want a hardship letter. If a potential seller cannot provide all of this information to me at the time of the listing, why should I think it will be any different when we get an offer. I'll be reasonable if everything can't be provided at once, as long as I detect a sense of cooperation from the seller. Of course I will have to continually update the available docs, but by that time, the seller should be used to it. I'm also adding an aggressive price reduction schedule into the listing agreement.

I think to be fair to the seller, the buyer and the lender, I should have everything ready to submit as a full package when we get a reasonable offer.

Short Sales are not a mystery but really should only be handlled by the dilligent, organized professional. In this post you are referring to listing with the owner of the property not the bank itself. Because you are right without an offer to go to the bank with to start a negotiation with, the process never starts. Can't win if you don't play.

Kim - Communication is the key. I worked with buyers recently. They really liked a certain house. The listing agent's voicemail was full! Next morning, the voicemail was open again, except the message advised an email was the best method to get in touch. I sent off the email early in the morning and didn't receive a reply until later that evening. That's what I call responsiveness!

Lana - Sad, isn't it.

Sally & David - I'm not sure a separate license would work, but I agree about brokers keeping a sharp eye on their inventory and taking appropriate action when necessary. Short sales aren't just about selling a house. They're about saving the homeowner's financial future.

Jim - Real estate requires diligent, organized professionalism, but Short Sales require extra diligence and extra professionalism. They also require an element of caring. Homeowners facing foreclosure are going through emotional turmoil. It's up to the agent to cut through the fear, anger, and confusion, and to think in logical terms because the homeowners just can't anymore. And I don't blame them, either.

Mary - Preparation is the key. Basically, I don't ask for any Short Sale docs until I get the contract. But I do explain everything, plus I leave behind full instructions as well as every form the homeowners will need to fill out. This way, they can begin organizing everything.

I also ask for a storyline from the seller. What's happened in their lives and what their current financial problems are. Sometimes it's hard to cut through to the truth. I don't just ask questions but listen to what's underlying. People don't want to talk about money, and they certainly don't want to talk about failure. It's better to get it all out on the table so we can move forward as partners.

Ginger - Thanks for dropping by. I'm glad to impart what little wisdom I have. Just like you, I'm still learning. I don't think it ever stops!

Michael - You hit on a great point. I currently have Short Sale listings that are picture-perfect ready for sale. The homeowners put every effort into making their houses shine. They were ready to show just like any serious sellers. And they're cooperating every step of the way on all the other things that matter. Why should agents work with anyone who isn't serious about the process?

Judy,

It is a good idea that after an agent qualify a short sale listing, to automatically have price adjustments in the listing contract. I have it in my listing contract as "After 15 days on MLS, and there are no offers, price will be adjusted to % of original listing price (3%-5%). During that 15 days are the most critical as if the property shows well, marketed and advertised agressively and easy to show to prospective buyers, and there are no offers, something tells you the price needs to be adjusted.

This holds true in a non short sale listings, but there is more urgency to a short sale listing as time is of the essence!

Take care and thanks for a great post!

Laura Rivera

Although the listing agent should be lowering the price until you get an offer - buyer's agents should also understand that they can put in a low offer and the worst that can happen is that the offer get's countered! If I see a short sale listing I know that there is a bargain available. As long as you teach your buyer that the process can be longer than normal and may take a few months, they can actually get a great bargain.

It seems that until I lower the price to an almost ridiculous price agent's don't bother to show or place an offer. We still have to look at the comps, market stats and place our offer price accordingly so their is a higher chance of getting an approval. Don't ask me if the bank will approve your offer....I have as much insight as to the bank's mentality as you do. Price your offer according to hard numbers and you will make both our jobs easier and if you take the time to inform your buyer that the price was lowered to generate activity on the listing and that their offer will stand a higher chance of acceptance if they offer higher than the asking price (due to the prior sales minus a market decline percentage) then you are doing your job.

