Who is a lender really helping by agreeing to a short sale? Here's a hint: it's not the buyer or the seller.

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Who is a lender really helping by agreeing to a short sale? Here's a hint: it's not the buyer or the seller.

There is a lot of talk about lenders and short sales, and about how the process of negotiating a short sale can be a long and tenuous undertaking. It is a stressful time for everyone that is involved in the transaction.

I hear agents complain all of the time about frustrated buyers backing out of their contracts after months of negotiations. They blame the buyers for not appreciating the complexities of getting a lender to agree to possibly lose money on a loan.

Yet lender can take months to arrive at what would seem to be a very simple decision. And that decision is only based on one fact: Is the bank going to net more from a short sale than they would after going through a foreclosure and placing the property on the REO market?

And for lenders holding second mortgages the answer is even an easier one. Is it better to get something than nothing?

When a lender gets a short sale offer for approval, the bottom line is presented in black and white. It should be a straightforward business decision based on readily available sales data that is there for anyone to examine.

So why would a lender take months to arrive at a business decision that should take only a few hours? It should be a simple take it or leave it, what else is there to think about?

After all, the buyer is getting the property at the current market price, so it's not like they are stealing the house. And the seller must walk away with nothing.

So the lender should realize that a short sale buyer is a blessing and not a bane. They should be treated with the courtesy and respect that anyone in business would treat a potential customer that is going to generate more revenue for the business.

So why is anyone surprised when buyers say that enough is enough? They are simply tired of dealing with an entity that doesn't have enough good business acumen to realize that the LENDER is the only one that benefits financially from a short sale.

And it's high time that they start acting like they understand that fact.

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Posted by Richard Weisser - Coweta Fayette Real Estate - Newnan homes for sale on 09/06/2009 06:58 AM

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Originally posted at: Coweta Fayette Real Estate & Newnan Homes for sale blog by Richard Weisser of Better Homes and Gardens Real Estate Metro Brokers: Who is a lender really helping by agreeing to a short sale? Here's a hint: it's not the buyer or the seller.

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94 Comments on Who is a lender really helping by agreeing to a short sale? Here's a hint: it's not the buyer or the seller.

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2009

I am really not a fan of this turkey buzzards although a friend chastized me saying they are part of the food chain. Hmmm

Richard, great points. Unfortunately, I see no change in the process from many of the larger institutions. There have been some improvements in some smaller banks lately.

Let the picture speak a thousand words. . great post . . Thanks Richard!

Hi Richard, It really does seem that simple doesn't it. However I think the decision process for the lender is probably a little more complicated thena simple math equation that any old bank clerk is capable of making.

I get very frustrated too when it comes to lender decisions on short sales. I think the whole process could probably move a little faster. But I try to keep in mind that lenders are face with 1000's more short sales then they are staffed to handle. I think a lot of the decision makers at the lending institutions are brand new to the process and ned time to learn the process themselves.

Richard...Well said, I have had half a dozen short sales going all summer, each time I call the seller's lender I get put off, told the file isn't complete, or surprise asked for more information. Rather than treating me like I'm an annoyance, how about Mr. Lender you say thanks for keeping this deal alive while we screw around up here.

Hi Richard. Just one more thing. I would like to reblog your post but I am afraid too after reading your disclaimer at the end of your post.

Janice...

We would be in a real mess without them, but they sure are ugly! lol and thanks.

Gabe...

I have one horror story that I have yet to blog about ... and it is indeed about a large national bank. Thanks as always.

Fernando...

I think that it's perfect for the post. Thanks for noticing!

Kind of reminds me of how our government works.

Bob...

I think that it's the fact that they spend so much time making a decision that got them so far behind in the first place. And you may always reblog any post that includes the reblogging button because it meets all of the requirements ... I would appreciate it very much and consider it a compliment!

Steve...

Dang it ... you said what I was trying to say PERFECTLY! lol and thx

The premise may appear to be true. However, with PMI and MIP, not to mention tax breaks for foreclosures, the lender is often better off simply foreclosing.

Often, it's a waiting game, take the short sale package into the system and then play chicken. Who's going to fold first, the buyer, the seller or the lender.

The loss on a short sale is a matter of simple arithmetic. The benefits of foreclosure to a bank are not generally known.

Kenneth...

A little! lol

Lenn...

I understand that completely ... so why don't they just close the door on a short sale if it is not in their best interest. Instead, they choose to keep all of their options open.

My point is, why do agents get upset when buyers refuse to play the game anymore? Wouldn't any reasonable person think that the numbers could be run a lot faster?

And my post on bank behavior and bailouts is upcoming! THX as always.

Richard,

Given that your premise is correct, and I believe it is, one of the real frustrations of short sales is the randomness of performance from bank to bank. I've heard of short sales getting approval in two weeks and other in nine months. It makes no sense at all.

Rich

Richard, The reality is the lender very rarely is the entity making the decision. In fact, in most cases, the "lender" is nothing more than the servicer of the loan. They make money from servicing the loan whether payments are being made or not. The entity taking the beating is usually the MI company. And of course the end investor. Not much of this has anything to do with the lender.

Most of the delays are on the front in. Agents sending over incomplete packages, swamping the lender by sending in multiple offers, submitting low ball offers that don't have a chance in heck of closing, waiting for BPOs to be ordered and submitted. That's why the process takes so long.

But still......nobody wants to foreclose.

