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How Can We Sell Upside Down Homes and Have Buyers and Sellers Happy

The market has so many homes that were bought at 100% financing and now the payments and taxes are sky rocketing. They turn to us to sell their home so they can hopefully not foreclose. I find the sellers want us to lower our commission and cut costs but still sell the home. If by chance you find a buyer, the sale is very fragile until the day of closing. The mortgage brokers will give a denial of a loan without a real denial if the customer wants out. I find this disturbing. The Buyers even want it all, they want the seller to pay closing costs and put 500.00 down. Well no more for me. I thought because it was being bought through a community program I was safe, but no it fell a day before closing. I had a commitment and a HUD and the buyer still got a denial.

Advertising is a problem when you are not getting high commissions. Thank goodness for blogs and the internet or I would be sunk. It still cost money and time. And that is another thing the buyers and sellers have to realize our time is worth something, we trained and pay dues for the business, they should realize we need to make a living.

Maybe if I blog enough, the buyers and sellers will see we are worth the money and not go to discount brokers that will end up costing them just as much. The upfront money then the signage and advertising costs the buyers money. The do it your self sell seems to be just a mortgage company with CSR's to cold call for the company. Most of the time there is not even a real estate agent involved. If there is the buyer and seller they both will paying more than if they went with a legitimate agent from a reputable company.

Lets cross our fingers that the business survives this technical age of do it yourselfers. Glad to be back from the mountains where I could not communicate with technology for a week.

Melissa~

Posted by Melissa Langridge on 07/10/2007 08:31 PM

Comments (17)

real estate rocks

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17 Comments on How Can We Sell Upside Down Homes and Have Buyers and Sellers Happy

JUL

2007

If they bought and the market goes down, That isn't a reason for them to go into foreclosure. The payment doesn't change depending on the value of the home. It only means that they need to stay in the home until the value comes back. If someone is willing to pay more than it is worth,sell it. But, don't expect the lender to take the riskfor the money above the appraisal.

I wouldn't cut my commission. Would you ask the buyer to pay you above the reasonsble rate for your area for selling it. What are people thnking? Values can decrease just like the increase.

OK I buy that. Good comment, I never thought of it in the way you put it. Do you mind if I use that as an example script for my listing appointent friday. I liked it.

Melissa

Melissa- I don't mind a bit. I think is crazy that someone would risk buying a home at a high ltv and then they would be upset because they lost value. They haven't lost any money yet , They haven't sold it.

Shaun Wren

Centric Mortgage.

You are correct and maybe they should wait and rent it for awhile? They know they made a mistake but want out in the positive, with a low appraisal looming. Thanks alot

Melissa

Shaun,

I think what Melissa is trying to say is that a lot of people, especially here in Florida, are seeing drastic increases in taxes and insurance. If the homeowner has these items escrowed, then yes their payments will go up. Then throw in the fact that some of them may have been put in ARMs that are coming up on adjusting, this would cause the payments to go up again.

In some areas of Florida, people who bought their home 2-3 years ago are seeing the property values drop back to what they purchased the home for. This would put them back to almost the LTV that they had when they purchased minus what little went to principle from their payments.

If they can no longer afford the payments because of the taxes, insurance, and rate adjustments (and heaven forbid they were put in an Option ARM that have forced them into fully amortized payments), then their only option may be to sell to avoid foreclosure.

But what you say is also true. A loss is only a loss when the property is sold, just like with stocks.

Melissa,

You do pose an interesting issue that will become more and more evident. I have been asked this very question by some of my realtors. How can they sell something when the seller owes more than what it is worth? My answer to them is find a buyer that is willing to pay enough to payoff the seller's mortgages or tell the seller that they have to come up with the money to pay the difference. As harsh as these sound, there is really not much more one can do. If neither option is available, then the seller needs to find a way to come up with the extra monthly income to cover the increase(s). As soon as they let themselves go 30 days late, they have made it that much more difficult to buy a new home after selling. Hope this answers your question.

Never drop your fees, especially in this market. If anything, increase them. Reason... it is a tough market to sell in right now. Tell your sellers that you have to spend extra time and money to market their home and make people want to buy their home over the thousands of others that are on the market. You will do everything you can to get their home sold and remind them that you do not get paid until the home sells. If it does not sell, you are out the money, not them. The only time I can see an exeption to dropping the fee is at the closing table because one of the parties is just shy of money. I know I have dropped my fee a little because the borrower was short a couple hundred dollars. If I did not drop the fee, then the deal would have died.

I see alot of buyers who see real estate values drop and want to short sale to get out from under, but they still need to live somewhere and real estate beside being an investment is also a place where people live.

JUL

2007

The upside down house is the above home exactly , Florida is having a hard time. I do wonder if they rent for year if it will turn around and allow them to get something out of the problem.

