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A "short sale" is an option NOT an entitlement!!

Call Broker Bryant today!!

"Short sale". The new buzz word. We've all heard it:

"I owe more than my house is worth and I WANT to move. I'll just ask the lender for a short sale."

"I don't want to live here anymore and I need to do a short sale."

"I want to take a new job up North but I just bought my house last year. I need to do a short sale."

"I'm tired of making these payments and want something smaller. I need to do a short sale."

"I quit making payments because my lender said once I was behind 60 days I could do a short sale."

"I NEED.........blah, blah, blah!!!!!"

Folks did you notice all of the "I" in these statements? What is wrong with people today? What happened to personal responsibilty?

As REALTORS® we need to start counseling people properly. The folks in these above scenarios DO NOT qualify for a short sale. They need to honor their obligations. As a group we need to quit saturating the market with "short sales" because folks feel they are entitled to one.

A "short sale" is for folks that are experiencing financial difficulties and who cannot afford to keep their house. It is NOT for someone who just feels like moving.

Now having said that, these folks may very well apply for a short sale and it may be granted BUT it is flat out wrong!!

The real estate market is experiencing enough difficulties without REALTORS® automatically playing the "short sale" card just to get a listing. You need to look these folks in the eye and say "Sorry, I can't help you. Short sales are for folks facing legitimate financial difficulties. NOT for folks that just want to move."

A "short sale" is great option for folks who are in dire straights. It is NOT an entitlement. Use it but don't abuse it.

OK.....that's all I have to say about that. For now. What say you?

Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 01/11/2008 12:45 PM

Comments (48)

short sale, educational, short sale series

Originally posted at: Selling Poinciana One Property at a Time.: A "short sale" is an option NOT an entitlement!!

48 Comments on A "short sale" is an option NOT an entitlement!!

JAN

2008

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Blog Boy...

You and I both knew it was just a matter of time before 'short sales' turned into nothing more than an escape clause.

I really do hope other's in our industry will grasp this concept.

Advising Seller's to abuse short sales is just going to create another uncontrollable monster.

P.S. Yah. I know. I am a bit serious on this issue. Shhh :)

TLW...ROAR!

OK BB...feeling a little grumpy today! Which hat are we wearing? Actually as always your right on!

Ok, I agree but it seems that over half of the country is in this postion?

Short sales are not for those couples who are going through a divorce so they can hurt each other.

I have a case where the husband (a doctor) has defaulted on the house (about $80,000) so he could add to her worries. The 2^nd on the house and the defaulted amount will not satisfy any of the lenders so even a short sale is not going to save this couple. Vengeance is a sad resolution.

You hit it right on the nail. People need to take responsibility for their decisions.

Good post. I have a client that mentioned Short Sale to me. He said his friend suggested it to him. Problem is , just like you mentioned, he is not having financial problems. He is having personal problems about wanting to move closer to his job.

Bryant- We only take short sales on listings that warrant it. Over one third of the houses for sale are in a short sale mode. I think people should take responsibility for their decisions and choices. But if you listen certain politicians they are promising to bail these bad decisions out, blaming everything and blaming the free market and capitalism.

It goes much deeper than just not wanting to own up to your bills and choices.

The sense of entitlement is a disease that is spreading in our country and will turn this wonderful free market into a socialist country if we are not careful and we do not accept responsibility! Katerina

A big golf clap for BB!!! There are so many fraudulent short sale transactions going on in the valley. It isn't hard to spot. A new one is where the seller is selling to a relative like a SPOUSE or CHILD. ARE YOU KIDDING MEEEEEEEEEEEEEEEE???????????

Multiple multiple multiple BPOs are being ordered for short sales now. I just had one tenant ask me why I was the third doing a BPO this week after he told me he was buying the property. I didn't know he was the nephew until I explained that banks are trying to catch fraud and a good value on the house. Then he told me he was the nephew. Do you think this is right or fair? I don't!

Banks are getting screwed daily because people get away with it. The REAL people in dire straights cannot get help because of garbage like that. I have turned down many short sale listings and just two weeks ago I decided to become a short sale agent because I am sick of the antics currently being pulled with the list agents and fraudulent buyers/sellers.