Richard,

I love the photo you chose to state your opinion! You make some very valid points. Bryant does have a point about the lender being only the "servicer" of the loan. Regardless it is a very frustrating process and you are right it should be streamlined and either it's a good business decision to take the offer or its not! Get on with it!!

ToulaRosebrock,com

Hi Richard:

You are ABSOLUTELY RIGHT!

I only blame the lenders with these short sale delays.

I understand that they need to have all the paperwork and numbers, but these 4-6 month delays are just non-sense.

It is a frustrating process for sure, but so far (knock on wood) we have had success getting our short sale listings to settlement tables. It would be much better if the process were more streamlined ! You make some great points... why would the bank want to go through a costly foreclosure versus accepting a short sale ? Is also better for both the community and the economy as well !

Richard, I do believe it good be accepted in a shorter amount of time.

But, we are dealing with beaucracy here. It takes forever just to get to the right person. 9 times out of 10 the package isn't uploaded to the computer so they can all see it.

I agree with BB up there that many agents just don't know how to do them...don't submit a complete package.

Another reason that short sales take so long to approve or deny is that while we are trying to get them to take their loss now, they are trying to convince their borrower to start making payments again. As long as they think that there is a chance that they can work out an arrangement with their borrower and keep this loan alive, they wont approve a short sale.

I suspect that there are other forces at work here too. As long as they dont foreclose and they dont sell short, the loan is still an asset. I would imagine that a non performing asset is better for their capital position than an actual loss. And I bet that they are trying to meter their losses...a little this month and a little next month is easier to swallow than all of it right now. So we wait.

I have long suspected that the banks are taking time to ensure that these losses fall into guidelines for bail-out money, but that's probably just my imagination.

I kind of disagree that the buyer is getting it at fair market price. The only reason to suffer through the long short sale process is because you think you are getting a much better deal than you could get with a typical seller.

I've seen banks let homes go for some ridiculously low prices. It made me wonder how their people could be so stupid. I just have to assume that there were other aspects of the entire transaction that made up for it.

We recently submitted a cash offer on a short sale $800,000 home (with proof of funds). After 2 months we received the banks reply. No, not a counter, not a ball park level, just no. As you know, in Atlanta you can look up an agents sales by agent ID. This agent has never sold a property and only recently was licensed. Of course, after a couple conversations this was apparent.

Rich...

All I'm saying is that there has to be a benefit to to mortgage holder or they won't do it! THX

BB...

So why does it take up to a week to just be able to speak with someone in loss mitigation?

Why do I have to call the Chairman of the Bank of America just to get a phone call returned? And if the Chairman of the Bank of America can't get a loss mitigation specialist to call me, what hope does the average borrower have?

Regardless of the investor (who is ultimately the "lender") it is still a business decision.

Let me ask you this and see if you agree....

Don't you think that these homes would sell for more if the process was streamlined? Are these loss mitigation departments shooting themselves in the foot by not moving swiftly? If a short sale was easier, buyers would be bidding the price up, don't you think?

I've recently had a great experience with a smaller lender. I submitted a short sale package and 2 weeks after we had an offer we had an approval letter. It should close in 3-4 days. Wahoo! It's not always that easy.

I don't think I am smart enough to respond to this. My thought process runs in this vein, what is the right thing to do, then do it. The whole process makes no sense to me. What I find very interesting is that often short sales are appraised out at the price they are going for. So, how short is that? I think there is something here we are just not privy to from the lenders and investors. And my guess is that only a handful of people are privy to that. No, I am not a conspiracy theory type person. It is just that with all the bad press about this, about lenders, about everything in general, one would think that they would fix what is broken. Perhaps it is not broken for them at all?

No, it's not the buyers fault. And BB has suggested that agents don't do this properly. I have a feeling that for most of us, we would not get the process right from lender to lender. I bet the parameters change, I am sure things get lost.

At a closing there are checklist pages that the lender sends out to make sure everything is the way they want it. Everything is on there. Down to the specific order of how they want the documents back in the mail. Since I have not done a short sale yet, is this true of the lender when you put a short sale package together? Do they send a very specific set of instructions, that are idiot proof? Just curious.

Congrats on the star!

The theme song to a really bad western movie starring Gregory Peck was Oh Turkey Buzzard and the movie was McKenna's Gold. It was so bad it was funny and the theme song at the first of the movie was a clue, as is your picture, except in short sales I forget to laugh. Ah misery, thy name is Countrywide.

Great post -- if only it was really that simple. From the common sense viewpoint -we all think the lenders should give a fast uncomplicated answer based upon simple accounting. However, it is frankly NOT that simple.

The lenders have to do their due diligence...they have to prove to their share-holders the justification of the loss and this takes time. Servicers are paid to service so they don't "care". Loss Mitigation departments are "over-whelmed" with negotiators handling hundreds of files. Some servicers pay their negotiators to just clear files off their books which can mean a bonus if they approve or deny. Second mortgages, HELOCS, and incorrigable attorneys on junior liens, sometimes make for extreme challenges and POC solutions. The investors behind the lown and MI -- all have their own requirements.....

Basically - you cannot ask for OR expect rationality. Agents have to understand that no two short sales are alike and that there are an infinite number of combinations of lenders, loan types, investors behind the notes, and buyer and seller situations that as a combined ball of wax have to each be handled differently.

Short sales are a market necessity that can be made workable through combined persistence!!!!

