Real Estate Blog - ARE YOU VIOLATING THE REALTOR® CODE OF ETHICS WHEN YOU LIST A SHORT SALE? A RANT.

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ARE YOU VIOLATING THE REALTOR® CODE OF ETHICS WHEN YOU LIST A SHORT SALE? A RANT.

* * * * WARNING! HARD CORE REAL ESTATE TALK * * * *

DID I GET YOUR ATTENTION? GOOD! THIS IS SERIOUS BUSINESS!

WARNING? TAKING SHORT SALE LISTINGS WITHOUT SHORT SALE KNOWLEDGE IS SHORT SELLING THE CONSUMER! As the real estate market continues to adjust, there are many home owners who are in need of real estate brokerage services of agents who are competent through training or experience in Short Sales. However, day after day, agents with no short sale knowledge or or experience are taking listings, entering them in the MLS without the competency to manage the short sale transaction.

There have been many articles on ActiveRain written by agents and brokers with short sale listings experience. I am confident that most ActiveRain members would research this speciality before taking short sale listings. However, on a daily basis, while researching homes listed for sale in our MLS, many of the homes listed as "short sale" are not property prepared to accept an offer to buy. What results is repeated complaints that "the bank has been sitting on our contract for ____ weeks (you fill in the blanks).

Our MLS has a listing category for SHORT SALE. Short Sale listings can be searched and identified. In addition to the listings in the SHORT SALE category, many have "third party approval" in the Agent Remarks, which is a clue, although this same language is also used for relocation company owned listings.

While short sale listings are a small percentage of our total number of active listings, they are in the news and prospective buyers are running in to these listings on the Internet and in the media. The home buying consumer sees short sales as a buying opportunity. We can't blame the consumer. Short sales can, indeed, be a buying opportunity, especially in my market which is still about 25% higher than the average home buyer's qualifying price range. The number of home owners who are "UPSIDE DOWN", is small, but they may be in dire need of competent real estate advice.

AGENTS WHO TAKE "SHORT SALE" LISTINGS MUST KNOW WHAT THEY ARE DOING. Over and over I hear of listings advertised as short sales. Yet when we inquire about the status of the short sale package or approval, we are met with comments such as

"What does that mean?", or
"Can you get it?", or
"Why don't you just send the offer to the bank?", or
"The owner wants a contract first before telling the bank.", or
"The owner has some things from the bank but doesn't know what to do."
"I didn't know the seller had to qualify for a short sale."
"What Short Sale package?"
"There's no hardship. They just want to sell."
"You can't ask me about my client's lender."

BUYERS AGENTS AREN'T PREPARED EITHER. Agents are submitting offers on short sale listings with "drop dead dates" in the Contract of Sale. Or, they are providing letters of pre-qualification with brokers and no underwriting. BANKS ARE NOT STUPID. Offers with "drop dead dates" are going to be dead on arrival. Pre-qualifying letters need to be more than the usual "Mr. and Mrs. are pre-approved and this letter means nothing."

Agents shouldn't be writing contracts for short sales and agents shouldn't be presenting offers on short sales when they don't know what they are doing. Taking a listing or writing a contract for which an agent is not qualified is a disservice to the consumer we strive to serve.

The sad fact is that agents are taking listings for homes for sale from home owners in distress or thinks that they qualify when they may not. The agents are putting the listings in the MLS and just waiting to see what will happen. THAT is not good representation and may also be a serious violation of the Code of Ethics.

The consumer expects a listing agent/broker to be competent in the discipline in which they are hired. When taking SHORT SALE listings, REALTORS^® must be competent in that discipline. Anything less is a violation of the Code of Ethics.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Article 11
The services which REALTORS^® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.

REALTORS^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)

Standard of Practice 11-1

When REALTORS^® prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following:

identification of the subject property
date prepared
defined value or price
limiting conditions, including statements of purpose(s) and intended user(s)
any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
basis for the opinion, including applicable market data
if the opinion is not an appraisal, a statement to that effect (Amended 1/01)

Standard of Practice 11-2

The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR^®is an agent or subagent, the obligations of a fiduciary. (Adopted 1/95)

Standard of Practice 11-3

When REALTORS^® provide consultive services to clients which involve advice or counsel for a fee (not a commission), such advice shall be rendered in an objective manner and the fee shall not be contingent on the substance of the advice or counsel given. If brokerage or transaction services are to be provided in addition to consultive services, a separate compensation may be paid with prior agreement between the client and REALTOR^®. (Adopted 1/96)

Standard of Practice 11-4

The competency required by Article 11 relates to services contracted for between REALTORS^® and their clients or customers; the duties expressly imposed by the Code of Ethics; and the duties imposed by law or regulation. (Adopted 1/02)

Courtesy Lenn Harley, Broker, Homefinders.com, 800-711-7988.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 03/26/2008 02:58 AM

Comments (145)

short sale

145 Comments on ARE YOU VIOLATING THE REALTOR® CODE OF ETHICS WHEN YOU LIST A SHORT SALE? A RANT.

MAR

2008

LENN - I couldn't agree more. There are so many agents that are taking these listings and really have no clue as to how to deal with them. Often times, the agents don't even indicate it on the listing, so I've been given an extra step now, as I have to verify that the listings are not short sales before making appointments. I have warned buyers that they can be in for a lot of frustration with a short sale, but some are willing to take the chance.

Whats even more frustrating is when your sellers' don't get you the paper required in a timely manner...

There are so many agents out there that are totally clueless on both the seller side and the buyer side. Pretty scary.

In Georgia you may be engaging in the illegal practice of law without a license. There was a ruling last March that there are too many implications in directing someone in a short sale if you are not an attorney!

Adam. It's driving me crazy. We have to call on every listing wtih "third party approval" and the agents know nothing beyond that. They are playing it by ear.

Michael. If the sellers don't cooperate with their own short sale, we can drop the listing. What is worse is when the agents are taking these listings, putting them up and not giving sellers good service.

Rob. It is, indeed, scary.

Jim. Very interesting. In my area, when one of the agents in my network takes a short sale listing, we do have an attorney review. We move these things. If the offer doesn't come in right, it goes back. We do not send junk paper to the bank.

Lenn, I couldn't agree more with your rant. However, I will play devil's advocate for a second. I've spoken with several sellers who have spoken with their lenders who turn around and give permission for them to talk with me. When I get the loss mitigation person on the phone, all they want is an offer before they'll discuss a short sale. I point out that I need to know if the owners qualify before I spend my time, money, and energy marketing a property for them not to accept the offer. Some don't care about all the paperwork I have the owners gather and send in, they just want an offer. Granted, this is not all of them, but it has definitely happened to me more than a handful of times with different lenders.

Lenn...what a great post. I am located in an area that has been totally destroyed by short sales....or at least the mis advertisement of them. Our local board does not know how to handle it so they have chosen to just do nothing. Over 44% of the homes listed in my area under $200K are short sales...talk about a mess. We have so many starving agents that are talking people into these sales and they have no clue what they are doing. They read an article in REALTOR Magazine about how to make money in short sales...ugh!!! Or they get snuckered into going to a get rich quick in short sales seminar and then they are off marketing specifically for these listings....grr!!!! most of these people listing their homes short don't even qualify for a short sale.

Your words are much better written than mine on this subject and I appreciate your knowledge

Donna. Interesting. I've heard that happen but never experienced it. My question would be, are the sellers still current with their mortgage payments?? Once the seller misses a payment, and if they are really qualified for short sale, they will, it gets the bank's attention.

Kristi. You're right on the mark. Florida is in bad enough shape without agents loading the MLS up with "short sales" that aren't.

This is like everything else in real estate, isn"t it? I blame the brokerages for a lack of training and/or supervision. All aspects of what we do, whether a short sale or not, effects lives and competency matters. Alas.

Lenn - Thank you very much for this post. I was set to close on a short sale on March 20. The Listing Agent told me the sale had already been approved by the bank. The agent continued to rush me in everything we were doing and wanted the closing to be set asap. After my buyer and myself did everything we needed to do, yet, the sale had not been approved. It was very uncomfortable explaining to my buyer. After a lot of prayer we should be closing on Friday, March 28. I could not agree with you more. Realtors should be competent in dealing with these types of sales. I became very knowledgeable with the help of a "true" short sale specialist regarding short sales. I wish everyone would.

