We get at least one call a day at my office on short sales. It is really amazing how many people - professionals as well as potential sellers - do not even know what the term "short sale" means. This blog assumes you have actually worked a short sale already -- if you have -- or if you are curious -- read on!
For the short sale to work I like to think of the process as the coupling of a trilogy.
#1 - you need to have the Seller who can no longer (maybe never could in the beginning too!) afford the mortgage payments.
#2 - you need to have the Lender that you can convince is better off with a short sale than to take the property through foreclosure.
#3 - you need a Buyer that can close at a price agreeable to the Seller, the Lender and the Buyer.
The market is in such a state in South Florida, that there seems to be plenty of Sellers and plenty of good intentioned Lenders. Finding the Buyer is now becoming the challenge for the selling broker. Yes, there are plenty of agressive vultures that will severely underbid the property, but finding a real buyer that will make an offer that is close to the selling broker and lender's advisor BPO (Broker Price Opinion) is really not for the faint hearted in these times!
As a result of these increased pressure to find buyers, the listing brokers are finding they are wasting time - their time - in preparing for the lender the short sale financial package, including the hardship letter and the seller's tax returns, financial statement and back up material. These brokers are finding they are better suited to do what they were trained to do - get listings, service their customer, and find buyers through marketing.
If you are a broker that is doing short sales, is thinking of doing short sales, or has done short sales and had a horrible experience -- then you should consider using a professional for the short sale package preparation and negotiation with the lender. There are plenty of "short sale firms" that promote doing this work and you can find them on the Internet and even on ActiveRain. Be sure you find out the cost - without beating around the bush (like we get paid by the lender at the closing). You need to be sure you know up front what they are getting paid and how they are getting paid -- and if the amount seems to cheap to be true -- then find out why. No one does all this work for nothing or next to nothing!
You as the broker need to protect your commission and you as the broker for the seller have your duty to get the best price for the seller -- even if the money is all going to the lender.
Keep your professionalism intact and don't be a jack of all trades. Outsource where necessary and you will find the short sale process an interesting and not necessarily a more stressful way to keep your financial statement in the black during these difficult market times.
Copyright 2008 Richard P. Zaretsky, Esq.
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 article 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.
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11 Comments on SHORT SALE TRILOGY
Thank you Richard. I know they are coming. I enjoy how you write with such clarity.
In my community there really hasn't been much in the way of foreclosures but they are coming I am sure we will all be encountering this in our markets. I have taken 2 courses so far but I like your suggestions about working with a professional or short sale package. My firm will be rolling out a course for us that will include CEU's as well but I am just going to take in everything I can in the meantime. I do want to get paid for my efforst. Best to you in 2008.
Reminds me of a quote I saw on here recently.
If you think hiring an expert is expensive, wait until you hire an amateur!
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Anyone considering outsourcing their short sales should also be aware that many companies charge an evaluation fee up front - Short sale companies seem to be popping up all over the place.
I've seen fees vary quite a bit - flat fees; 20 - 30% of the listing commission, etc
I've been adding a negotiator fee to the HUD of 1 to 2% - depending on the deal.
Great quote Erby.
I"ve had some experience with two different 3rd party short sale "negotiators" and have found their work to be less than satisfactory. As the listing agent in several instances, I handled all the paperwork with the bank and worked directly with the seller and buyers' agents.
The so-called added-value provided by the 3rd party consisted of them calling the short sale dept of the bank and sporadically reporting status of the case. Since they didn't provide weekly reports, I started calling the lenders myself to stay on top of progress.
Typically, the 3rd parties reported milestones such as, "file has been assigned to a negotiator", or "appraisal has been ordered", a week or more after I had determined this myself. On one occasion, I called the bank and was told that updates were needed for pay information since what they had was out of date (file had been sitting for so long) and I contacted the seller to get the information to the bank. The 3rd party never notified me that additional documents were needed in order to keep the file moving.
While the 3rd parties purportedly save time and hassles, most of the administrative work was still on my shoulders and the phone call to the bank once a week is not that hard.
I was recently offered by a short sale company a 30% commission for being a Realtor for them. It was a lead here through Activerain I thought this was a misprint so I sent an E-mail. But it was not and here is the response:
Hi Paul,
That is correct. We offer 30% of the commissions. We are providing the lead, you have possibilities to double end, and you have possibilities to gain more prospects from the listing. Please let me know if you are interested.
Thank you,
Marizol Moreno
Short Sale Processor / Negotiator
The Williams Law Center
Direct: (323)580-2437
Fax: (800)673-7319
Sorry but I work hard for my money so I was not about to give up 70% of my commision. Amazing!
Paul
Yes, amazing!
Do attorneys get to share in a real estate commission in your state?
Richard, you are providing an invaluable education to ALL AR members. Thank you.
At Paul and Richard,
I am the Realtor that works with this law firm. They basically negotiate and process my short sales. I am one of their top producers and they usually go out of their way to assist me, specially when I receive out of state listings, hence the reason they were reaching out for me. Basically, these are opportunities for Realtors who know the value in receiving a lead and maximizing that lead to grow their business. The Realtors that we select are savyy Realtors who go in to this partnership and want to generate additional leads from sign calls, open houses, referrals, possibility of double ending it and ultimately want to assist in helping a homeowner in a distressed situation. The reason we only pay out 30% to the listing agent is because we handle everything with the seller as well as with the bank for the short sale processing and have additional fees to pay out. Hopefully this is a better explanation for you.
Best of luck in your business Paul. Have a great 2011!
Lily Sibrian
Foreclosure/HAFA & Short Sale Certified Realtor
Doma Properties
Many attorneys in Florida will work for 1-1.5% of the sale price - provided it is guaranteed by the listing broker. But they cannot split the commission as an attonrey in Floirda cannot share commissions unless the attorney is also a licenced real etate agent.
I don't like contingencies on legal fees in this scenario since it appears to me to be a conflict of interest and could influence the attorney from doing what was abolutely best for the client (which sometimes becomes something OTHER than a short sale.)