I think people need to decide if all of this is worth wearing orange jumpsuits and picking up trash on the side of the road.

Renne, And there you have it!!! Selling to the relative on a short sale. FRAUD FRAUD FRAUD!!! And it is certainly going on. Do a google search for short sale and you will see folks teaching this stuff. There are even companies that will negotiate the short sale then cut a deal where you can still live there. The deal is they will then split 50% of any future equity. Unfortunately we are only seeing the tip of the iceberg for short sale fraud.

Bryant, I couldn't agree with you more. This is a pervasive problem in our society -- people are not held accountable for their actions anymore. Instead they're held up as victims.

Joe, "Problem is , just like you mentioned, he is not having financial problems. He is having personal problems about wanting to move closer to his job." I hear that every day. As REALTORS(R) we need to be aware of these and not participate. This is the beginning of another crisis if we all don't wise up and do the right thing.

Katerina, I'm just like you, very picky I who I choose to work with. I did a property search today for a potential buyer today and in the price range I searched every property that showed up was a short sale listing!! 128 results with 128 short sales!!!. That's what sparked this post. Then I read a post earlier from a member of AR asking how we handle sellers that want to relocate but owe more than their property is worth. Half the comments at the time were just automatically suggesting a short sale. Why? She never even mentioned anything about a financial hardship, just the fact that they wanted to move.

Right on target, as usual. I believe we, including the media, are quick to throw out "short sale" like it was some magical solution. And we, as real estate agents, need to be a little more honest with folks.

BB,

On target, as usual...I've had this conversation with a gentleman in the last month, and I counselled him that although it's not a good feeling to know that you owe more on your condo than it is worth, you are financially obligated to keep paying the mortgage! Short sales are not an easy out, they are a last resort! He was certainly capable of making the payments. At least he understood and is continuing to pay his mortgage....

I'm not sure people recognize the future credit implications of doing a short sale, either; or do they just not care??!

Cheers,

Heather

Bryant - It is wonderful to see that someone has the chutzpah to call a spade a spade. It will be a fine day when we end the abusive relationships we have with all the systems in place to promote our economy.

Just I just say "Amen" and move on. Yes, I did !

Oh, I so agree with you! I remember when I sold my home to put my kids through college my CPA told me that most people would have filed for foreclosure rather than pay off my exceptionally high credit card debt. But, I felt obligated to pay off all of my debit and sold my home to do so! My debt, My responsibility!

I think a lot of agents are going to be spending a lot of "spinning wheels" time pursuing short sale listings. We're listing one this weekend because the lender advised the owner to do so. She already has the docs.

But, real agents don't create short sale situations.

Geez. Now we have a new mortgage fraud category, seller short sale fraud.

What next?

BB, You are right, but of course you know that. I receive calls all the time from people who want to know if they can qualify for a short sale just because they don't WANT to pay.

The entitlement mentality is a real drain on our economy. Just think of all the litigation that arises from the entitlement mentality.

Excellent commentary. Just like anything, some people will find a way to abuse the system for personal gain. I don't think personal responsibility has completely gone out the window; it's just that the minority is being very vocal looking for someone, anyone to give them what amounts to a handout.

BB -it's amazing that people can look at short sale as a "financial strategy" that fits their current situation. Why people forget that debt has to be repayed, or else this economy will stop functioning in its usual capitalistic ways. That won't help anyone.

BB - I am constantly amazed at the real lack of personal accountability. Entitlement seems to be just what these people think, and not just about the short sale they desire so they can do something else. What is wrong with people these days?

Ann

So true about the clients needing education. Unfortunately, a lot of agents need educations too. And with the banks constantly changing the rules, and each bank having different rules, we need constant re-education.

Everyone's a short sale expert these days

Yeup!

BB, My head is spinning - no I'm not Carrie! We've all seen the plethora of short sale ads and classes as you've suggested. You're right, too many of these don't fall into the category. And I've heard as well of the agents going after the short sale listings. As much as I can say that I've seen it coming, I never really thought about all this supposed short sale fraud that we're going to see. Oh Yeah! More crap for the books!