Lenn,

Good post!

Personly I've never seen "Article 11 section 11-1" enforced except after a REALTOR® loses a civile or criminal action. It's too bad this isn't enforced it would be good for the public and the REALTORS®.

I don't understand how the MLS allows you to post listing when you can't necessary deliver on a full price offer.

The consumers, the banks, the debtors, and the REALTORS® would all be so much better off if the REALTORS® would learn short sales or "not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth".

All my best.

Bill

Lenn, I have had the same experience as Donna. When we do the Authority to Speak to the Loss Mitigation Dept, they send the package and I have it all ready to go. The hardship letter is written but the banks will not entertain or say yes until their is an offer, an appraisal etc..

That is why the package when it is ready to go must have everything 100% in order.

I hope the newspaper picks up on this one! I am soooooooooo sick of listing agents who don't have a clue! If you don't know what you are doing, refer it to someone who does. PERIOD. I have no doubt that will see some short sellers, who lose their home only to find out later that their agent was incompetent and there will be lawsuits. (As well there should.)

Lenn, the last one I had rejected like this, they were 3 months late and the lender had already sent them notices of a pre-forclosure and the sellers were going through a divorce and Mr. Seller lost his job... total sob story, and the lender wouldn't work with them. It's 4 months later, and they would probably work with them now since all the mortgage stuff has gotten worse, but not 4 months ago, and they've already been foreclosed on now. Sister of a friend of mine. Very sad.

Lenn, I wrote a little piece yesterday about short sales and raised the minimum questions that agents should ask when they see a short sale listing. Currently I have one listing with an offer pending, another to go on the market this weekend and an offer out on a listing. I've gone to multiple short sale listing sessions and each time I make sure that I have all of the information ready before I list or offer. How many agents even know there is a new NVAR form for short sales that go with either listings or sales? Hmmmm anyone want to bet on that number.

Lenn- One of the differences in short sales has to do with the state the short sale is in, the lenders handle short sales differently in trust deed states than in statutory warranty states. Florida is a warranty deed state not a trust deed state. Therefore the short sales can not begin to be negotiated until there is an executed off by the seller. You see, the short sale lender holds NO deed to the property unlike trust deed states like Arizona. In Arizona an agent can get a short sale started without an offer. IN Florida the seller is the only one who can execute an offer. The third party lender needs to approve the sale but never signs an offer that the seller and the buyer signed.

We have lots of agents here who do not know how to do short sales. They should refer them to those who do know. I would happily give a referral fee to an agent who does not know how to do a short sale. In fact we take listings around Florida and split the listing 50/50 with agents who will market the listings and we will do the short sale part of the process.

The rules also vary from lender to lender and each one seems to be a new experience. I am fortunate that short sales are such a small percentage of our market that I do not have to deal with them much.

Lenn: I actually JUST received a call from a client that wanted me to look up a listing that had a notation that the "AGENT IS SHORT SALE EXPERT"! We don't see that often around here but, unfortunately I've made offers for buyers who have no idea that there is nothing out of the ordinary with the sale of the property! The agent has NO remarks and we've actually been ones to request the 24-hour answer! And, you're right--we got the big fat REJECT stamp! Had the listing agent disclosed this information, my client would never have made an offer on the home as they were looking for a quick Close!--a waste of my time and my buyer's time.

You and Katerina should get together and travel the country giving short sale seminars! You have no idea how few agents know ANYTHING about short sales!

Lenn, I get frustrated from my side of the transaction when there are delays on the seller/bank side which cause the buyer to extend a lock. aj

Lenn: this is such an important topic. I saw a listing and the agent did it the "right" way. The attorney for the seller attached a letter explaining in "plain" English exactly what would or would not occur - what would or would not be acceptable in an offer -- and fully explained "as is". I was impressed.

MAR

2008

Lenn - as always - offers sound advice and very valuable information. I couldn't agree more. We don't have many short sales around here and I have not undertaken to learn how to list them. HOWEVER - the reason I haven't tried is very simple: I'm a relatively new agent - and there are only a handful of people around here who know how to do short sales. Most would rather see the newbie try and FAIL MISERABLY then share their valuable knowledge with them. THAT IS WRONG! I don't trust the course work that NAR offers on this further than I could throw a piano and I can try to read about it on-line. But too much is at stake for me to take something like this on without someone mentoring me. Finding someone willing to do that would be near impossible. I could become competition and there is little motivation for the few people who know how to do this to help me.

Everyone needs to take a hard look in the mirror on this... did some of you let a newbie flail around deliberately when they had that listing? Are you the same people who complain that new agents don't know what they are doing and that the public doesn't trust Realtors? Then look in the mirror to see the enemy. Many long-time agents simply want to hog it all for themselves and this contributes to new agent incompetence and the bad reputation Realtors have in general.

As to newbies that take on the short sales without proper training - I understand why you did it - particularly if you are in an area where getting a listing is tantamount to striking gold - but THINK ABOUT WHAT YOU ARE DOING TO THE SELLER...Their financial lives are in your hands. I know you are starving and I understand that a lot of agents are hard asses that want you to turn that hard-earned listing over the them...but there is an awful lot at stake here. If you don't know what you are doing - REFER IT OUT but demand a very fat fee for doing so - particularly if the agent you are referring it out to refused to help you list it yourself. Do NOT do this unless you are very sure of what you are doing!

Lenn - This is a very informative post. I agree agents should not take listings they are not capable of handling. The stakes are high for the sellers; such emotional , physical and financial stress. I is only right that these sellers should expect competent service from their Realtor.

Having worked outside of real estate I can look at the real estate industry from a different angle and I have to agree with some of the points Ruthmarie made. In some agencies the failure to mentor new agents leads to incompetent actions which in turn give the profession a black eye. Some experience agents just don't see the big picture that sharing information will be beneficial to all in the long run.

Thanks for bringing this subject up for discussion.

Hi Lenn,

Great post. The crisis is real. Sellers and buyers are misinformed and agents need quality education not get rich quick seminars. Thanks,

Bravo Lenn.

I've been approached in the last 3 months by people that I know wanting me to give advice about short sales and listing their homes with that in mind. I've declined both and explained "I am not experienced nor knowledgeable in this." Both people I have referred to someone who does have the experience and the knowledge to guide them through it all.

I'm also a wee bit tired of seeing "Short Sale Specialist" tags on ads and websites when there is no follow-up language to help a consumer understand why they are self annointing themselves as specialists. (Is there now a designation? Accounting classes? College courses? Experience?)

Lenn - I know of an agent who tells people to just let their house go, they can sell it at a loss and let the mortgage company or bank eat it. She also tells them that a "short sale" won't hurt their credit. She calls every distressed seller a short sale. This is not a new agent either, she has been a broker for over 22 years. It embarrasses me...

Short sales are not worth the time and trouble. Nobody wants to jump through the hops or take the time so most of them fall apart after we spend a lot of time on them.

I don't know how many times I hear an agent say ...whats a short sale? They better know what they are doing before taking one on. They take patience and they are all treated the same as all the other ones on the pile.

Lenn, I had the very same issue with my first short sale that Donna did. The bank refused to even speak to me without a contract. It could be that the sellers were current with their payments so the bank did not really care.

I now turn all short sales over to an attorney. Most of the time they will negotiate with the bank for my client and charge no more than their standard fee for closing. I'm NOT a lawyer and have no desire to act like one.

Lenn, great post. I only with my brother-in-law, an agent in California, would have read this prior to convincing my sister to sign on with him. My words fell on deaf ears, and being so far away I wasn't able to stop it. Que sera.

Lenn: great information about short sales. There is much to much at stake to have inexperienced agents dabbling in short sales. Dealing with the Loss Mitigation Agent can be a different experience with each bank but an agent who takes on a short sale should know the basics and more! I have to agree to Donna Harris. Some lenders do not care to sign any agreement until there is an offer.I think Countrywide was like this.

I currently have a short sale listed and so far we are not getting anywhere with the bank. My seller has a relative who is an attorney and I keep suggesting that he call the bank. It is frustrating and a lot of work to try and get through this.

I know on other seller who 30 minutes before his closing was still trying to get the bank to agree. Sometimes they don't think that something is better than nothing!