To your short sale success!!!! We should keep in touch! (Short Sale Daily News)

One of the brokers in my network and I had a meeting with counsel to the Maryland Association of Realtors last week for an update on new MD short sale addenda and the ramifications for home buyers. It appears that to simply "walk away" is going to be increasingly difficult or costly for the buyers under the new rules.

Sadly, there is nothing to expedite the process. MD is writing new rules for the game, but one of the players, the banks, aren't involved. They continue to play by their own rules.

I'm becoming more sympathetic to agents who are not showing short sale listings.

Richard: I think part of the overwhelming problem is that it is time consuming enough to have a bank look at one offer, but listing agents are almost forced into taking multiple offers and throwing them at the bank, which only increases timeframes for approval. I think some regulation of the process is in order. The folks that need the answers are the ones getting hurt...sellers and buyers.

Applying common sense to lenders is almost an oxymoron. They are the ones who got us into this mess. Short sales lower the market values to be sure, but REO sales decimate the comps. It should take as long to approve a short sale as it does to underwrite a new loan. That it doesn't speaks to the fact that the lenders have too few staff on hand to handle the demand, period.

I have come across some new ideas to put my buyers in better positions when writing on short sales, and helping sellers get faster and better answers...CDPE Certified Distressed Property Expert training has some great ideas....

It basically depends on the lender and its investors. The only bank you can probably paint with a wide brush is Bank of America. I've had approval from GMAC lately in 26 days and last week in 18 days. Litton came through in 23 days. Wachovia is a dream bank to work with. CitiMortgage and Wells Fargo have decent turnaround in 4 to 6 weeks. But Bank of America, yowza, and Lord help you if that original loan was from Countrywide.

Richard: Amen to this one! We have had several deals where the buyers just got tired of waiting on the lender and we found and sold them another house. You would think with the time limit on the $8,000 credit running out the lenders would be more motivated, or do they know something that we don't? I also agree with you that the process is entirely to long and the general public does not understand why the system operates like it does. Great Post and looking forward to your next one.

You have really hit it with this one. Congratulations on the recognition.

Richard, I don't agree with the delays I'm just trying to explain the. Short sale negotiators for the lenders are handling 100s of files at a time. NOTHING will happen until the file they get is complete. For example: If you sent in a file tomorrow but left out a bank statement that file would just sit. The person whose job is it to scan in 9image) the documents is not going to call and ask for the missing document. The file will never be opened and the case will be closed. This happens over and over again.

The lenders are not able to keep up because theyu are being swamped with incomplete or worthless paper work. IF all agents knew how to handle short sales the majority of these time delays would be eliminated.

As REALTORS(R)( we have the power to make this happen. Our NAR could very well grow a pair and give it's membership a uniform way to handle short sales. And not something just to protect REALTORS(R) but actual guidelines that would make it easier for all of us to do our jobs including the lenders.

lenders MI companies and investors do NOT want to foreclose on properties. They want the payments to be made. If that's not possible then they much prefer a short sale over a foreclosure. A foreclosure costs them far more than a short sale.

Short sales are changing daily. The lenders are getting better with their systems. Now it's our time. It's time for us as a group to learn what we are doing. No more just throwing deals up against the wall and hope they stick. Learn the process from the lenders point of view and then figure out how to work withi8n their system until something better comes along.

By the way the average borrower has no shot of doing a short sales. Lenders want to work with agents not borrowers.

A BofA short sale will take 4-5 months. That's a fact. Buyers need to be told this before they go under contract. If they need to close in 4 months or less then they need to go look at another property. It will take 1-15 days minimum for a short sale package to get imaged in to the system with BofA. Why in the world would you try to reach a negotiator within a week? It ain't ever going to happen. I do not agree with the process BUT I understand it and try to work within the parameters I have been dealt.

If the process was quicker the properties would certainly be worth more money. And that will happen. In the meantime we need to do our part.

This is a very thoughtful post. The banks got overwhelmed and as a result lost control of normal processes. Too bad.

Richard - well you do have to wonder, don't you. And it has not changed much in the last couple of years of dealing with this stuff. But it seems that some banks are handling this a bit better, and clearly having a complete SS package can make a huge difference. And I have heard some amazing stories about very quick approvals in some instances.

Jeff

The process definitely needs to be streamlined. Once lenders accept the fact that short sales requests are going to increase and not decrease at least in the next couple of years, then maybe they'll hire the necessary staff and provide adequate training to shorten the response time. Wouldn't that be great?

Richard - Great Post. There was an article in Sacramento Bee today about Bank of America and Wells Fargo. B of A has modified 4% of the loans that have been requested to be modified. Wells Fargo a whopping 8%. WFB says they are just overrun with requests and have hired thousands (probably for $9 an hour with prior work experience at Carls Jr -ok, I know I'm sounding jaded).

Ron - you're post is exactly what I think is going on - that there's 2 separate departments (short sale, loan modification) and they are at odds with each other. Actually maybe three departments as the foreclosure department can be different from folks working in the short sale department which would explain why some homes are sold in the middle of good faith short sale offers.

I have also heard that keeping it as ANY type of asset is better than showing it as a loss - so the reluctance to foreclose. I also heard (boy I hear a lot.) that big banks can work their accounting in ways that they could actually hold on to nonperforming assets for 15-20 years.