My current short sale is in move in condition - minor painting and was the lowest priced listing in the subdivision but I didn't get any real activity until it was priced an additional 30K lower. Now I will probably get a couple of offers and someone will end up being upset because they will feel cheated because their offer was not submitted.

Investors think nothing of submitting low ball offers and they end up with the bargains. Buyer's agents have to do the same especially when short sale listings have been sitting for a long time. But instead they tell their buyer's that "short sales" are too difficult and not worth the wait. Yes, its much easier taking the easy way and selling them a "regular" listing but its much more fulfilling teaching them that if they have a bit of patience, the process is explained and they buy a "bargain" at $20K or more under a market listing how much more will they appreciate that "wonderful agent that taught them how to buy a great home for less than any of their neighbors. Banks would rather approve a short sale to a regular buyer than an investor as long as they numbers add up.

Short sales will be with us for a long time and its our responsibility to learn how to "work" them whether your a listing agent or a buyer's agent. With the less than stellar job that the banks and the government are doing with "loan modifications" and their continued propaganda in telling homeowners to "do the loan modification yourself" or "use a government approved counseling agency" we will end up with more short sales instead of less. If you have had any experience with "free government programs" you will understand why people will pay for "loan modification companies" to do the work. Although their are some companies that are taking advantage of the situation many are truly trying to provide a service but all are being painted with the same brushstroke.

Education on both sides - agents and consumers - will make the process easier for everyone. One house at a time, one agent at a time, and we can start to get the housing market back on its feet.

Well, now I can jump off my soapbox and enjoy the rest of my "freedom weekend"!

What do you do when you work for months to get a deal accepted from the lender then the buyer walks? It's like the "Short Sale Walk of Shame" when you have to tell the seller. We have had incredible luck posting our "approved" short sales on www.RealEstateRoadkillUSA.com. The best part is, it's FREE!

I think you need to consider the bank you are dealing with and the time constraints. If you have little time, price it low and get a highest and best. If you have more time, price it at market and walk it down. YOu have to show the bank you are aiming for a good price.

As far as Lenders not wanting to pay closing cost in the past, it was not the fact that they did not want too it was simply they could not (if it was a fannie or freddie loan). Short sale rules prohibited the seller from paying any closing costs. Now that has changed, they are allowed to pay up to 1% of the closing cost. I closed a deal about a month ago, were the contract was written as such to allow for the seller to pay for 1% of the closing cost. The shortsale manager rejected the first HUD saying that they could not pay any closing cost. I sent her the Mortgagee letter showing the new legislation showing that this was no indeed allowed. Problem solved, we closed as planned. Seller was allowed to pay 1% of closing cost. Mortagee Letter 2008-43 Dated Devember 28, 2008.

Good post, you are a very caring & sincere agent that any seller should be grateful to have. Not all agents care at all.

I agree that there are way too many agents out there working short sales; however, just having an experienced agent isn't enough. Obtaining legal advice prior to selling a home short is imperative. There are situations where bankruptcy or foreclosure would be a better option for a homeowner than a short sale. It all depends on the state and county laws where the property is located. Also, my E&O policy doesn't contain language protecting me in a short sale situation. Agents should check their policies before working these types of sales.

Tina in Virginia

Judy -- Excellent post -- I had a buyer who wanted to place an offer on a short sale the other day. Found out the listing agent already had two offers at list waiting for approval. It's been seven weeks already and the agent told me the seller JUST submitted his financial statement. WHAT? Then I asked what her BPO came in at and she told me she never did one, but she 'thought' the lender's came in at $xxx! WHAT? again. IT was a series of errors made -- one after the other -- risking the seller's position due to the time wasted. Agents MUST learn the mechanics of a short sale or refer them off to someone who does. Many, many homeowners who qualify could be saved from foreclosure if they have knowledgeable agents and attorneys handling the transaction. Keep up the good work, Judy. You're a savior ... and yes, I think providing excellent short sale service qualifies as philanthropy!