This is interesting...I wonder if some of the banks are not responding for the simple reason that theya re hoping the borrower will come up with a solution..since I am on the comercial lending side I am wondering-is a short sale listing taking place during the wrokout phase between a bank and a borrower/potential seller? If so the real estate agents could be spinning their wheels. I do know that most baks are extedning workout terms by more than 6 months because theya re trying to minimize the real total writedowns that come in the form of bad media coverage tot he banks and Wall Street brokerage firms(ie Bear Stearns). I suspect banks are even extending work outs because they are inundated and way behind in dealing woth foreclosures.

This was a great blog.....it just has me thinking of so many things. I now see how these short sale scams are also hurting the good name of realtors! I'll be revsiting your blogs.

Kindly

Charles G Hennebeul

Owner

American Cash Solutions Inc

http://www.activerain.com/amcashinc

http://www.mybuildingfunds.com (commercial loans only-under construction-currently accepts applications for our Stated Income/Stated Asset commercial loans in the formof a regular 1003 application as required by one of our lenders)

Lenn, I would say it is definately a violation of the CoE. But that won't stop any body from doing them. Shorts sales are rampant in my market. Just about the only things selling are short sales and foreclosure. Makes it real hard for the regular seller that just needs to sell.

Miriam. I agree completely. Brokers have the responsibility of supervision of their agents. Agents have the responsibility to associate with brokers who offer the brokerage services the agents need or want. Too many agents are selecting brokers based on the commission split and not considering the training and services offered by the broker.

Sonya. Your experience is repeated daily throught the industry. IMO, sooner or later, a few buyers or sellers are going to be filing complaints with the state licensing authorities or lawsuits. Sooner or later.

Bill. Agreed. Agents need to learn the processes or stay out of that segment of the business.

Missy. Banks may vary in their processes, but it's the listing agent's responsility to get the bank's procedures for that particular deed and manage the transaction. We know that different banks have their own procedures. My point is that agents shouldn't even be taking these listings unless they are competent to manage the listing when they find that bank's procedures. I know agents who are taking 10-20 offers on short sale listings and just sending them to the bank. They don't even eliminate the clearly not qualified buyers. I spoke with a buyer yesterday who called complaining about a short sale offer that he made with an agent 3 months ago. Good Grief, he's a contingent buyer. Neither the listing agent nor his own buyer's agents understandsa that the bank is not going to approve a contingent contract. I sent him to his agent's broker. Buyers are just desperate for some help. Sellers are too. I made one short sale listing referral yesterday to an agent who knows what he's doing.

Sandra. "If you don't know what you are doing, refer it to someone who does. PERIOD" Absolutely. Absolutely.

Donna. Sometimes the owners just don't know how to get the good representation they need. And, sometimes there is just nothing that can be done.

Cindy. You're on the ball. Indeed there are too many agents with no knowledge just "trying". I submit that they are in violation of the code and are putting themselves and their broker at risk.

Katerina. You clearly understand the short sale process and also understand that there are differences from case to case. I cannot for the life of me understand how agents can even take these listing with absoloutely no knowedge. And my personal beef is agents representing buyers with no knowledge. It's making my job harder and harder.

Randy. You folks in Hawaii seem to have the good fortune with the real estate market and, of course the weather.

Debe. I believe that a short sale listing is material information and should be disclosed. We don't want to be writing on short sale listings for buyers whose lease ends in 25 days.

Alan. I don't know why anyone would be locking in with a short sale.

Joan. I would be too.

Ruthmarie. I believe that agents should get information and training from their broker, not other agents. Other agents are our competition and they need all of their time and energy to promote their own business. I suspect that agents need to get some training, then work with a few buyers on short sales before taking on listings. Refer them out to experienced agents and watch. But, it's not fair to expect other agents to mentor unless someone offers. Even then the associations don't always work out well. It's the broker that should be doing this.

Jennifer. What I dread is the complaints against agents and brokers when buyers or sellers believe that they have been damaged by the actions of an agent.

Paddy. I agree. Thanks.

Kris. You are so right. the "short sale experts" are crawling out from under the same rocks that the "foreclosure experts" came from.

Linda. I'm not sure I understand what you wrote, "let it go and sell it at a loss". The only way a owner can do that is to bring money to the table. A short sale on the credit report means several months arrearages. Not nearly as bad as a foreclosure. But, not good either.

Russ. I suspect that there are "a few" in Michigan. They can take time.

Neal. Me too and that same agent will take a listing or write for a buyer on a short sale seller.

Jim. You're smart. It's often wise to have an attorney involved in VA. My short sale referral agent in Northern Virginia takes the seller right to the attorney first thing.

Forget short sales; at this point I would be happy for competence on either side of a regular sale. ;-)

Our office just implemented a short sale policy to make certain all agents are educated about the process.

Lenn - I hope Realtors(R) reading your post take note and think twice before taking a listing. We are here to serve our clients and disservice is upon a client when real estate agents taking listings, such as a short sale, pre-foreclosure or foreclosure without the knowledge and expertise in this field. A violation of the Code of Ethics.

Amen. And thank you for the reminder to these agents that their lies in MLS are in violation of the COE. I know the agent that Debe mentions above, and am turning him in at every opportunity. It's a disgrace to our industry and a complete disservice to folks who are in a financial bind when they get one of these hucksters 'representing' them.

Interesting blog. I have not been in the real estate business forever but I have been trying to learn all that I can about Short Sales. I have one short sale listing now. What I am hearing from other Realtors dealing with short sales is that no two short sales are alike - which can make training and "knowing what you are doing" hard.

The one I have now is through Bank of America. I've called and called their Loss Mitigation people and gotten passed around. No one at the bank seems to know what they are doing in regards to short sales. My seller has not paid his mortgage in probably 5 months now, we have not received any notice to foreclose or anything from the bank. I think they are simply so backed up, its flying under the radar. When I did finally get ahold of someone at BOA who knew something, they said they did not even want to hear from me again until I had an offer. I had one at one point, and when I called BOA back to tell them about it, that I would be sending it over, they said it could be 3 months before I'd hear back on it. 3 months?! The buyer will find a way out if they have to wait that long. It's really a problem that I'm sure many banks are facing. They need to hire more staff to handle all the short sales, or they are going to end up eventually with a ton of foreclosures on their hands if they cannot settle a short sale in a more timely manner. They wouldn't give me a "formula" to use either as far as how much under value they would accept, which would make life easier. Anyone else frustrated with the banks? You try to do all you can as the Realtor but without cooperation from the bank, its useless, and the client suffers.

The 2nd paragraph in your blog, under Article 11 states: "...unless they engage the assistance of one who is competent on such types of property or service..."

Clearly, if someone is not competent, they should either refer the business to a competent colleague, or engage the assistance of a competent team member, or Team Leader, or Broker in Charge in order to deliver competent and professional service to their client.

Lenn, I was doing short sales and foreclosures in Central fl for about a year.With six months of intensity..I can't tell anyone anything except MOST listing agents do not have a clue, and even if you do get all your ducks in a row, there is NO promise of getting the deal done. So I walked away from tons of open files with what was left of my sanity. My advice for real buyers is to deal with the banks after the auction, they will definitely want to sell it then, afte they have run their process thru and collected on their insurance....Further, on no less than 3 homes I was pursuing with all due diligence, the homes went into auction and were taken back by the lenders......Who then hired an REO agent to spend money and fix them up, and then sell for less.........

Lenn, I say pick your battles, I will take a home that can be bought, clear title, with a cash offer in 2 weeks or less over months of maybe, maybe not..... In Fl there are sooooooooo may to chose from, why bang your head against the wall.....Also, for those of you who think foreclosures are bad, try working bankruptcy courts for property...Bring your own Valium

Like Kris says: there should be a designation for this. Short sales are polluting our MLS and it's wrong for someone to take these on without the skills or a great mentor with the knowledge!

Lenn,

It amazes me how many agents get short sales and foreclosures mixed up. Even with all the articles and reports available, agents still don't take the time to educate themselves.

Great posts. The problem here is getting to be like agents throwing mud against the wall to see if anything will stick long enough to put $$ in their pockets. The market under 200k is saturated with short sale listings -- and, based on our experiences working with buyers, you're exactly right --some of them should not be on the market right now.