I understand that each bank has there own system What if they would gave the listing agent a copy of everthing they wanted and every agent that had an offer got a copy of that. It sure would help! Of course the listing agent would have to answer the phone and call back!

I agree that this really is pretty simply. They have risk management policies in place. I saw some short sales not come together because of the very slow process... and end up in the REO market..... Then the homes sat through the winter... and they were so damaged by the spring... that the prices had to be lowered even more... it doesn't make a lot of sense to me... the lenders got even less!

some banks are really streamlining the process...then there are the others...Nationstar was awesome..I had a short sale approved in 5 weeks...the negotiator was brilliant... then I found out they got paid when a short sale closed..interesting.

It doesn't take much thought to figure out why the banking industry is such a mess!!!!!

Valorie, Almost all of the lenders have a short sale package and outline of what they want. Just ask them or go to their website.

Anna, Sellers need to check out the loan mod or refinancing PRIOR to listings a s a short sale. They'll know pretty quicklky which way they need to go. Agents should know this.

Oops!! Sorry Richard. I couldn't help myself. I'm outa here :)

Richard, I have run across some lenders that had rather foreclose than to sell on a current market value...

Who ever said that banks were astute businesses that made money. I had a wise old uncle who said if you want investment advice, the last person you should consult is a banker. He is right. Their behavior in short sales is a perfect example. Most of my customers refuse to even look at them. Why wait months for these rude entities to respond when they can get a foreclosure for the same or less, and get a yes or no, often in a matter of hours.

Good news is that in our area the inventories, especially of distressed properties such as those mentioned above are dropping. Will be glad when the last nail in placed in the short sale coffin.

Short sales need to be standardized! Rumors (and an occaisonal fact) of greatly discounted accepted offers only increase the incentive to have buyers write such offers. Selling agents need to recognize the picture and set their expectations accordingly (is the loan better served to the lender going to foreclosure so they can collect the MIP or PMI, is there a first and a second, is the second truly better off accepting 10 cents on the dollar or should they hold out for for more since a good accountant can get them a better write off if they loose it all, etc.) I just wish the lenders would communicate during the process to set the expectation (if it is going to be two months for file review at least admit it up front).

You read all the time how banks don't want to OWN homes and don't want to foreclose. But in my experience, their convoluted process of getting a short sale approved shows us they don't care. We've seen houses sell for LESS than they would have, a year into the process, because the lender drug their feet and the buyer chose to walk. Logic is missing in the process.

BB...

I think that you missed my point entirely.

My point is, that the lien holder ONLY approves a short sale if it is in their best financial interest to do so. Since that is the cased, they have a FIDUCIARY obligation to their shareholders and investors and the taxpayers of the United States to do all they can to mitigate losses.

Real estate brokers are not underwriters. We are not loan processors. It is NOT our obligation to assemble confidential seller information for them. It is, however, absolutely their obligation to justify the 25 BILLION dollars that taxpayers contributed for their ineptness.

You say that it's OUR (The real estate agent's) obligation to learn how to do the lienholder's work for them. I absolutely disagree. We have already done our job. We have successfully marketed the property and produced a buyer. That is what real estate brokers do.

My point is it is in the lender's interest alone to do a short sale. So they should start showing a little more responsibility in accommodating them.

How's this:

I had one loss mitigation person fax me a document. It took me two days to get it AFTER it was faxed. I wonder how how many FAX machines I could by with 25 billion dollars?

BB...

I said that the BofA loss mitigation was supposed to contact me within a week after being INSTRUCTED by the OFFICE of The CHAIRMAN to do so ... not from the beginning of the process.

Richard, The current system is certainly broken BUT it's what we have to work with at this time. We gather seller's financial information and try to build a case to present to the lender because it's in my sellers best interest for me to do so.

I couldn't care less about the lenders. The short sale is to the benefit of my seller. I am trying to salvage their credit and help them unload a burden so they can get on with their lives. In order to do this I have to know how to work the system to their advantage.

I'm in no way defending the lenders. I'm doing the best I can to educate agents so we can help Mr and Mrs Homeowner through this mess. If they are foreclosed on their financial position is screwed for years to come.

You and I are in agreement that the lenders suck. However my sellers do not have the luxury of waiting for the system to be fixed. They are in foreclosure today. Their problem is immediate. So in order to help them we have to learn how to work within the current environment. Too many agents are spending too much time complaining about short sales instead of spending that time trying to help people.

The issue with buyers is that they are not being told upfront what to expect. If they are told the process may take 5 months or more (regardless of what the listing agent says) then they can make an informed decision about whether or not the wait is worth their time. If it is...then they need to be prepared to wait. I rarely blame the buyer. I almost always blame their agent.

I work short sales from both sides of the transaction. My buyers have patience and get the house they want and my listings close. Most of this is about setting realistic expectations.

Good topic for discussion Richard. By the time we all figure out short sales.....the market would have moved on to other things :)

Oops!! I forgot one. Richard I think this is the premise of your post:

"My point is it is in the lender's interest alone to do a short sale. So they should start showing a little more responsibility in accommodating them."

What's in the lenders best interest is for the borrower to make their payments and honor their mortgage commitment. But since they aren't able to, hopefully due to a legitimate hardship, the lender will consider a short sale instead of foreclosing. Either way they are being expected to take a HUGE loss. There is NO benefit. The benefit is to the borrower (seller) who is able to write off a huge debt and salvage some of their credit.