A short sale is completely different than a normal sale. I can't believe some agents still don't recognize this.

Tina - A homeowner should definitely seek legal and tax advice.

Lyn - Your comment is MOST appreciated. At least, I try, which is all any of us could, and should, do.

'Arise' - As I understand it, the 1% seller-funded closing costs apply only to new FHA loans. Good to know, since first-time buyers are the engines driving this market.

Gene - Right on. Two different situations require 2 tactics.

'Elite' - Buyers usually walk because they don't want to wait more than 2 months to close, which is why lenders had better get their act together!

'Dynamic' - I love it when buyers call me on a Short Sale listing that's just gone pending ... after it's been sitting at the same price for weeks. It's like a shopper who doesn't think a pair of jeans is THAT special until another shopper buys it! Enjoy the rest of your 'freedom weekend'!

Laura - As I mentioned earlier, I have sellers sign a Price Adjustment Schedule at the time of listing. Because they understand this is for their benefit, they're very happy to confirm every price reduction.

Barbara - In Florida, once we have a contract signed by buyer and seller, we have to change the listing status to Pending OR, if keeping it Active, add a comment about taking back-up contracts. As to the financial statement delay ... maybe the extended time it takes to close a Short Sale isn't all the lender's fault after all!

Mike - Just today I reviewed a property where the owners received a notice of default a week ago ... and the price of the existing listing has not budged an iota. Wherever the problem lay, time is definitely ticking.

I am one of those agents you talk about. The two main reasons why I won't have a price reduction is the following:

1. Seller wants to stay in their home for as long as possible without having to show their home. The high listing price discourages buyers while keeping the listing on the MLS to show that we tried to sell the home for x months/weeks.

2. We had a buyer in which we submitted a short sale package to the bank (buyer walked, hence why it is in active on the MLS). While negotiating with the bank, we keep the listing price high to: A) bring in high retail buyers B) If the BPO comes back high, we can then show the negotiator that we have it listed at that price with no offers (great negotiating tactic by the way!). Once we have an idea as to what the lender wants, then we'll adjust the price accordingly.

Hope this helps.

I agree with having the full package prior to listing the property. I learned this one the hard way when I had a Seller who would not sumbit his tax returns and bank statements. It's not fair to the Buyer and is probably part of the reason some of these take so long to go through.

Excellent article Judy, we are definitely in a short sale market.

Oh how many times someone contacted me a little too late to sell their home when in all reality they could have actually made money if they had only listed their home at the first sign of trouble. So much money left on the table. What a shame!

Interesting Post Judy... Since I started specializing in Las Vegas Short Sales over a year ago.. I've come across all sorts of interesting situations including Sellers that just packed up and disappeared. Kind of tough to get a price reduction (among other things) when you don't know where they went...

When you've done enough of them... the last thing you'll do is categorize all of them as the listing agent's fault. Just a thought...

(BTW.. I've closed over 80% of all the short sale listings I've taken...)

Thanks Judy for bringing one of my many hot buttons to light! Great points were made! I loved some of the excellent comments as well! In my community, we havent been hit as hard as some areas, but either way short sales have become the traditional sale today. With that said, many have learned through doing, others from some of the trainings offered, etc, but essentially I have found that each bank has its own set of rules - and each negotiator may also as well - my first one was a Wells Fargo and it followed a traditional pattern of 30 days for each step - 30 days for offer review, 30 days for appraisal, 30 days for approval, etc - and then I have had others that follow no pattern whatsoever, with the same bank! My advice? Expect the unexpected - and be prepared!

One of the many problems I see here in my community is that many agents dont want to do the work involved but LOVE having their sign up in front of the home - then they can take any potential buyers to another listing with instant gratification! This is sad - esp for the home owner as most are scared and have no clue what to expect next! Just for that reason alone I have written a manual for my short sale clients, just as I did for my first time buyers - so they know what to expect in a general way of course as no two are alike.