The reality is that we will soon be immersed in the listing side as well. Past clients, etc., in trouble have started to call. Research and questions and more questions and systems are the key for us right now. Also a commitment to only take the listings where the lender and seller appear to be on the same page. We've been very leary of the so-called short sale experts and seminars .... it seems to me the key to serving the needs of your clients is to be willing to bring in others to help facilitate the transaction. And as we all know, spending money on attorneys is not in line with many get rich quick schemes :).

Should we refer these listings out to a "loss mitigation specialist." Probably. But how do we locate one that is truly a specialist? What are the criteria? NAR has been of limited use so far and the local boards have brought in Floyd Wickman guys to give a course.

At best the course will tell you how to do it ... but the better lesson would be IF you should do it.

Getting all these troubled loans, and upside down properties "off the books" feels like a mountain the market has to climb before we can stabilize .... but I'm curious ... I have a sneaking suspicion that part of this short sale frenzy is based on all the bad publicity about the loan crisis and the homeowner's urgency is in part caused by the fact that they know this is an option. OPTION, not necessity. We had a man tell us that a local agent had advised him to skip a couple of payments and then they could bail him out of his house (which he bought at the peak of the market with no money down). He has no problem making the payments .... he just wants out of a bad investment. Bad business all around.

Very good post. I myself pass on a short sale and give it to another agent who has all the experience

Lenn - it's nationwide at this point, that agents do not know how to handle short sales.

Many listing agents do not know to prepare all the paperwork prior to taking the listing. Then, buyers' offers won't even be considered by the bank because the sellers suddenly refuse to complete the financial paperwork. That happened to one of my buyers this past week - the listing agent had previously told me that all paperwork for the short sale package was complete. Deal lost. I have an upset buyer, and the seller will probably now face foreclosure. We may just pick up this house after it has foreclosed.

The complete short sale package needs to be completed PRIOR to listing a short sale on the MLS.
Buyers need to be informed that even with the complete package, it may still take 4-6 weeks or longer to receive approval from the bank. Buyers also need to know that banks are expecting to receive fair market value, or close to it. There will be a BPO or an appraisal done after the offer is received by the bank - before the bank will approve the offer.

Agents need to know all this and more. And educate their buyers and sellers. Or refer these deals out.
And, you are so right that the brokers need to be taking the lead on this and training their agents. From what I see, that is not yet being done.

You already know how I feel about agents with no clue trying to sell these. So to your blog, EXACTLY.

LENN- Short sales are NOT for everyone- you hit the nail on the head when you pointed out that there is a special protocol when dealing with bank owned Real Estate. It is a niche market albeit a widening glacier melting global warming one. Unless you have specialized in this from day one-seek competent assistance or stay in your area of expertise. Good Job Lenn!

Without reading all the comments here, I would also add that a short sale listing should say in the public remarks that there is no guarantee of price...

Lenn, great post as usual. I agree that this is definitely a problem, and here are a few of my opinions on the subject.

A standard needs to be set by Legislation, NAR, Lending Institutions, and Loan Servicing Companies. Once we are all on the same page things will be better.
Even a professional at short sales doesn't necessarily know how the bank or loan servicer is going to handle the deal. Every bank or loan servicer has different "rules and guidelines". Some want to jump on deals and some don't want anything to do with them.
When I got started doing short sales it was a relatively unknown thing, you had to jump in and learn by trial and error. There were times you had to walk the bank through the process! Not much has changed here except that more people now know the term and banks are well aware of what a short sale is.
If an inexperienced agent is thinking about taking on a short sale I would recommend they at least have a mentor (with short sale experience) watching over them and guiding them.
A common misconception about short sales is that it is just a pre-foreclosure. The deal may be a loss from the start with a bankruptcy involved, liens, etc. Essentially too many hands trying to get whats owed to them in the pot
Every single agent out there should have to take a class to know the basics and at least know why they themselves should or shouldn't be handling the transaction.

It's a very complicated situation and unfortunately nothing will change unless people & companies start getting fed up with the current way of handling these things.

Good post and very true. We have taken every class about short sales we can fit into our schedule. The classes all end up varying as to what to do as this is such a moving liquid market. Some things that worked 6 months ago are not working now. Agents have to continue to take classes and stay current to be most knowledgeable.

It's our job as professionals to learn and master our skills...we can't master everything BUT we can specialize...Short sale training is being offered all over the place in classrooms, online. To me I think it is disgusting for an agent with no short sale knowledge or experience to play with people's lives.

I agree with you that these are in fact code of ethic violations...and really if short sales consumes a huge part of your mls...do yourself a favor and the people you attempt to work with and get strong short sale training.

We have agents in our company who opt out...and refer it to those who specialize. Great post Lenn!

Hi Lenn,

The vast majority of $500,000 single family homes listed in San Jose are short sales today. This is bad news for buyers because the banks are overloaded and even if the listing agent does know what he or she is doing, many transactions are not getting to closing at all. It's not a good deal if you can never actually close escrow.

I've heard of multiple transactions where the bank took 2 months or longer to reply. With that $500,000 home losing value at perhaps 3% per month right now, the buyers aren't going to hang around and keep their original price. Why pay 500k for a home now worth, say, $470k?

Unfortunately, I see it getting worse here in Silicon Valley, not better. You are right that a lot of agents do not know what they are doing. But even among those who do, it's hard to get past the bank's lack of response or permanently full voice mail.

Kevin, you have to be logged in for your post to pick up your profile, as you put it... but you should not use comments on others blogs to advertise your own services... it is just bad manners, if not worse...

Lenn: Another great post... As an attorney who does handle short sales frequently of late, and as a broker with my firm, I can say that we run across many agents (and sellers) who think they can expect normal consumer reactions from banking institutions, and of course, you can not. Also, it is a common misconception that banks agreeing to short sales are selling houses at far less than market value. In point of fact they are expecting market price for the house, in our experience. This means that the house is selling at current market value. Not some huge discount... the nature of short sales is really not well understood by most agents. They are not the same as auctions, in that some auctions result in sales somewhat below market value, depending on the buyer pool in the area, and the areas awareness of auction potential... short sales are not this... they are a mechanism to sell a house at market price, even though the debt on the house is greater than market price... usually (but not always) this results from a decline in market prices...

In any event, great post as usual... hope you had a great Easter... and that Spring and Summer are strong for you...

So true, so true!! Lenn Thanks for the superbly written post. I was a buyer's agent of a transaction where the seller & the seller's agent did not disclose the short-sale. And the buyer would have understood if the communication was there! Thanks again for shedding the light on this issue.

Lenn - few brokers do that at ALL. Quite a few brokers do not have a strong background in short sales, so even if they did have the time or inclination - it could be the blind leading the blind. I know a handful of people who have done extensive work in short sales and foreclosure. They WILL NOT share information. PERIOD. They consider this their turf and would probably try to get anyone who had a short sale to simply hand it over rather then do anything to help them learn. If the agent refused, they'd just let them drown. Also, you should realize that in our area almost ALL brokers are competing. My broker - although he is an excellent mentor - is very much my competition.

Two issues:
NAR has to come up with education classes that are of higher intellectual value than Romper Room.

Competition notwithstanding. The lack of cooperation among agents is appalling. There WILL be new agents...GET OVER YOURSELVES and recognize that if you allow a new agent founder and fail - it reflects on YOU.

It's interesting that Jennifer (1 county north of me and former Westchester resident) mentioned that this was an issue in particular. Maybe some of what I am experiencing is a NY thing -or particularly acute in NY.

Paul. Thanks very much. Many of the short sales in my area are listed way below market value and the mortgage companies are negotiating from there. They are primarily in the lower and moderate price ranges. My Virginia listing partner does get an attorney involved early on. It helps. Agents in MD are not so oriented to using attorneys. There are other problems with MD real estate, but we're on the way to settlement with one next week. Thanks for the kind message and I hope you enjoy the Spring. We're in blossom here so you should be too soon.

Mary. I'm afraid that CA is a special case along with Florida. It must be in the water. We have not been hit that badly, but it is getting worse.

Midori. Thanks. The Associations have got to sponsor more Short Sale training. I'm not talking about someone trying to sell "how to make a mint selling short sales" either. I'm talking about short sale dynamics and the differences between the lenders and what to look for when someone is contacted about selling as a short sale seller. It's not as simple as taking a listing and hoping for the best because that owner is in trouble.