The one taking the beating is the investor. That investor could very well be you or me. Or my mother in her retirement fund. I don't want the lender just agreeing to a short sale because they are being asked. I want them to do their homework. Unfortunately this takes time.

OK I'm done. Maybe :)

The problem with any large corporate entity is that there is no such thing as a balck and white issue or a simple answer. If you want a short sale property as a buyer, unfortunately you just have to wait and hope that things work out for you. I wish it wasn't that way. Congrats on the feature my friend.

Depending on the circumstances the buyers are getting a good deal well belong market (don't know percentages)in my area. There are most homes where they can't sell near market so they start chopping the prices in order to get an offer. That makes me wonder, if the lender could possibly do better if they foreclosed. Just as a quick example, TH that was around 275,000 now down to 209,000 and finally got a short sale offer - that's pretty good savings for the buyer! The bank might or might not approve the sale, that's the problem like you said. Banks just act like the buyer doesn't exist - a pain in ass entity. With their bad attitude and past solutions I don't see them doing anything but foreclosures in the future. I won't show them anymore and buyers don't want to see them based on past experience from their friends, etc. Short sales are not 'for sale' they are 'for limbo'.

Richard - Yet another fabulous and thought provoking post well worthy of the feature. Congratulations. I personally feel our entire banking system is flawed but that is fodder for another post. How is it that a bank (which is supposed to be a 'for profit' entity) can make loans and if those loans fail, they still get bailed out by us, the taxpayers. You can thank the good old Federal Reserve for that one. The banks are in a win-win position, regardless of cost to the public. If they make the loan and it gets paid back, they win. If they make the loan and it fails, they get reimbursed by the Federal Reserve and taxpayers.

I need a vacation...

Richard, Great topic! The current market has certainly created a brave new world. The comments provoked here certainly express the various approaches and attitudes we as agents carry. I think one task we as agents will always face regardless of the market is that of bridging information gaps created as we bring all parties to the table. There is no one in a better position than agents to coordinate the gathering of information so that all parties can make a quality decision. The whole SS market feels like a game in play while the rules are still being written and learned after some play has taken place. The encouragement appears to be coming surfacing where agents have learned the game, lenders have staffed and established clear policy and buyers and sellers cooperate. All the best!!!

Richard, I am with Bryant on this one. We agree the system is broken and it is broken on the lenders end and the agents end. Agents need to learn the system for each lender and submit complete packages and stop bogging down the system with incomplete packages and multiple offers. The great thing about this business is that if you do not like short sales, don't take the listing; otherwise, go get em and get em closed. As much as I hate the process, we are getting them closed and have a great track record, of course we have great resources like Bryant and Wendy.

Great blog!

Lyn,

Re part of your post: "Just as a quick example, property that was around 275,000 now down to 209,000 and finally got a short sale offer"?....that's the rub.

The bank is not going to accept $209k. The listing agent just wants an offer, any offer - for the bank to start doing their work. For a buyer to think they're going to buy something for many thousands below market is a falacy (in all but the most extreme cases). It's totally bait and switch.

As agents, we should be counseling our buyers about that "bait and switch" policy. Sure go ahead, Mr. Buyer, and send them offer for $209k and bank will do BPO and come in with market price of $275k. Yeah, for wasting way too much time.

As Bryant stated - just make sure you're buyers know the total drill with short sales. Maybe they can snag one. In Sacramento, with the REO's drying up, agents are forced to deal with short sales. Just make sure everyone knows what they are in for. As our famed Ms Elizabeth Weintraub has mentioned in her post. Wachovia is awesome. Other lenders should follow their lead. They have a territorial manager in place that personally meets seller/buyer/agents at property. Asks seller to provide needed info for decision AND makes decision on the spot (or so I've been told by other agents - and what the Wachovia rep told me). How hard is that? Pay someone some decent money and MAKE THE DECISION!!!

I've always been told "follow the money". Banks are not stupid...there's something in it for them to be operating in this fashion. I've been told that there's some "magic" formula that their accountants know as far as whether it's in their best interests to foreclose or accept the short sale amount.

My opinion - the banks are making a killing fleecing the sheep. Anna

Christianna - in this market the short sales are getting within a few percentage points of market. Not the killing that some agents want to portray it as.

Bryant - The one taking the beating is the investor? Oh my - but if they're one of the biggies (I'm talking to you B of A, Wells Fargo, Citi) they come out ahead. They take the money - pretend they're trying to help (see my earlier post of 4% of B of A loan mods going through) and tell the government "Show me the Money". It is a farce beyond farce.

And to say"What's in the lenders best interest is for the borrower to make their payments and honor their mortgage commitment"?. Well, you are right in a Utopian world. But I am inundated daily with desperate tales of hardship through no fault of their own - although some like to say it's all their fault. OK - maybe occasionally a buyer should have know better but..

What I'd like to do is have a department more committed to mortgage fraud. I see this example daily when looking up properties:

Home sold for $450k as it had construction defects. Buyer refinanced loan 2 weeks later for $850k. Took the $400k dollars and now it's being foreclosed on. Why aren't we on these people instead of the ones trying to keep their heads above water?

In January, my buyer made an offer on a home listed at $215k. Offered $190k; bank replied 5 weeks later with $209k & commission cut. My buyers walked; wouldn't pay that much and would not wait another 5 wks for possible turndown on counter. WELL............now it is back on the market at $169k after being foreclosured.

