March 9, 2008
Why do Realtors fail at short sales? There are arguably hundreds of excuses, but really only 10 or so REAL reasons.
1. Lack of Ability and Knowledge
Short Sales for most agents represented the new chic way of making money in a volatile, foreclosure laden real estate market. So, they took a 2 hour class at the board, became duly knighted "short sale experts" and off they were to conquer the masses. Unfortunately most found that trying to perform short sales without the knowledge to do so was like picking up a baseball bat and trying to hit a Roger Clemens fastball.
You can take all the baseball classes you want and unless you have the knowledge and ability to perform, you are never going to hit that fastball. People train for years to become great at their "profession". A (2) hour class does not qualify you as a short sale expert.
2. Lack of Experience
Experience is the best teacher. I believe I have read that somewhere. there is no substitute for experience. I believe I have read that somewhere before as well. How can one call themselves and expert without having any experience in the chosen field of expertise. I have changed the oil in my car before, it hardly makes me a mechanic.
However, at least I have changed the oil! How many real estate agents decided to get involved in short sales without ever having completed one in their real estate career? Here's a hint...over 90% of the licensed real estate agents had NEVER successfully completed a short sale prior to 2007 (source: MBA). Where did all the experts come from?
3. Laziness
In order to be an expert at anything you have to continually train and practice. Have you ever played a competitive sport? Training and practicing are not paid activities. But they are absolutely necessary for you to complete in order to raise the level of your game. No slow, fat, weak kid ever succeeded in football. No slow, weak, fat realtor is going to succeed in short sales.
What amount of training and practice have you engaged in prior to attempting a short sale? What was you daily regimen of fine tuning your game? Yet, you bought some business cards and slapped the words "short sale expert" on them and bamboozled your way through the last 7 months trying to feign being a "short sale expert". How did that work out for you?
4. Trying to Find The Shortcut
There is no short cut for success. As the great Vince Lombardi once said, "the only place success comes before work is in the dictionary". Short sales are a lot of work. It is not a field for the faint of heart. You need the knowledge, the strength, the ability and the perseverance to succeed. There are no shortcuts except to failure. Sending all offers to the bank for "3rd party approval" is a fools game and an immediate sign that you do not know what you are doing.
Where's your comprehensive short sale package? Where's your loss severity analysis? Where's your regression analysis? Why did you list the property incorrectly? What's this stupid addendum your broker is telling you to have singed?
If you have not prepared all of the requisite documents and reports and submitted them correctly you are destined to absolute failure.
5. Lack of Personal Incentive
Everybody already knows that the commission is one of the first items that the bank is going to try and knock down. Well, if you know that going into the deal and that's the sole source of your revenue then you need to be prepared that you may make a little bit of money or none at all if your commission needs to be struck in order to save the Client from foreclosure.
That's a cold hard reality pill to swallow but if you decide to be a "short sale expert" then you should not be surprised by this at all. don't take a short sale listing if you are not prepared to possibly reduce or eliminate your commission.
What we see and hear quite often is Realtors saying that"it's too much work" for what you get paid doing a short sale. Too bad! You're the expert, if you don't know how to make money in short sales, stay out of the game! If you are truly an expert and have the knowledge and experience, you'll make money.
It's those who do not that have commission issues. But..who cares...not our problem. Accept it or get out of the short sale game and do your best to sell something else...LOL
Related article: Urgent Short Sale Deal And The Lender Has Already Approved The Price
6. Picking The wrong Properties To Represent
Despite what you think..every property is NOT a short sale candidate. There are very specific properties that make for ideal short sale candidates. Do you know how to find them, what to look for? I thought you were an "expert". Short sales have to be identified via prospecting based upon a very strict criteria. Most of the agents whiffing on their short sale deals are doing so because they are finding the right deals to work on. They are spinning their wheels hoping to put a square peg in a round hole.
Let me ask you a question, do you know anything about demographics, psychographics ans statistical analysis? If you do are you applying that knowledge to your selection criteria of short sale deals that you want to get involved in. Simply put, with millions of people in foreclosure, cherry-picking is not a bad thing.
Our closing ratio is so very high because we are EXTREMELY selective in the short sale transactions we decide to get involved in. We don't go rushing out the door to take every listing just because someone calls. Our time is much more valuable than that. Besides, we already know the most likely of short sale opportunities will be accepted.
7. Subscribing to The Rumor Mill
Would you ask your friend, neighbor, or broker to tell you how to open a parachute if they never have skydived before? Heck no! So why are you asking associates, friends and other brokers how to do short sales..they don't know either! I read so many postings on Active Rain and other real estate blogs about short sales and it amazes me how many people ask for advice and how many people proffer advice on a subject they know nothing about. Unplug and learn how to do short sales correctly from people who can PROVE to you that they know what they are talking about.