Bob and Carolin. Thanks. YES. We do, indeed, have to get all the traininig we can get.

Bryan. Good advice. It is that complicated. Once an agent takes on a short sale listing, they need to know what to expect when the offers begin. Buyers Agents need to know how to handle the contracts too.

Courtney. Good advice. The listings should also say if the seller is seeking Short Sale status. Many do not.

Kevin. You need to get your own ActiveRain blog and post your advertising on your own blog, not mine. Prowling ActiveRain for short sale posts and advertising yourself is not good business.

Paul, you are so right and I do apologize to you, Lenn and everyone here. Like I said I am new and with further reading discovered such. Unfortunately I cannot edit or remove my own post. Or can I? I guess it's a lesson learned as I'm certain I am not the only one that has made such a mistake.

I have since started my own blog also with an apology concerning my comments here. My comments were only to help with some conerns in and about this topic and not to spam or advetise. This topic is what I do, just as some of you are instructors, specialist, attorneys and realtors. It's how it came across I guess...

Lenn: Please feel free to remove my comments and accept my apology. This is a very good topic and of interest to me especially with todays markets.

Have a good day.

Sincerly,

Kevin Whitehorn

Allison. Indeed, agents with some experience can handle these things, but I believe only agents with significant transaction experience should undertake to list them.

Susan. Yes, agents should never take on clients that are outside their experience.

Don. It is nationwide, but not so bad in my area. What I'm finding though is that it's hard to find homes for buyers without running into a short sale in a selection of listings. Often the "short sale" is just a listing of a house for sale where the seller wants out. Since the listing agent doesn't understand short sale, the seller is hopeing for some relief that will never come. That's one place where agents are going to get into trouble.

Richard. You are smarter than the average bear.

Mary. You are in an area of many short sale listings and it's a tough market. You're right, many sellers are looking for a way out. It won't work. Banks are not taking short sales to help folks out. That's not their business. They are merely "mitigating their loss".

Jennifer. That one defies me too. Selling foreclosures is just like selling any other "as is" property. That one always tickled me because all of our properties are really "as is".

Renee. That's the first time I've heard that, a designation for short sales. Our boards here are offering CE for short sales. That's a start.

Mike. I don't find foreclosures bad at all. Just inventory. Bankruptcy sales, no problem, you just have to get the trustee to accept. All of these niche specialities are there and should only be handled by agents with experience. If a home owner contacts someone about a possible short sale, the agent should find a qualified expert and make a referral until they learn the nitty-gritty themselves. Clients shouldn't be used as training resources.

Kirk. We agree completely.

Laine. You are correct. The lack of service from the banks isn't helping. They need to invest in more personnel and training for these cases. The case load appears to be daunting for their clerks. Therein lies the problem. Clearks are handling the processing and the decision makers are remote and probably working by committee.

Leigh. GO THEM 'UM. Yes, it's hard but we can't have inexperienced agents representing our industry

Petra. I know it's hard in some areas to get training, but it's essential to at least know the fundamentals. Writing offers with drop dead clauses shows a basic ignorance of the process.

Cree. You can lead a family member to the bottle but you won't be able to stop them from drinking too much.

Lloyd. Read Katerina on this. Read Katerina for all things Short Sale. She has the MOJO.

Monika. The incentive is seldom there for the bank. They're in "loss mitigation", not income producing. That's why using them for the lending resource sometimes makes the difference. With Countrywide, it get's your contract a look, anyway.

Jim. Thanks for the comment. I'm laughing out loud. You are so right.

Kelly. I believe that is a very smart move for a broker. Good business too.

Charles. You bring up a very good point. Just what are the banks up to??? Could be they are looking for a bailout for the consumer from the government. They can keep waiting. The government has no money. They've already done what they could by pumping liquidity into the financial houses and Fannie and Freddie.

Whatever the government does will be done, IMO, only to buy votes. Banks don't vote.

Yes, I'm a cynic.

That said, when a consumer contacts me about a Short Sale, I do a financial analysis and, while they may have a "workout" with their bank, I haven't seen a single one yet that will be able to keep their home. What I see is just more interest accruing and interest on interest.

Bryant. You are in a disaster zone. Seems to me that listing agents in Central Florida should all be short sale experts by now. I wonder how many of them are advertising "Short Sale Expert". besides me.

I'm doing my first short sale right now, and lender delays have made the first contract fall apart. Any other short sales I will be tipping off to another agent in my office that specialises in them

Matt. Sometimes they aren't worth the time involved. But, some of them go down like chocolate ice cream.

And that just goes to show that running around listing or presenting offers on short sales is not the easiest thing to do. My client's insisted on looking at one...even though I explained some points....and we didn't get a definite answer on anything from the agent.....just to 'make sure' they could delete it from their favorites. It was NOT what it looked like in the pictures....and definitely not worth market value nor the wait!

Sally. In my area, they are often a pretty good buy. But, worth the wait? Only a short wait.

Lenn,

Great Post! We have the big problem in Las Vegas of agents taking short sales and putting ridiculously low prices on them with a chance of slim to zero of the bank accepting the offers and approving the short sale.

It's such a waste of time for everybody involved and it confuses the consumer from concentrating on the realistic deals priced properly.

Paul. What concerns me is the loss to our reputation when more and more of these transactions fail. The agent always gets blamed.

Great post, Lenn. Thank you!!

Couldn't have said it better.... I just closed on a short sale that took 6 months. I would give the money I made back (which isn't much) to not have gone through the ordeal. I had the CASH buyer and yet it still took 6 months. Reason being....agent worked 30 miles from the property....bank was in California, we're in Illinois. NOBODY knew what they were doing. I begged my clients to purchase another property, but that's what they wanted. Long story short, my clients had to get a dumpster to remove all the garbage in the home after closing. At closing....no keys to the home, no mailbox key, (it was a townhome), no association bylaws, no check for me but two made out to the listing office, and they cut my commission. Who am I going to complain to?

What a horrible mess!

Precisely why our Brokerage mandates Short Sale Training before Listing or representing Buyers in a Short Sale Transaction. Reputation is everything.

Would agree with that, just commented on a blog also about short sales. We have both been in real estate for a long time, and while we have had speakers touching the short sale issues, it is not enough for us to be out there representing our sellers. Until we have more knowledge in short sales, we will work along with someone who has more experience than we do. This is the market we are facing, and we all have to step up to the plate and learn a little more about the process.

Ravinder. My pleasure.

Ida. Sooner or later, the banks are going to have to figure out that if the agents aren't paid for their time, they will be either selling these things themselves or foreclosing. Competent agents will not work for nothing.

Paul. That is wonderful. That's the way it should be.

Earnie and Barb. You are right. The real estate industry must get a handle on this matter.

Good post. It all comes down to education for everyone involved. I had a short sale recently that closed start to finish in less then 60 days. It did help that the lender was here in GR.

Lenn,this is a very good and informative post on short sales. I agree. Real Estate Professionals who have never done a short sale shouldn't do it. However,I feel that if they do get one,refer it to a very competent and experienced real estate professional like yourself for a very good referral fee. Problem is so many real estate agents want to take advantage of you and give you some crappy fee or nothing at all. Thats why a lot of real estate agents don't refer them to their fellow real estate agents. Some real estate professionals are too greedy and not willing to help train newbies/rookies on short sales.

You can read as much books and attend short sale seminars all you want. But that doesn't make you a short sales specialist. Great post Lenn.

I did short sales a lot back in the mid 90's. But I've tried a few this time around and the banks are just so much harder to work with than they were then. It's like nobody understands what they're doing or how to make it work. It's easier for the bank to just put a home on the foreclosure track and let it slide along. That's why nobody much makes offers on short sales out here - just leave them alone a couple months and it'l be bank owned and much easier. Too Bad. But the agents you talk about are the ones making it worse because they are listing these places at ridiculously low prices and then have no idea on follow-up. A black eye for them. Thanks for your rant.

I stay away from short sales. I have no education or training in them. A mortgage broker offered a one hour meeting on short sales so I could find out about them. After all I have read here on AR about them I doubt anybody is going to be able to show me the ins and outs of a short sale in an hour.

I personally think there should be an intensive course along the lines of a designation. I doubt it would weed out all the incompetence because there will always be false experts.