I feel part of the problem with the original offer was the listing agent was not experienced in short sales. We struggled through the process and no one was the real advocate for the seller. That is one of the reasons I took the CDPE training. I wanted to make sure that my future clients weren't in the same position.

So, Faye, you think a more experience short sale agent would have made the difference? I am up to my eyebrows with short sale experience. I choke on it.

My take on what you wrote? That's what a buyer would do - and that's what a bank would do - and most lenders don't care because I could sit at my computer all day long and show you how many short sales went into foreclosure with the eventual REO pricing many thousands below a valid offer they had.

I state again - follow the money. There's something in it for the lenders - maybe not on the frontside but on the backside.

Someone - anyone - call the lenders out. They are the Emporer with no clothes.

Car dealers? They show you their invoices that they're selling you a car for $200 over invoice? What they don't tell you is what they get from GM for advertising costs, for selling "x" number of cars at the end of the year.

Do not feel bad for the lenders. They don't feel bad for us.

Richard,

I'm thinking that you're right...initially. But I have to admit, I would be better off following Andrea's example...as I have not done a short sale...or rather, I haven't completed a short sale transaction. I've had a seller who was a short sale...that didn't get anywhere; and I have a buyer who was almost stuck on a short sale. He and I both came to the conclusion that it was not in our best interests to pursue any short sale listings...and unless my buyer clients have a long amount of time, I will suggest to them that they forgo looking at short sales.

Listing agents? Be wary of sellers who are very well versed in how to stay in their home and not pay payments and pretend they want to sell - or that's what they tell their lenders.

How can you tell who they are? If it's appointment only. If the listing photos are absolutely awful - that's your clue. Some sellers are looking to stay in their home as long as they can (no payments) until forced out. Another dirty little secret.

Gosh, I'm on a roll tonight.

I can play the devil's advocate (never a more apt time to use THAT term).

They want to see which way the wind is blowing. Delay and obfuscate... and see if the market is going to rise or fall. Then they can see if they want to risk turning it down.

Maybe we should all stop allowing them to take months to come to a decision.

SEP

2009

Richard,

I agree with you. Alas, even my "good" banks are now taking much, much longer to respond - and I always get them the complete package just as they want it. The bank negotiators are overwhelmed - both by volume and by agents handling short sales who don't know the whats and whys.

Those negotiators love me and my thoroughness but have to process in order received. They're spending too much time chasing listing agents for missing documentation and my offers are held up!

Anna, I certainly believe a more experienced listing agent in Faye's case could have made a difference. Maybe they would have negotiated a better deal from the outset and submitted a contract at $209,000. Assuming the property was priced right at $215,000 an offer of $190,000 was too low. Now I don't know the value of the property so I'm just talking hypothetical here. Lenders depend almost entirely on the BPO (value) to make their decision. They want very close to market value. As listing agents our job is to know what that figure is and then price and negotiate accordingly. if we do that one thing the odds of getting the short sale approved go way up.

Richard,

Our market just didn't plunge in the same way. Short sales are very, very rare in Toronto.

However, I would imagine that at some point the realization that the market has dropped is going to sink in.

Brian

Good morning all...

I still think that my message is being lost here. The talk keeps shifting to the skills of the real estate agent.

My point is, we are NOT loss mitigation negotiators by trade. Nor should we be. We are form fillers and order takers, and many agents are very good at that.

I am saying that it is is the lienholder's best interest to accommodate the agent, and they should be helpful instead of stand-offish.

If they need certain things, email or FAX a list of exactly what is required. What is so hard about that? Why is it the responsibility of the agent to try to learn the nuances of each bank?

I think that there is a certain amount of agent elitism involved when they continue to suggest that it is the agents that are at the core of the process, and that they are part of the problem. Sorry, that doesn't fly.

An 5th grader knows how to write a checklist. You would think that a bank that was gifted 25 billion tax dollars could hire one to create simple directions for sellers.

Anna, When I mention Investor I'm not talking about the lender. I'm talking about the end investor. This could be the lender but usually these loans have already been packaged up as securities and sold off. The lenders are getting paid to service the loan. They get paid whether payments are made or not. The investor does not. That's why it's in the investors best interest for the payments to be made.

Richard, Almost all of the lenders have exactly what you are asking for...a check list of what they need and forms to be completed. All the agent has to do is ask. Or visit their website. Why don't agents know this stuff is available? Go to our short sale site. It's free and has just about everything you are referring to.

We keep getting back to the agent because those of us that do short sales every day KNOW that these check lists and stuff are already available. There are systems. They are very precise but they are not secret.

If I could post documents here I could give you the check list and seller forms for BofA. Wells Fargo. GMAC, Fifth Third, ING, Wachovia and most of the other ones. Then agents can "fill in forms and take orders" if that's all they want to do.

However, there are special skills required if an agent wants to do short sales. They always have the choice of not doing short sales. We CAN'T control the lenders but we CAN increase our skill set. Handling short sales may not be our responsibilty but it is certainly our job if we choose to do them. This is a fact.

I understand your point and I'm doing my best to address it and give you a solution. What am I missing here?

I feel the people working at the banks know when their pipeline of short sales stops, they no longer have a job. What is their motivation to move quickly? Moving slowly is their job security.