8. Lack of Adequate Due Diligence
Have you read the annual report of the bank that you will be asking acceptance of your short sale from? Do you know the level of their non-performing asset base? Has Moody's lowered their credit rating? What are their stockholders saying? (there's an easy way to know) How many REO's are they sitting on..nationally and in your area? How many foreclosures do they have pending? Have they properly filed their Court documents? Was the mortgage sold?
I could go on and on and on with the amount of data that a true short sale expert obtains to validate and support their request for a short payoff. If you are not doing at least the minimum of what has been asked in this section then you are truly not being an expert and you are showing that you have not even performed a cursory level of due diligence.
9. Lack of Focus
Short sales require a lot of communication and extensive follow-up. Many agents are not even affording their short sale clients a modicum of attention. They are either working on other deals, prospecting for new leads, working a second job...whatever! Short sales are time sensitive and require special attention. How many calls do you miss? How many offers do you not respond to? I can't tell you how many times we have had to re-fax offers or incessantly track down agents who fail to respond. This is absurd. A homeowner is about to lose their property and they entrusted an agent who may or may not ever be available.
10. Playing God With Lives
This short sale dunce is the worst. This is the agent who actually calls back to tell you that he received your offer but he:
a. The offer is too low and the bank will not accept it
b. We need to place the offer on a form he understands
c. He has an addendum that he requires and it tells me we have no contract even after it's signed (yes..received one and laughed)
These agents in my mind should be bound, gagged, flogged and left in the public square in stocks naked! They should be exposed. They represent distressed homeowners and try to inject themselves into the transaction as if they had some importance and time after time we see good people represented by crappy Realtors going to the gallows of foreclosure without so much as a concern by the Realtor. Shame.
They have nothing at stake, it's not their loan, not their property, and if they do not make the commission they want then they could careless. I personally have seen this and have had read about it on numerous real estate related social networks. If you'd like I can send you the links to the posts attributed to these vermin posing as real estate agents.
10. Lack of Negotiation Skills
If you do not realize that you are in a negotiation you have already lost. Do you understand what the field of loss mitigation is? Do you know how many levels of collection there are and what goes on at each level? Do you know what each level is trained for? Do you know the experience level of your opponent? Maybe you should go to Monster.com and search "loss mitigation executive" and see what kind of experience and knowledge you have to have in order to be a Senior Loss Mitigation rep at a mortgage lender. Then compare that criteria to your resume and let me know how you measure up.If you do not know the various techniques and strategies for negotiation and have not been trained as such then you are vastly unprepared to engage in such negotiation and you are hardly an expert.
Bonus: Fear of Reputation
I often hear from those involved with short sales that they are concerned with how foreclosures and short sales are affecting the overall real estate market and economy. They also fear that negotiating strongly with the bank for the best possible deal is some form of bad karma. this is business people.The short sale expert already knows how low a bank is willing to go. The Short sale expert already has the knowledge that the loan amount is inconsequential to the amount of the discount or final judgment.As for the impact on the overall market?
Hey..don't we keep hearing that real estate is local? If all that is selling in a market is the REO's and short sales then those sales represent the true market value. Trying to stave off a short sale by not competently executing and negotiating the short sale ensures the continual drop in the market you seek to avoid.
FYI...what do you think the bank is going to do with that property when your short sale fails? Do you think for an instant that the bank cares about your local real estate market and the impact their low priced REO is going to effect? A true short sale expert understands that this type of property needs to be looked at as a commodity and it is apparent that MLS boards and the like are trying their best to bandage the wounds caused by the tsunami of foreclosures and it's not working.
Bottom line, if you are not comfortable doing a short sale the right way, from listing the property correctly, to performing all the steps necessary to get the best price for your BUYER then you need to step out of the game. It's the BUYER that you need to be kow-towing to in a short sale. A true short sale expert understands this wholly.
Super Bonus: Can't Attract Buyers
Yes...it's all about the Buyers. Without a Buyer in a short sale you don't have a short sale. It's that simple. If you are not marketing to Buyers properly..you're done!
The Seller is DOA at your listing sit. They can't make any money. Their only other alternative is bankruptcy. They have absolutely no control in the transaction. Their credit is going to be ruined if the property is foreclosed. The 1099 issue and deficiency judgment issues are what they are and a true short sale expert knows how to properly explain each. So what's the problem?
Why are agents listing properties at full value or around full value? You are not going to draw out most buyers at that price. There is so much inventory the price has to be low enough to bring out a real Buyer. Notice I said "real Buyer". A real Buyer does not and would not walk away from a great deal. He does not have to. Why? Because if the short sale is executed properly and is accepted he would be a fool to do so.
Short Sales are viable, they work and you can generate a great deal of revenue from them. The problem is that most agents will not take the time to obtain the skills to be successful in this arena. Unfortunately, they are slow to exit the game as well. If you are going to be involved in short sales, please, by all means, do them correctly or have the decency to get out of it completely.
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