Sometimes short sales can be a good thing. Although it depends on the subdivision and how it may affect property values, we need to move properties as much as possible to inject the crisis. I'm not saying make it your bread and butter but it's an option that does sometimes stimulate with positive results.

Lenn,

Quite honestly I don't know much about short sales but I have had 2 of them listed. The first one was drastically and criminally overpriced and is probably in foreclosure now. The bank only gave them 8% off original sale price. That was the crime...they paid $100k more than they should have. I was glad to get rid of that listing! Now I have a listing that I inherited from a departed Realtor. Original price $225k, when I took it over I dropped it to $199,900. The bank said they could go to $175k, then $159k. An offer came in @ 140k and the bank said they would not take any less then $175...huh?

Thanks but no thanks I'd rather just do normal real estate and let the idiot bankers drown in their own foreclosures. What really gets me is that the banks want into the RE business! Haven't they made enough of a mess?

Lenn, thanks for all the information on short sales. I have written two offers recently without knowing the sellers were taking the home back to the bank. Quite a learning experience.

Lenn, I see here in South Florida exactly what you're referring to and the truly sad part to it all is that an already distressed homeowner is the one who loses out as their chances of a successful short sale closing are slim to none - now that's a crime. I don't know how these agents lacking in the proper knowledge can go to sleep at night knowing that they're messing with someone's life by not properly representing the seller. So many look at short sales as the next get rich quick scheme. Geeze, I'm even seeing all these so-called training companies popping up offering agents training when they themselves are green behind the ears - another example of the power of greed.

Lenn, excellent. Yes, there are a lot of agents taking short sales that have no idea how to do a short sale and have not done their homework. Maybe it's time that a those who have the experience start writing about it so that all can become familiar and know what they are doing. That's what makes Active Rain so wonderful. There is so much sharing of knowledge and little finger pointing. I think that's why Active Rain will and has done so much good for our profession. We have become a helpful profession for our own kind.

I've wondered about this as well. Your point is a valid one. I also wonder how many agents are legaly exposing themselves by offering a listing in the MLS that may meet a ready and willing buyer with a rejection. Rejecting a buyer that agrees to purchase the home at the stated terms can be a recipe for a commission owed if the proper disclosures are not made in advance. Too many agents are taking such listings without fully realizing that not only are additional skill sets needed, but there is a need to disclose the factors at play. Excellent post, Lenn.

Lenn - this is an excellent post and good reading for all! I have no less then 3 offers out on behalf of Buyers, and it has been over 6 weeks with no indication of any type of response. Needless to say, one of the Buyers and I are going out in the a.m. to hopefully find an alternative ....

MAR

2008

Could you consider that the MLS is in violation of protecting the seller's rights by having a specific classification of 'short sale?' Doesn't that wave a red flag over the front door that the seller is stressed, has to sell, and will probably take a low offer?

As much as I agree that too many agents don't know what they are doing, most had never heard of a short sale two years ago. Our industry is on the job trianing. I'm not so thrilled with every bank either. One of the national banks flatly announces that they won't respond within two weeks, and usually doesn't respond for weeks longer. Others doen't know that laws differ from state to state. Another requires buyers to qualify with them before looking at an offer. Some want a HUD before you put it on the market, and then limit the commission for both sides to 3%.

I'm sending a HUD from a refi along with the short sale packet that shows that the loan originator charged $8,600 for an origination fee on an inflated $230K appraisal that the seller never saw, $900 in daily interest, and $3,100 paid on the back end, to show the lein holder why the property is just a little upside down. From my calculation, the seller overpaid about $7,000 in closing fees. I make my sellers raise their right hand and promise never to sign anything that they don't understand and don't agree with.

Lenn- Good rant. Many agents have no idea what the criteria is. Just because someone is upside down now does not qualify them.

Mark. Bingo. True. "Hardship" is in the eyes of the bank.

Mary Jo. No, I don't consider it a violation of anything to disclose that the property is a "short sale". When a buyer writes an offer on a house and there is a "time is of the essesence" clause, a closing date, etc. the buyer is entitied to the disclosure that there is a "third party approval" requirement. It's clearly material information and buyers may not be in a financial, tenancy condition, etc., to make an offer on a property if the dates in the contract are meaningless, which they are in a short sale.

Derek. I recommend that all buyers writing on short sale listings continue to search the active listings market and I want a withdrawal letter in the file in the event they move to another property.

Paul. Thanks. I believe the dynamics of short sales is very compicated and agents with experience of many transactions behind them will be better able to work with the surprises.

As for the suggestion that an offer can trigger a commission owed to the buyer's agent, I don't believe so. There are few situations in which the seller's commission would be triggered and it would have to be by contract default of the seller to the listing agent. Most listing agreements, which are a contract, states that the listing commission is earned if the agent produces a buyer meeting the terms of the listing, i.e., price, terms and conditions, and the seller refuses to sell. In that case, the listing commission is earned by the listing broker.

If the listing broker collected a listing commission based on a rejected offer, it would seem to follow that the buyer's broker would be entitled to the co-op on that fee. The question here is, when was the last time you saw a listing broker proceed against a seller to collect a commission on a rejected offer???? This is fodder for a full discussion. You need to write a post about it. It should trigger an interesting debate.

For me, my though is always, "What does the contract say"??

Buyer's agency fees are, I believe, earned at settlement, not contract. If a buyer defaults, they may owe their Buyer's Agency a fee, depending on what was agreed in the BA Agreement, which, we know most agents don't use and, therefore, have no claim to a fee unless settlement takes place and they earn the co-op. That works in about 99.9% of sales. In the one where the buyer defaults, the BA usually loses.

Gena. Absolutely. I suspect that a number of agents have learned some of the basics for short sale transaction management through these posts and comments, especially the comments.

Lynn. " chances of a successful short sale closing are slim to none - now that's a crime." THAT IS EXACTLY WHAT I'M CONCERNED ABOUT. Agents are leaving themselves open to board comlaints and even litigation for "Complaint for Damages" suits if they harm sellers by taking short sale listings and handle them poorly.

Kay. I believe that short sales are material information and should be disclosed.

SARA, SARA, SARA. This is the best comment of the day.

Indeed, they would be in "real estate by "Listing Mitigation" office. I love it.

Michael. Indeed. We're moving them slowly but surely. However, they take informed and patient management to help the buyers and the sellers.

THANKS FOR ALL THE COMMENTS FOLKS. THEY HAVE ADDED TREMENDOUSLY TO THIS CONVERSATION. I'm at a loss to respond any further because I've lost track of the comments/responses.

Thanks.

Isn't it the responsibility of every agent to have knowledge prior to taking on such a listing?

Ron. One would think so, wouldn't one?

What is so scary to me is that it isn't just short sales that some agents are clueless about. I am working with a Realtor that states he is an REO specialist. He is working for the Bank, representing the seller (the bank). I have the buyer and have found that I am having to do both sides of the transaction cause MR. REO is lost and the bank is calling me to answer questions for him....

sad but true.

daniel

Lenn - yes, I absolutely agree and would surely document a rescind letter on any short sale offer that was made, whether it had expired or not, and keep the paper trail of it.

OOH! If I hurry, I get to be Comment #100 on this fabulous blog. I'd ask for a prize, but the content is priceless.

Unfortunately, this one is gonna take a minute. You've pushed a button.

Lenn, I have had it up to my eyeballs with incompetent listing agents who are using distressed sellers as guinea pigs. A short sale is no place to learn the ropes without qualified assistance behind the scenes. This is only part of my soapbox. I am amazed every month that I look at the foreclosure list to see listings in MLS in which the listing agent had no idea the seller was behind on payments. Tell me, how the heck does that happen? When I offer the professional courtesy of letting them know the seller is in trouble, they are usually surprised by it. When I take a listing, my seller signs off on authorization for me to have contact with the mortgage company regarding the account. Any listing agent who doesn't know their client is in trouble, needs to use their license as kindling for wet firewood.

Where are the Brokers while all of this short sale shenanigans are going on?

Daniel. That could get rather sticky if they ask you confidential information or agency level information about your buyer. You're right. It's sad.

Derek. Ha! I always have a "Notice of Withdrawal" in my case files in case I need one. Always.