All I have to say about short sales is ugg! Ok, not really. Through the comments I've seen folks say part of the problem is in agents not getting the correct paperwork and complete package to the lender in the first place. I have found that even when one person is telling me the package is complete and in process I have another tell me they are missing something my file shows very clearly was sent. It's a bit unnerving to think that the folks in charge can't keep track of the paperwork. The same folks who gave the loan in the first place. Are the having trouble locating the original paperwork?

I have thought the same thing as Lori Bowers for quite some time. These people are employees that don't really care about their jobs for the most part.

As far as checklists, every lender has a checklist that is readily available so not having a checklist and not submitting a complete package is not acceptable for the listing agent. Both the buyers agent and the listing agent need to understand the process and the time it takes to make it thru the process and need to educate the buyer and seller. If an agent does not want to deal with a short sale, it is the agents choice to not work a short sale.

It is the agents responsibility to gather all required documents and submit to the lender. Follow thru and follow up to make sure the lender got the package.

Jeff...

I'm sorry, but I disagree. Who says it is the agent's responsibility? Especially the buyer's agent? Neither he buyer's agent nor the buyer have anything to do with the seller's problem of providing clear title.

Our contractual agreements in GA state that an agent has NO responsibilities when it comes to the seller providing clear marketable title.

It is, however, the agent's responsibility to find a property suitable for their buyer. And if the happens to be a short sale the agent cannot choose NOT to submit the offer.

Once again I stand by my premise. To state that an agent has an obligation or responsibility to negotiate a short sale and assemble documentation packages is patently false in GA. I say it is the lender's responsibility and since they have the most compelling reason for authorizing a short sale, they need to be more helpful and proactive.

BB...

Here's what you are missing ...

It is in fact, the responibility of the lienholder to accomodate the borrowers becuse it is in THEIR best interest.

For crying out loud, if a short sale can save them $30-50K then they could hire one specialist for every short sale and make money.

What I find troubling is the elitism that says "you need to know how or give us the work" in which agents try to promulgate the theory that this is sonehow an agent responsibility.

It isn't because someone says it is. Your responibilities are outlined in your brokerage agreements, and I'll bet there aren't many agents that list "loss mitigation representation" as one of their responsibilities in their brokerage agreement.

BTW, I'd check with my E&O carrier. I'll almost bet that those activities are not covered.

Once again I speak primarily about Georgia. I don't know how agen't responsibilities vary elsewhere.

Sorry Richard, I should have been more clear, it is the listing agents responsibilty to gather the sellers information. I am not a buyers agent, I only work with sellers and refer buyers out to a team of buyers agents.

Our short sale addendum to our listing agreement in FL says the seller will promptly supply the listing agent with the documents that the lender will require. It is the listing agents responsibility to represent the seller and in this case we are talking about a short sale.

I sure do not understand your last paragraph, it is the lenders responsibility to assemble the sellers financials and documents? I agree that they need to be more proactive for sure but we are not having the issues with short sales like it appears that you have in GA.

You stated in another post that the lender should supply a checklist. They do, all it takes is a simple phone call or google search and you have the checklist right in front of you.

Richard, with all due respect, sounds like you should just stay away from short sales.

Exactly!

Jeff...

I didn't say that right...

Let me clear that up, because I should have said that those people directly involved in loss mitigation have a responsibility to THEIR investors to save them as much money as possible.

That is a DIRECT responsibility. That's why they are there. And that is in fact their job.

You cannot shift that responsibility to the agent. All of the comments that I see about delays blame the mess on the agents and I'm sorry, but I just don't see it that way.

Why does a poor real estate agent have a greater responsibility than those charged to perform this fiduciary duty? That is the question here.

Richard,

I guess we will agree to disagree. I do alot of short sales and don't have the issues that you speak of. We assemble a complete package and have little problem with the lenders asking us for anything else. I do see alot of agents short sale packages and still feel that is the biggest problem that we have with short sales, let me explain.

The banks are slammed with short sale packages, actually some banks like BofA get 6000 to 8000 new packages every week. I have a great contact at BofA who is very helpful and very informative. She tells me that out of the thousands of packages that they get each week, less than 10 % of them are actually complete and ready for a phase 1 negotiator. That means that they are sorting thru 8000 files and only getting 800 that are actually complete. How can that be BofA's fault, they are very specific about their requirements for the short sale (although I believe they don't need 1/2 of what they ask for).

Yes they do have a direct responsibility to their investors, just as I have a direct responsibility to my sellers and you your buyers. When I take the short sale listing, I am fully aware of what is needed and what my responsibilities are, otherwise I would not take the listing.

Sorry but I blame uneducated agents, lazy agents and misinformed agents who should not be taking short sale listings as much as I blame the lenders for short sale short comings.

Jeff...

First of all ... I thank you kindly for the dialog. That's why we are here ... to learn from each other!

And I have been know to keep the spot stirred... Bryant can attest to that.

In GA we are behind the times with needed addendums, MLS categories etc. You guys in FL are light years ahead of us, so perhaps more is expected!

Please believe me when I say that your position is both respected and welcomed here! And while we can agree to disagree, I may in fact, agree with you more than I let on! ;)

No worries Richard, I have learned a great deal on AR and read all of your blogs! We are all in this together.

Richard, The point is that if agents don't want the responsibilty then don't work short sales. If they choose to work short sales then they best learn how to do them and take responsibility for their actions or they are harming the consumer and bogging down an already difficult system.