BB - I've heard a few comments that make my blood boil. Some see it as a way to escape their responsibility or to go do something else, without understanding what it means OR the implications. This needed to be said. Thanks!

Jeff

BB - There are some who have no other alternative. It's called hardship. A hardship is not an "I want" situation. It's a matter of need resulting from a catalyst other than personal motivation. Problem is, there are far too many agents so anxious to take a listing that haven't a clue how the system works. They're taking short sale listings encouraging these people to jam up a system that is already overwhelmed with legitimate short sales.

We do quite a few short sales in our office. Probably about 40 of them are currently for sale with our office at this very moment. Only 1/3 or so will actually get approved and result in a sale. So even if the seller wants one, odds are pretty high that they will not get one granted even if they price the property to sell.

If the seller lied on their orignal loan application and then tries for a short sale, the lender will refuse the short sale nearly 100% of the time. The lender finds out they lied when the seller provides their financials with the short sale paperwork.

Actually, many "investors" are opting for the short sale route; which I agree is flat out wrong. Some people got into the market hoping for a huge profit while the market was heading to the sky. Needless to say, many were left holding an empty bag, upside down investment. These "folk" should not be eligible for the short sale! Lenders need to unload non-performing loans- secured by devalued properties. The lenders were responsible for the loans and appraisals that prefaced the loans. I guess the lenders have some reponsibilty here too.

JAN

2008

BB,

To me what you said in your statement tells me these people could probably still make the payments but they just want out of a pressured situation. In my my mind the only reason why someone goes and attempts a short sale is if they truly cannot afford to continue paying and they owe more than they can get on the market and they don't want to sell for less or they have to bring the money to closing because they will be up side down. It is to relieve you of the debt that you cannot afford to pay and to avoid foreclosure. It's sort of the last alternative if it is really true. It's just an excuse to get out of something that maybe they never should have done in the first place...leave the short sale to someone who really needs to do one. The ones who actually live in the home...not the investors who just want out because they are lsing money on an investment...I have purchased many investment properties and unless it was the last resort...I wouldn't do it.

I had one short sale this year and it was what the people absolutely HAD to do. We tried to get more for the home for over 6 months. The house just could not get the type of money they had to get to pay it off. They could not afford to be there any longer. When peoples incomes change from disabilities or Job loss, they are put into a situation where they HAVE to sell.

Like everything else thoguh, it seems people are always trying to find a way to exploit the system.

Hi guys. Very good comments.

Rob a 30% closing percentage is actually not bad from what I have been hearing. I decided today to start charging an upfront fee at time of listing for all short sale listings. I figure since the closing percentage is so low I need to get paid something upfront for my efforts. It will also help weed out the sellers that don't want to participate. They need to have some skin in the game.

A "short sale" may very well be a viable solution for folks that truly have a hardship. But if they don't we need to let them go. We need to quit recommending and taking short sale just for the sake of getting a listing. Be picky. Make sure the sellers understand all the ramifications of choosing this route and make sure they are motivated to work with us to get it done.

I agree completely. I have 2 short sales now, both for legitimate reasons. One was hurt on the job and cannot work (he is facing 100% disability) and the other lost her husband to a car accident and cannot afford the payments on her own.

The problem is that their is no accountability on the sellers part. They don't have to pay taxes on the difference, their credit can be cleaned up easier and they can walk away with no penalty and buy another home in a few months at a reasonable price and lower payments.

Also there are no set guidelines/rules for a short sale. Each lender decides yes or no when asking for one, and there requirements can vary from one end of a football field to the other.

Unfortunately it seems that short sales are running rampant, and the sad thing is, for homeowners who are sticking with it, they are also getting hurt by declining property values.

BB, the only one I've dealt with is one in which the seller was entirely deserving (and in arrears) of a short sale opportunity, and it was a NIGHTMARE (ending in a foreclosure). I cannot imagine dinking around with the hysteria, the non-answered phonecalls, and the B.S. for someone that is no way, no how going to get the short sale. With banks getting more realistic, perhaps someone will enjoy the effort- it is not going to be me.

JAN

2008

When someone calls me about a short sale, I make sure that they actually need it! I tell them that if their situation doesn't warrant it then more than likely the bank want allow it. I then give them all the options they have and how they can turn this into a positive for them and the market.