Amanda. Your comment is worth of a Featured Post. I agree. When a buyer's agent is called by the title company to inform you that the bank says the seller is behind in payments and the bank has accelerated their note, it's all over, unless there's some money somewhere.

This should be cause for license revocation, but nothing ever happens. Nothing ever happens. Nothing ever happens.

The last one I had, the listing agent tried to get me to reduce my fee to help the seller out. HA! My buyer sent a letter telling her of the complaint he would be filing with the RE Commission if the sale didn't go through and he wanted his agent (me) paid in full. She was scared crazy, got off her butt and arranged a short sale through the bank. It was tough, but my buyer got his house.

This is negligence, no due diligence. I have no sympathy. All they have to do is ask the seller if they are current in their payments and get a copy of the latest statement. For some reason, too many agents are afraid to embarrass their sellers. Geez.

And another thing I am seeing is that too many homes that are on the foreclosure list that are popping up with only one photo in MLS (if that many), hardly any description and no measurements. When I notify the agents of the auction coming up in a matter of weeks, those that tell me they already knew I will ask if more photos will be added. You would freak if you knew how often I am told no. I smell a rat and am tracking over a dozen properties right now to see who the next owner is. As Robert Dinero's character said to his future son-in-law in Meet The Fokker's, "I'm watchin' you."

We are also frustrated with the lack knowledge of short sale paperwork and the proper way to list a short sale on the MLS.

Agents that have not done a short sale before need to get with their broker and get the necessary training that is needed to insure that they are taking care of their client.

The Brokers need to get trained as well!

Okay, I'm done now. I promise.

MAR

2008

Not only do I not take short sales, I also do not encourage my buyers to look at foreclosures...I know nothing about it and tell them so. I do know that 99% of the foreclosures here are in horrible shape and need lots of work. Fortunately that's enough for my buyers, who only want "cheap" not the work that goes with it. lol

Goodness Karen. Foreclosures in my area are often the result of a mortgage resetting higher than the owner can pay on a 2 year old home in pristine condition and beautiful. These are not the old HUD houses. These are great homes that were foreclosed in a mortgage mess. We sell them and our buyers get very good value.

Amanda. Right you are.

Patty and Scott. Right you are too.

Amanda. I don't even know why these houses are listed. There's only one thing that can stop the process then, a pre-approved buyer or cash buyer. Often the listing agent doesn't even have communication with the lender. Often too, the owner has their head in the sand.

Lenn - there are probably a few homes that are pristine - but they get snapped up quickly. I remember my friend's home was foreclosed on, after they had done a good amount of work to it (new kitchen, fresh paint, updated bathrooms, etc. It wasn't pristine but in decent shape) They lost it because they didn't know how to handle their money, and it went for a REALLY good price - but those "nice" ones go VERY quickly. There aren't many of them either. Some of the foreclosures I've seen look to me like they were bought by wanna be flippers who ran out of money. One of the houses I looked at was hideous on the outside...and not very nice inside. Stinky...except the hard wood floors were GLEAMING. They got as far as refinishing the floors...and then lost the house.

Karen. We see them around here too. But, the foreclosures we're focused on are the new or newer homes purchased in 2004 to 2007 when prices were skyrocketing. Most were purchased by speculators, many agents and brokers, who intended to sell quickly. When the buyers dropped out of the market, they couldn't sell and found themselves upside down quickly.

Many have never been occupied.

They're foreclosed and selling for 10-20% less than the original owner paid.

Yep - that's what people are looking for when they are looking for foreclosures in our market - but they just aren't here. After my post, I did a quick MLS search to see - and currently we have 19 foreclosures - one of them is completely infested with mold, others have "need TLC" in the comments. Nothing in the "new" category.

One of the listings from a while ago cracked me up - the agent actually said in the MLS : "Not for the faint of heart...this home needs LOTS of work..." LOL At least she was very honest!

Karen.

Check these out.

http://www.homesdatabase.com/lennharley/LO6614932

http://www.homesdatabase.com/lennharley/LO6703363

Lenn, My position has not changed. Nobody should do short sales. Everybody loses. See my post Don't List That Short Sale

Bill Roberts

I really can not disagree with anything in your message. Great blog.

"In Georgia you may be engaging in the illegal practice of law without a license. There was a ruling last March that there are too many implications in directing someone in a short sale if you are not an attorney!"

I can tell you that in California, attorneys are tracking short sale transactions with the intent to sue agents for screwing things up.

Sometimes the short sale creates an opportunity to negotiate with the bank in a manner that benefits the seller. One example would be getting the bank to agree to NOT pursue a deficiency when a deed in liue or foreclosure would leave the seller open to that course of action.

In other situations, I have seen so-called "short sale experts" leave the seller with a greater liability than if they had just walked, but the agent is happy because they got it approved. Big deal. On what terms?

Many make assumptions that the bank calls all the shots. It doesn't have to be that way, but without an attorney well versed in TILA and RESPA, you are likely more the agent of the lender than of the buyer. If you are negotiating short sales without the assistance of an attorney, you are taking a huge a risk.

Bill. My position hasn't changed either. Agents who take short sale listings with no background or ability to properly advise their seller are violating the COE.

You are correct about the matter of the PMI. I keep telling agents that it is often better for the bank to simply foreclose rathern than go for short sales. Further, there is the matter of bankruptcy. Want to talk about a complication. I served as a bankruptcy trustee and this is, IMO, often the best route for a home owner to take. But, I won't go there.

MAR

2008

By now a short sale is a house hold word, I can't tell you how many people talk about short sales and don't even have a clue. I read alot of your comments and was surprised not to hear that agents don't first try to get the seller and the bank to communicate and to try to modify their loan, after all the listing is not the only thing as Realtors we should be offering to put quickly in the mls and post a sign.

My first concern is not to get the listing but see what I can do for my client. Most of my leads come from lenders who can't seem to finance and or re-finance, or even a short refinance can't help the seller. I have had success getting the seller to first communicate with the banks most banks don't want the property back.

Granted some lenders are very difficult to deal with, and the sellers have had a tough road when they can't first talk to the lender to see about modifying their loan. I usually try to set the tone, and then bring the seller back on board since I don't want to and or put my broker in a situation that might end up in a law suit for something I could have communicated to my seller. The bank wants to see initiative on the sellers part.

Usually by the time the seller comes recommend to me they are on their road to a short sale and they have already got their mind made up to loose the house. I recommend them to talk to their accountant especially if their second was to purchase toys and not for home improvement, since they could get the first and second forgiven but not the money earned on the second, and with the debt forgiveness on the second turns into a tax liability.

I feel if more agents try to help their clients keep their homes we wouldn't quite be in this mess, but so many agents are only interested in listing the house.

Great post.... I know I got carried away.... just wanted to express my feeling to really try to help the seller keep their homes.

Rod. Thanks for the thoughtful comments. However, you reinforce the premise of my post. Most agents are not sufficiently experienced to list short sales, NOR are they experienced to advise on mortgage matters when a home owner is in trouble. Further, you're walking a fine line when giving advice on anything other than real estate brokerage advice. If a real estate licensee begins giving advice in the sophisticated areas of finance, refinance that you're suggesting, they would simply be violating the COE further than by simply taking a short sale listing without knowledge and experience.

There is a serious disconnect between an agent knowing what can be done in the market place via short sale listings and the lending entity. The home owner is in the middle and knows little to nothing, may not communicate well with the bank and they may not even have mortgage instruments eligible for short sale or modification. This is far to complicated for the average real estate listing agent. That is why I'm warning them that, simply taking a "short sale" listing and throwing it in the MLS to see what will happen leaves the agent and their broker at significant risk.

I had a chance to follow your links to foreclosures Lenn - wow, ours are nothing like that. at least not the ones on the MLS. I suspect that there are some agents who have investors in their pockets and they get the listing sold before it even hits the MLS.