What also bothers me is exactly what you said - they leave the price too high for too long! What good does that do? I do realize that there are some banks who want to see the home on the market at current market price for at least 30 days but as soon as the 30 days is up, lower it! GET AN OFFER SO YOU CAN GET THE BALL ROLLING FOR YOUR CLIENT!

I also hear things like, the seller wants an offer in the mid-600s minimum - why does the seller care? Afterall, the final sales price is up to the bank, NOT the seller! Why would a seller concern themselves at this stage with the listing price, unless the agent hasnt bothered to educate them? It takes about 30 minutes to explain to a seller what to expect - and as an agent it is your duty to do so - or pass the listing on to someone who does know all the rules!

I also see agents who advertise the listing at 2.5% and then take the larger cut of the commission for themselves. I can see why they would want to do that but if the bank gives out 5% - you need to split it 50/50! Some agents also dont realize that you CAN ask the bank for a higher commission such as 7% - I found that if I ask for 7%, we split 5% - when I ask for 5%, we seem to split 3 or 4% - go for the gusto - what do you have to lose? I have never seen a bank turn down a short sale approval over a commission..............

However, what I also seem to encounter more and more these days are SELLERS who refuse to lower the price, capitalizing on the fact that they can stay in the home for free, for longer; with the state of CA passing the new law giving all pre-foreclosures an additional 90 days, the sellers know that they can drag this on and on to the point that some have been in their homes RENT FREE for almost 2 years! WOW! Let me clarify a few things before upsetting some of my co-workers - I am not speaking of the unemployed with no where to turn! I agree that we as a nation need to help our fellow man in trouble............What I am speaking about is the fraud that seems more rampant today than ever! I have encountered homeowners who have their homes listed, allow showings, speak of the features to my buyers, etc, and then refuse to look at any offers! I just had one where my buyer wrote the highest/best offer, Mrs seller said she was signing off - then called to tell me that I needed to add a sentence to the counter; (pls note that I did confer with the L/A and I did get written permission to talk to the seller....) I explained to her that this wasnt necessary as it is covered in the SSA, but that I would add the language she requested in order to make her happy. A week later, she calls again and says that I need to change the wording again - this time I need to change dog cages to dog pens.............WHAT THE ($)*&#_)*$^*??????

Needless to say I never heard from her again, nor has the L/A; last we heard was in writing from her attorney - she plans to attempt a loan mod - for which she does not qualify for as the L/A tried this already..............she hasnt paid her taxes in over 3 years nor made a mortgage payment in nearly 1 year, but has the nerve to call my buyer and ask for money to move...................this is the frustrating part of the entire process. You can have a buyer fall in love with a home the seller has no intention of selling...............I have had this happen a few times, the seller files BK at the last minute, and drags it all out some more. Again, if we were talking about unemployed families with no where to go, I can sort of see why they would do this...........however, it doesnt solve the problem nor does it ultimately help anyone.

As a nation, we do need to solve the problem of where these families will go! Prez O's idea of $1,500 won't do a bit of good - these families need at least 5k to 10K to be able to lease a home for a few months - oh I can go on and on about that, too! Next time!

Just recently, I had a client buy a few homes at auction; one of them was occupied by a tenant who was paying rent to an agent - who doesnt own the home nor never did! Okay, let's not go there! Then the other home he purchased was occupied by a woman who had been given a loan modification but she still chose not to make her payments and 3 months later the bank foreclosed (she was at work the first time he stopped by to let her know of the ownership change)! She had her home listed for about 9 months as a short pay, didnt cooperate with any offers, got to stay in the home - but just didnt want to make the payments.....................We also seem to have a lot of short sales that are occupied by tenants who are paying their rent on time, each month - but the sellers are not paying the mortgage! Those poor people have no idea that they are about to get locked out of their homes! I guess I am seeing more of the ugly side of this business - although I do realize that there are a lot of families affected.....................

So, the point I am trying to make is this:

1. Agents: if you dont want to handle short sales - give them over to agents who enjoy them (I love a good challenge) AND know what they are doing. It is okay to walk away from a listing, esp when you are unsure of how to handle it.