Hi folks. I've spending quite a bit of time this week thinking about short slaes and my strategy moving forward since there are many short sales in my area. I'm trying to look at these from all angles so I can develope a plan that will give me the best opportunity to enter this market area without wasting a lot of time any money on deals that won't close.

I plan on writinmg about this topic this week in more detail, so stay tuned.

Well, I agree that some of the Owners are idiots for always thinking they can just opt for a "short sale" (which may or may not be the case--they most of the time need an actual hardship) but I am even more ticked at the agents who have never done a short sale (or even a pre-foreclosure) that think that the Owner deserves a short-sale when those Owners are investors (and have multiple properties) or if the agent feels sorry for an Owner just because of whatever. It's even worse when companies from all over the US want to charge a "referral fee" to local agents to list a "short sale," which, if it even goes through, is going to have the commission probably lessened by the bank anyway.

Well, I like your idea of charging an up-front fee for short sales. Excellent idea. Otherwise, I don't know what to do about short sales. I have a lot more thinking to do re: whether to continue to list 'em or not. Good post, as always.

BB, I've beaten this horse until it died. Maybe they will listen to you.

And an aside to Renee, "equity stripping" is a felony in almost all jurisdictions.

Bill Roberts

I put in my short sale listing agreements that if we don't sell their property, but help them work out a deal with the bank (modification, forebearance, deed-in-lieu, etc.) that we get paid a $1500 fee for our efforts.

We all must be held accountable!! Why have we lost that and where did we loose that? Our country was built on accountability...Boston Tea Party .... and yet now we seem to think it doesn't matter. It does matter! We are accountable for our debts!

Thanks for the blog and the comments are also an education (d i v o r c e) oh the details can be ugly!

JAN

2008

Our country was built on strong values but in todays society our government has created so many escapes for individuals to be rewarded for all the wrong actions. Then these people abuse the system.... there are people who do really need help because something bad has happened beyond their control ...like losing your job and illness. Then individuals who work hard are picking up the slack for these individuals. Crawling off the soapbox.

BB - What's crazy to me is how the general public and even many real estate agents didn't even know what the heck a short sale was 2 years ago!

Now people think that they have an extra option out there... ESPECIALLY SO CALLED INVESTORS!!! The banks aren't going to roll over and play dead ya know!

P.S. it's confirmed that Countywide is being bought out by Bank of America. THIS major change, should tell most there is a lot of stuff shakin these days!

JAN

2008

God morning BB..I agree that there are many who are using the short sale as a fix all rememdy...actually most fail, and go to auction...We are working on quite a few, the majority of mine are abandoned homes without tennants......We take them as normal listings, and work them as well as possible....Remember my last posts about all the listings for short sales with bait and switch pricing...I still get mad about all the listings being shown at a price that it cannot sell for without bank approval...and as we have stated, most do not get approved....

Sorry about pushing my old agenda here again, it still drives me nuts

AUG

2008

BB - great points - I had one recently that the bank agreed to work with and they still want a short sale... it is CRAZY

DEC

You agents are getting what you deserve for helping to manipulate this market to it's fraudulant peak in 2005-06. 20 years of appreciation in 5 years is fraud!

You knew what the mortgage companies were doing, and did you really believe people could continue to make the payment after the teaser rate was over?

Home loans were handed out like hot cakes to every idiot on the street!

Armagedden is here!

JAN

I love to listen to people step up on the soap box and preach.

"People need to learn responsibility" "Where is the accountability"

Question: Where were all of the "enlightened and moraly irreproachable" agents and brokers a few years ago when normal people were being approved for these insane loan products on these over-inflated properties? I'll tell you where 99% of them were... in their nice cars driving to the next showing or to the next closing. I knew a LOT of them.

Just because you're in the real estate business and educated in the field doesn't mean everyone else has the same knowledge and expertise not to be taken advantage of by shady lending practices. I think everyone will agree that people need to take individual responsibility for making a bad decision, but at the same time, the lenders/agents/brokers who participated and reaped the rewards of executing the transaction for these people need to take some responsibility as well.

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