Lenn: I totally agree with you, I have talked to an attorney and understand the ramificaitons of helping a client with his finances, which is why I call and make the intial ocnnection with the bank and then have the client follow up, alot of times the client is frustrated when they first talk to the default loan department. I try to quickly review the problems and concerns of my clients and after talking to the lender, because every lender I have talked to they have their own requirements for paperwork to be filled out, and I like to get it filled out and back to the bank ASAP and have all the repairs quoted so after marketing the house at fair market value and then after two weeks with no offers I am ready to drop the pirce 10% plus the repairs. I always include in the MLS that the sale is subject to a short sale along with some other terms including the possiblity of commission adjustements, The state of California has a short sale addendum which I also have signed at time of the listing, once I have the listing I market the heck out of it, and when I get a buyer I explain the delays and the terms, I turn in all offers..... since the sellers has to agree to sell and then forward onto the bank.

It makes me upset that agents just treat it as another lilsting, this is when we need to expedite everything we can to make this a smooth transaction, now when I call the bank and tell them I have a short sale pending, all my paper work is in place and have full authorizattion to work with them.

I have one listing write now that the sellers have not missed any payments and there is no second, they have talk to the bank and they modified their loan, I current have the listing at market value ready to go in the event we have to change to a short sale, the sellers were doubtful they could keep the house, but with some work it looks like I might be loosen a listing and the sellers are going to be able to keep their house.

I wonder how much the requirements are from state to state, but since we are working with lenders and banks thru out the country they seem to have similar requirements.

Let's save thos homes for our sellers by being a good facilitator, they will refer you more business too and tell everyone what you did for them.

The banks should require some credentials when working with agents that our listing clients properties as subject to a short sale.

I had one agent who went on vacation and asked me to handle his work load, he had a house that was listing as a short sale and didn't even see how he could have helped his client, the house was listed as a normal sell for over four months, when I got it I sonctacted his clients and learned they were in dire straights for months due to medical bills and they allready told the agent they couldn't afford the home, unfortuantely the bank thought this house worth more than any CMA and or BPO was and even after I tried to convice then of the required repairs and to top it off I had a buyers agent with a solid offer, the bank didn't care about taking the house back, they thought the house worth more than the market would bare.... they lost there house, the lender was Litton, they were almost impossible to work with, I also had a buyer for a short sale on a triplex and we were in limbo for two months before the bank said that they wanted more money than the offered amount which was according to the cma perforemed a realistic amount and foreclosed on the unit. This unit was in so bad of reapairs that someone made a call and the health department vacated all the tenants, no heater in one of them, the tenants had to use their stove for heat. It would have been clean deal, now the unit sits vacant all boarded up....... go figure and all for $20,000 more.

Litton is hard to communicate with, and too many people are always handling the case, have you worked with them before?

that is why i attend almost every short sale class that i can, they are happening a lot and i want to stay current with any and all new policies.

MAR

2008

Rod. I've never worked with Litton, but I've worked with a number of financing institutions whereby the case was not handled by the same clerk twice. The easiest banks to deal with are the ones with employes who handle "files". The hardest are the ones whereby you have to speak with whichever clerk gets the call and pulls the record on the computer without any knowledge of the history. The clerks make notes to the computer but don't always understand what they mean.

Banks are doing a serious disservice to the consumer when they treat a mortgage acounty like an electric bill account.

Karen R. Foreclosures are not a huge percentage of our active listings. They are, however, in the news and buyers want to consider them, as they should.

Lisa. That will help you for years to come.

Fred. I really cannot disagree with your comment. Thanks.

This should be interesting.

What is the big deal now? The same Realtors(R) who sold these poor people the "investment" propertiesin the first place and had no knowledge of investment fundamentals in the first place. What are you going to do about it? Contact your local board and it costs you more to file a complaint against another agent than the other agent will pay in fines if the local board finds them guilty. Ethics mean nothing if there is no self policing and self enforcement process in place. In some boards you can be fined more for listing the wrong subdivision on a MLS listing than for an ethics violation. Wnless you personally plan on doing something big to stop this, what is your point?

Parked to haul away carnage.

Parked.

Good stuff, Lenn. Keep up the good work.

Dan. Thanks for commenting. I agree that there is little gained and much, time and money, to lose for a Realtor to file a COE complaint against another Realtor. However, having sat on Grievance Commitees, I recall that the consumer complaints were taken very seriously. Further, once a consumer complaint citing Chapter 11 is determined in the consumer's favor, that is powerful ammunition for a Real Estate Commission claim against the Guarantee Fund for damages up to $25,000 in my area.

Finally, a decision against an agent in Grievance or Professional Standards and the state Commission would be powerful ammunition for a seller lawsuit against a negligent listing agent and their broker.

The point of my post is to discuss the risk associated with inexperienced agents taking short sale listings. I agree with your opinion about the lack of enforcement for COE violations, but who's willing to pay for it?? It would take a staff of investigators to make complaints to the Grievance Committees and "staff" are costly. Big boards could do it. I don't know about small boards.

We're just discussing things here. Who knows, it might save some home owner further losses when their home doesn't sit for months as a "short sale" when it isn't. Who knows, it might save some agent a lawsuit for damages due to their negligence. Who knows, it might save some buyer's agent the angst of writing on a "short sale" listing that isn't.

Cleanup, aisle 12!

Quick Question...What was the point in trying to get the referral if you can't represent buyer and seller?

I find the moniker "short sale" amusing because they are anything but. Sorry to interrupt. Proceed.

Parked next to Lisa and Paul.

Ida. Enjoy.

I'm laughing so hard. I'm actually having a REAL TALK moment.

This is bringing back all my years on Real Talk when we bantered back and forth about agency, dual agency, exclusives, showings, etc., etc.

ActiveRain is so much better. But every now and again you get someone who just can't let go.

I'm just an innocent by-stander caught in the maelstrom of AGENCY.

Few may know, but I'm a recovering Exclusive Buyer's Broker. I switched my company to Single Agency back in 2003 when so many of our buyers had homes to sell and I put it to a vote of my agents.

I'm flagging this one for "What the heck are people thinking?".

Spam grows in the Hamptons?

Amanda. That comment belonged to another blog. I don't know how it got mixed up. Someone asked for comments about a new web site.

Thanks.

Looks like this one is about all over but the shouting. If I was a mapping wizard like the author of this post, I would paste one here of Planet Beatdown, total population of one.

Well, this was fun. Thanks Lenn fora great show. ;)

I have a lot that I'd like to say, but I'm not going to continue to the off topic discussion.

Er...is that what I've done?

MAR

2008

In just one of the cities I work in (Oxnard, CA) there are 500 short sale listings. In that same area 16 of the shortsales have closed in the last 6 months. Not very good odds. If you're working with buyers, you're far better off just selling the REOs and in 6 months those short sale listings will be REOs at better prices.

Joe.

Our percentage of short sale closings to regular and bank owned properties closed is very small too. It's just the news noise that gets the attention.

Jim Crawford is right about what he said as far as doing short sales in Georgia. Agents should not be discussing the short sale directly with the lender. The sellers should be doing that. What the agent should do is try to get as many investors as possible interested in the property to get the highest and best offer possible for the bank.

APR

2008

You might pull your head out of the sand long enough to realize that your point of view regarding showing houses out side your sphere of knowledge is debunked by most experts in the real estate business: spend your money on gas in today's world--spend your money like a crazy woman--smart brokers (agents) are referring their buyers to qualified brokers if the distance is excessive....running a buyer around from town to town is not only a waste of money, it is not smart if you don't know the inventory. You can't sell what you don't know...buyers are king right now and in most cases are smarter then you real estate people.

Since when is 35 minutes out of your sphere of knowledge or an excessively far distance...unless one happens to have a pea brain that's already full....

Heck, almost everything is 30 to 35 minutes from me. LOL

Ooops, darn, that's not the topic of this blog.

Distance is in the eye of the beholder. My good friend, Marty, up in Alaska, has to FLY to show some listings. Yes, he FLYS!

APR

2008

....and it still reads just fine even though so many comments were deleted.

Lenn must have seen the delete button warming up.

Are you able to get anything done besides reading all these comments? This is a job in itself! I think most real estate agents are probably going to be efficient in short sales before too long! There sure are alot of folks out there needing help!

APR

2008

Evelyn. I do indeed read all of these comments. They are the "juice" of my posts. I love the comments. They give me insight into the thinking of agents, brokers, lenders and others. Posts need comments to become a conversation.

Hi Lenn. Still in the bleachers....:)

Amanda. I forgot about this post. I just got an obscure threatening comment from anon. I bleeped it.

It would appear that someone has been contemplating their navel.

This blog does not allow anonymous comments