It's sad and the listing appointment I have is one of those they bought it for a price it is not comping out at.

If they pay me commission it's another big dig in their pockets. I am really sad that this has happened to people and hate charging them even 4% because I know they are paying it above the price. But I have found another agent will not sell it unless I put 2.5 in the MLS.

Hard question and I don't know the answer in good conscious yet.

Melissa

For what it is worth I am getting consistently higher fees in an area where a discounted fee is quite common. I have also eliminated almost all newspaper advertising. Remember, in any business it is not just what goes in at the top... what is important is what is left at the bottom...or as an old Greek gentleman used to say... "da guzintas gotta be bigger den da guzouttas"

In a market where prices are stable or perhaps declining, where there is commission pressure it is not possible to operate without strict control of the expense side. An additional expense cannot be buried by escalating prices giving higher commissions. (By the way the same is true for builders... they cannot bury errors or overruns with price increases... for some a new concept).

Many of these buyers that bought 100% financing got an 80/20 loan with the 20% at a variable rate and it did go up. I have a variable rate home equity line. It started at 4% and is now at 8.50 % I agree you have to offer a normal co-broke or the home may not get shown. I do not know the answer just that I have had to turn down listings that could no afford my services. I generally will give them a 1% break if I sell it & normal rate if it is a co broke. Just adjusting to this "normal" market

Yes, I can try but there must be an alternative for the Seller other than a short sale. For a short sale to work they have to be behind in payments. They don't want a foreclosure on there record. And they want me to sell it with open houses and the whole package. If I charge them a flat fee it would be as much as 1-2% anyway. It's not much of a discount.

Melissa

Ok , I have read enough to open my mouth again.

Look, buying a house is the biggest Investmentthat most people will make in their lives. The key here is that it is an INVESTMENT. Not all investments are moneymakers. There is some degree of risk. As a Realtor is it you fault that the values has drooped? No. Will you feel sorry for the seller yes.

Let me put it into perspective:

If you buy a car- over time it will decrease in value. You take your car to have a part put on.

It doesn't matter what the parts cost or what the car is worth. It could be a Kia or a Mercedes. It doesn't matter. you are paying for a service.

As a Realtor you are providing a service. How can you go to your next customer and say I have to charge you the going rate because you are not in a financial hardship?

It is very hard on the realtor either way and the Seller and the Buyers looking for good deals. How far down will the Sellers have to go? I heard it will bottom in December? I just have a house listing friday and I am scared to take the listing if I can not atleast get 5%, it won't comp out and I am taking a gamble too. Or I can't advertise it if I do it for 3% and give 2% out.

Thanks Shaun for you comment you have a valid point

Melissa

Melissa, why take the listing if it won't comp out? If you do you will eventually have to face facts and get the buyer to lower the price so you are delaying the inevitable. Or they get rid of you and you don't need to worry about a discounted fee but simply no fee and expenses. IF you get lucky and you sell it then what happens when the appraiser comes back and says no way... you still have the same headache only now it is bigger because you have buyers and sellers and other realtors.

As to Shaun's comments I agree with where he is going. B ut I do disagree on one point. The point of a home FIRST is to live in, shelter and all that good stuff. It is not primairly an investment though it si the biggest purchase most people go through. You don't live in investments you retire off of them.

Perrin- if you put money into a home wouldn't that be an investment? Are you not hoping the purchase that you are making would go up in value and someday you might pay it off an leave it for a relative or keep it as an asset?. An investment property is something completely different. It has higher interest and even Moe Risk to the Lender.

The point that i am trying to get across is this. If you bought the house and the property value drops, you should still expect to pay full price for the service of a Realtor that will provide you with full service..

If you are not Buying a home as an investment, You would be better off to rent. No upkeep, no taxes and no risk.

JUL

2007

i agree the loss isn't real till the home is actually sold. Are you seeing a lot of this? Great Post

I am seeing it too much, The last two listings I got this week are upside down, and I am just working with them so everyone comes out okay. I make my commission variable and give out something fair. I take whatever I can get over them breaking even or we compromise on something. I have to have everyone try atleast to make the numbers work.

It's the only way we can change some things

Melissa

JUL

A home is a HOME FIRST. The investment aspect, though perhaps significant is not why you buy. It may be a reason but should not be the main one...you buy a home to live in, because of what you can do with it, you buy it for security...both financial and personal. you buy it to enhance your family. ONe of the problems with the market earlier is people started looking at a home first as an investment then as a home.You paint a house not because it is going to give you money back (because it won't pay for itself...usually) or you remodel a kitchen (again you wont get most of that back either) because of what the do to the home/house. Investments are stocks, businesses and income property. The average person is a poor investor. You buy a home to live in and the long haul will usually make it a wise financial decision. Close but not the same thing...