2. Vet your sellers upfront! It is a ton of work to negotiate a short sale and if the seller's only interest is in living in the home rent free for as long as they can, don't waste your time, the buyers time and anyone elses. Walk away.

3. I believe it is a good idea to always get the seller's financials, hardship letters, etc, up front! That way you have a complete financial package for the bank, hardship explanation, etc, and as soon as you get an offer you can expidite it! Since a lot of banks today still have the requirement of faxing the offer and back up materials to multiple fax machines, it is time consuming - and your offer will be ignored if even one small document is missing!

4. GET EDUCATED! If you can't afford to take the class, call up a local expert and ask them to work with you on it! I offer my assistance whenever I can as I would rather see the home close as a short sale than as a foreclosure any day of the week! Ask your broker to provide some classes or call your local Board and see what they offer! But don't attempt a short sale in this market without assistance - you arent doing anyone any favors!

5.Speak out! Write your congressmen/women and be heard! Let them know what is happening in your community and what we need to do to help these families, help our nation!

Best to all.

Judy,

You are right on target. Each week I hear of another home that goes into foreclosure because the listing agent didn't know any better. Shame on them.

I don't personally do the negotiating with the banks. I have an arrangement with a professional company with 7 years experience that does nothing but negotiate short sales. They make sure agents like myself are properly trained to know how to list short sale homes to get them sold in 2 weeks or less.

I offer a 20% referral fee to any of my fellow Realtors who have limited knowledge of short sales. Please Realtors, leave it to the professionals that know what they are doing. Everyone cannot possibly know everything. You will be more of a hero by referring it to someone like that knows what they are doing and get the job done properly.

Gary Rossignol Short sale Experienced
GROUP Realtors
Cincinnati Ohio

You know what, you are right, time is really crucial and we do do a lot to help these folks out, however , we do choose to do that in the long run, do not cut your commission for such a difficult tasks that you have to face.

Excellent post, particularly about saving the homeowner's future and saving the economy from another foreclosure. I had a seller call me 10 days before the foreclosure sale. So, I put the house on the market that day (Friday), had multiple offers over the weekend, had a signed contract and complete short sale package submitted by Monday and the sale was postponed.

The CDPE class that was mentioned in the comments is a good educational program.

There is also a website available for information and to answer questions at www.CreateAShortSale.com. Just look to the upper right at the search box, put in the term you are looking for and the posts with that term will come up. So, if you need to get some quick information, help is available on the web. You can also buy the book, Create A Short Sale, Your Guide Through the Short Sale Maze that comes out this month.

The more Realtors who learn to do short sales, the more families we rescue and the quicker the economic recovery. Thank you for the post.

The major problem I am currently having with a short sale is getting the LENDER to get the BPOs. My buyer is walking to a different property because of the length of time (over a month) between the accepted by seller offer and hearing back from the bank (we haven't yet!).

Excellent post, particularly the emphasis on saving the homeowner's future and saving the economy from another foreclosure.

The CDPE course that was mentioned is a good educational program.

Short Sale help is also available on the web at www.CreateAShortSale.com . Look to the upper right to find the search box, type in the term you are looking for, and the posts with that information will come up. If you need a quick education on a particular point, it is on the website. You can also buy the book, Create A Short Sale, Your Guide to the Short Sale Maze to learn the process. It comes out this month.

Thank you for the post. The more Realtors who learn to do Short Sales properly, the more families will be saved and the quicker the economic recovery.

Judy,

It burns me up when I see short sale listings languishing on the market with no offers and no price drops in sight.

I'm also pretty ticked off at lenders who drag their feet getting back to buyers on offers.

Then you've got MLSs, which don't seem to have any uniform rules across the board re how to handle short sales.

For instance, it seems to be common knowledge that submitting more than one offer to a lender is a sure way to blow up a short sale. So if that's true, WTH aren't there enforceable guidelines in place across states which prohibit this practice??