Our CoE requires us to learn what we are doing or don't do it.

Refer your short sale buyers out and don't take short sale listings. Certainly no one can blame an agent for making that decision. Short Sales are not for everyone.

This has nothing to do with us. It's about protecting the public.

I'm getting reday to put up a post about this. You're in it. I was nice though I promise!!!

Bryant...

You know I take some of these not so popular positions on purpose lol! That's what keeps the conversation flowing. There really is one major bank that I don't like very much though. Can you guess which one?

BTW ...you know I respect you and value your input ... that's why I prod, prod, prod!!!

Richard - This is a very interesting post and the dialogue here I think is even better. You certainly make a valid point here with lenders taking their sweet time and should help sellers with their process. However, the reality is that sellers are clueless and mostly overwhelmed. Real estate agent must work with what we are given if we take on short sale listings. In my view, agents must educate themselves to help sellers, who really need our help to keep up with their lender requirements and requests - the same if you are representing a buyer, who is buying a short sale.

Short Sales are here to stay at least in my market and I'm obilgated to my sellers and buyers to educate myself the best possible way to serve them the best way possible.

Petra...

Thanks for the great comment. All I'm saying is that thosed charged with facilitating the process should do so with professionalism and courtesy. I think that goes a long way in a stressful situation.

Richard - absolutely - this is the least requirement on all sides of the transaction.

SEP

2009

Richard, I think there are some points you are missing:

1. The service lenders get paid to service the loan. The longer the delay, the more they will make.

2. Increasing the efficiency of loss mitigation means that the lender will need to spend money and resources on a department that does not generate revenue.

3. A short sale is a privilege and not a right.

4. It's the seller's responsibility, not the lenders or agents, to provide the necessary material to conduct a short sale. The sellers are requesting it, not the lender or investor. The servicing lender might suggest an alternative to a seller who has missed some payments, but usually they do not go out of their way to make it happen.

In regards to:

"My point is, we are NOT loss mitigation negotiators by trade. Nor should we be. We are form fillers and order takers, and many agents are very good at that."

That is true. Who do you suggest should assist the seller in their request for a short sale? Remember, that person should look out for the seller's best interest.

I personally do it because I don't consider myself just a form filling real estate agent. I feel very comfortable with negotiating short sales.

"I am saying that it is is the lienholder's best interest to accommodate the agent, and they should be helpful instead of stand-offish."

I also agree, but fat chance of that happening! Nothing chaps my hide more than to be transferred to a call center in India who gives me the extention number of the negotiator, just not their number!

Also, you will find that the higher you go on the food chain within the bank, the better service you get. Greater pay usually means greater intelligence.

Great Blog.

Satar...

This is a great response and I agree with you. Just we because we don't "have to" doesn't mean we don't "want to!"

I think that you should post this as a separate blog so more people can read it! Thanks for the well thought out comment!

You make some very valid points. I wish it were more stream-lined as well. BB makes great points. The banks are inundated & most packages are not sent in correctly or followed up with. You'd be amazed by the ineffiencies of agents. I receive 'offers' all of the time that are not even filled out correctly; missing documents, etc. And then the agent doesn't even call to make sure I received the fax or email. I'm sure they are doing the same with the 'files' they submit to the lenders. If everyone did what they were supposed to I'm sure that it would change but until then, the banks are working through this along side all of us; trying to make it work. We can only clean up what we are involved with.

Richard, the entire process is baffling to me as to why it takes so long. I suppose it helps to properly prepare our clients for what to expect in terms of time frame, but that doesn't excuse the lenders for their poor service. Hopefully, things will get better over time but I doubt the lenders will start hiring more people just to service the short-sales. Thanks for the post.

Richard: I enjoyed reading the back and forth conversation between you and BB in this point. I can see both sides of the coin. Personally, as a Broker and third party negotiator, last year my office closed over 300 short sales.

I do not work for the bank, so I cannot address your concerns. But, this experience has given me the opportunity to get very friendly with many folks in various executive offices and a lot of the problems seem to relate (to be perfectly candid) to the sheer ineptitude of the employees. The disproportionate amount of short sales to effective, strong, high-quality employees makes things go awry.

Personally, I view this real estate market as a great opportunity to grow and change. It has also taught me a lot about tenacity and patience. I now know that I have what it really takes to achieve against all odds. Now . . . I am also the unfortunate subject of an IRS audit that will take place on Friday. Will I be as victorious on that front as I am with short sales? Follow my blog . . . and we shall see ;-)

I think that more people with less files would help to get through the process more quickly, but many of these are huge corporations with much bureaucracy.

We have a short sale closing in a few days with a very small lender. You can call the decision maker directly, speak to him, have calls returned the same day and talk common sense. It will be about a 30 day close from beginning to end.

Hi Richard - exactly! I appreciate that you think I should write my own blog, but you did such a great job and I don't think I can add anything else to it. It's just a shame that people missed the meaning of this blog and took it to a tangent that totally missed the point.

Melissa's comment just enforces your point:

"...a lot of the problems seem to relate (to be perfectly candid) to the sheer ineptitude of the employees."

Your critics should ask themselves why this is true and then re-read your blog. Maybe the light will turn on.

Anyway, great blog.

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Richard Weisser - Coweta Fayette Real Estate - Newnan homes for sale

Newnan, GA

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Richard Weisser Coweta Fayette Real Estate

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