I've taken a crapload of courses about short sales because it freaks me out knowing that I could hold the financial future of a family in my hands. I'm thrilled that our brokerage works with a local real estate attorney in processing these deals....something tells me there will be lawsuits for years to come over these transactions.

It gives me great relief knowing Realtors like you, who know what they're doing in re short sales, are out there helping families.

I just cannot help but wonder why there isn't intensive training provided to all realtors on this topic (more than the freebie webinar ad classes that just promote someone's product).

Too many families are getting thrown under the financial bus....and I just can't help but wonder how much longer that will go on before uniform rules & practices are put in place re handling these transactions.

Judy, the experienced short sale listing agent has an offer ready to send in to the bank on day 1. No need to wait around for offers or lowering the price just to find out later that the bank won't accept your posted list price but wants $10K more ...

Great post a short sale is not a normal listing, I have fits when I see short sales on the market for 2-3 months with no offers or the agent is sending every offer he gets to the bank. A short sale is a management process, get the listing, set the price, get the offer to the bank, and get it accepted.

Always keep in mined the owner is the client not the bank
Get several offers one to the bank, 1-2 back up, the highest price may not be the one that goes to the bank.
Communicate let Buyers and Sellers know where you are at all times.

JUL

I am suffering as a buyers agent at the hands of a abusive listing agent !! This agent not only submitte dour offer 3 months after it was submitted but tried to ask me for 15K" under the table" for her seller !!!!!!! When I called her out on this, she kicked my buyer out of the transaction using the expired short sale addendum as an excuse( hwile she submitted our "expired offer" in the first place), presented a bogus offer to the bank and screwed her seller over because now the bank wants 40K more than the property is worth !! When I escalated this matter to BofA, I was told that the seller has to sign a promissory note or else this home will go into foreclosure !!!! Congratulations, incompetent listing agent......

Wonderful post and even better - the responses are so engaging!

I see real estate sales people dying on the vine without a clue how to evolve in this market and it is so troubling and sad. In reality, this is - for those that can engage themselves in selling value - one of the most vibrant markets in years.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This Post is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com. See our easy to find articles at Need Short Sale and Modification Information? - These Articles Probably Answer Your Question

I agree about referring the short sale out to a coordinator. I myself hold anywhere between 30 and 40 short sale listings and there is no way I could negotiate with the bank and maintain my listings, it is worth paying the fee for your sanity and the benefit of the client

You are absolutely right. I would say 95% of agents who are listing short sales don't have a clue.

I have stopped trying to understand why people do the things they do....~sigh~

JUL

YOU know the clients need to lower the price, and WE know the clients need to lower the price to get the offers coming, but even after you think you've explained it all from A to Z AND they really seem to understand the whole short sale concept, they STILL resist the price cuts. Or they want to start a little higher than your suggested price and EASE the price down (so they end up chasing the market).

It may be a short sale, but its still an emotional thing for most sellers. It's still a devaluing of something they value very much.

I now use a price reduction schedule that is part of the listing agreement and gets signed at the time of taking the listing. (I learned this from the CDPE course). It works well.

"Price your offer according to hard numbers and you will make both our jobs easier and if you take the time to inform your buyer that the price was lowered to generate activity on the listing and that their offer will stand a higher chance of acceptance if they offer higher than the asking price (due to the prior sales minus a market decline percentage) then you are doing your job."

Now that's good stuff, Dynamic. Let's all work together, here.

JUL

My family lives in Orlando, and what I see is that your area is being affected more than the rest of the country. I have done a few short sales, but don't enjoy the process, so now I have a company that handles the negotiating process for me. This way I can do what I do best.... sell houses

JUL

Great post Judy. Sometimes people just need to step aside and let someone show them how to do it right. That is the easiest/safest way to learn.

JUL

Taking on a short sale is a huge responsibility, best left with realtors that know everything there is to know about the process.

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