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 STUPIDOffers 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:

      1. identification of the subject property
      2. date prepared
      3. defined value or price
      4. limiting conditions, including statements of purpose(s) and intended user(s)
      5. any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
      6. basis for the opinion, including applicable market data
      7. 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.   Lenn's Blog

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

    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.

    03/25/2008 06:46 PM by Adam Waldman - Long Island Real Estate (RE/MAX)


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

    03/25/2008 06:47 PM by Michael Brown (RE/MAX Prime Properties)


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

    03/25/2008 06:57 PM by Rob Arnold, Florida Realtor / Investor (Sand Dollar Realty Group, Inc.)


    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!

    03/25/2008 06:58 PM by Jim Crawford ~ Atlanta Real Estate-ABR E-PRO (RE/MAX Greater Atlanta)


    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.

    03/25/2008 07:08 PM by Lenn Harley, Homefinders.com, MD & VA Real Estate


    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.

    03/25/2008 07:14 PM by Donna Harris, ASP (Re/Max HiNet)


    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

    03/25/2008 07:16 PM by Kristi Ross Palm Coast/Flagler County REALTOR (Hawk Beach Realty)


    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. 

     

    03/25/2008 07:18 PM by Lenn Harley, Homefinders.com, MD & VA Real Estate


    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.

    03/25/2008 07:19 PM by Lenn Harley, Homefinders.com, MD & VA Real Estate


    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.

    03/25/2008 07:29 PM by Miriam Bernstein, CRS, Westchester County, NY (RE/MAX Prime Properties)


    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.

    03/25/2008 07:33 PM by Sonya Rosser (ERA Buckhead Realty)


    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

    03/25/2008 08:45 PM by William J Archambault Jr (The Real Estate Investment Institute )


    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.  

    03/25/2008 08:49 PM by Missy Caulk Ann Arbor Real Estate (Keller Williams Ann Arbor, Michigan)


    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.)

     

    03/25/2008 08:52 PM by Sandra Carlisle - Luxury Homes on the Coast (First Team Estates)


    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.

    03/25/2008 08:53 PM by Donna Harris, ASP (Re/Max HiNet)


    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.

    03/25/2008 09:17 PM by Cindy Jones-Offering Real Estate Service for the 21st Century in Northern VA (RE/MAX Allegiance #1 RE/MAX Company in the World)


    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.  

    03/25/2008 09:30 PM by Nestor & Katerina Gasset, Realtors® Wellington Florida Luxury Homes (International Properties and Investments, Inc.)


    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.

    03/25/2008 09:35 PM by Randy L. Prothero - Hawaii REALTOR® (Century 21 Liberty Homes)


    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!

     

    03/25/2008 10:44 PM by Debe Maxwell (Helen Adams Realty)


    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

    03/25/2008 11:10 PM by Alan 'AJ' Nisen California Contra Costa Mortgage Officer (A Large Bank in America)


    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.

    03/25/2008 11:29 PM by Joan Whitebook, ABR, e-Pro, CEBA (Buyer's Option Realty Services)


    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!

     

    03/26/2008 03:10 AM by Ruthmarie Hicks (Nelson-Vrooman GMAC)


    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.

    03/26/2008 04:06 AM by Jennifer Fivelsdal,ABR,GRI,SRES (Keller Williams Realty)


    Hi Lenn,

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

    03/26/2008 04:55 AM by Paddy Pizappi PineBush & Hudson Valley NY Real Estate (RJ Smith Realty Real Estate Solutions)


    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?)

     

    03/26/2008 05:13 AM by Kris Wales- Metro Detroit real estate agent-Chesterfield Twp-Macomb County MI (RE/MAX Advantage 1, Inc.)


    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...

    03/26/2008 05:17 AM by Linda Scanlan (The Real Estate Referral Company)


    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. 

    03/26/2008 06:14 AM by Russ Ravary-- Michigan Homes for sale-- Your local Real estate & Mortgage person (Remerica Hometown One)


    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.

    03/26/2008 06:15 AM by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)


    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. 

    03/26/2008 06:21 AM by Jim Polhemus - Virginia Beach Real Estate (Long and Foster Real Estate, Inc.)


    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.

    03/26/2008 06:38 AM by Cree Quaker - Ulster County Real Estate (Barqua Real Estate & Design, LLC)


    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.

    03/26/2008 06:50 AM by LLoyd Nichols~SW Florida Homes (Right Choice Realty LLC)


    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!

    03/26/2008 07:20 AM by Monika McGillicuddy~ N.H. Real Estate Broker & Trainer (Prudential Verani Realty/Hampstead)


    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)

    03/26/2008 07:24 AM by AMERICAN CASH SOLUTIONS INC


    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. 

    03/26/2008 07:39 AM by Bryant Tutas-Tutas Towne Realty, Inc


    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.

    03/26/2008 08:01 AM by Lenn Harley, Homefinders.com, MD & VA Real Estate


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

    03/26/2008 08:02 AM by Jim Lee, Knoxville area Realtor® (Realty Executives Associates)


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

    03/26/2008 08:09 AM by Kelly Sibilsky - Lake Zurich, IL RE/MAX Real Estate Agent (RE/MAX Unlimited Northwest)


    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.

    03/26/2008 08:10 AM by Petra Norris, Broker, REALTOR®, Lakeland, FL (CDV TransAtlantic, Inc.)


    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.

    03/26/2008 08:13 AM by Leigh Brown Charlotte NC Broker/Owner (RE/MAX Signature Properties)


    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.

    03/26/2008 08:39 AM by Liane Jamason, REALTOR® ~ Tampa, Florida (Keller Williams Realty)


    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. 

    03/26/2008 08:41 AM by Kirk Westervelt - Greenville, SC Realtor (Keller Williams)


    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

     

    03/26/2008 08:43 AM by Mike Norvell Sr., Developers Capital Realty (Developers Capital Realty, LLC)


    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!

    03/26/2008 09:00 AM by Renee Burrows - Las Vegas NV Real Estate (Nevada Realty Solutions)


    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.

    03/26/2008 09:06 AM by Jennifer Kirby (Exit Realty Eden Prairie)


    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.

     

     

    03/26/2008 09:11 AM by Mary Parrish - Central Florida Realtor


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

    03/26/2008 09:13 AM by Richard Lecinski (Long Realty Company)


    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.

     

    03/26/2008 09:18 AM by Don Fabrizio-Garcia - Connecticut Real Estate & Appraisals (Connecticut Home Group - Keller Williams CT Realty)


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

    03/26/2008 09:20 AM by Cape Coral Real Estate Broker | Susan Milner | Florida-Future-Realty.com (Florida Future Realty, Inc.)


    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!

    03/26/2008 09:21 AM by Allison Stewart REALTOR ®St. Cloud Florida (Florida Pines Realty, Inc)


    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...

    03/26/2008 09:54 AM by Courtney Cooper, Owner/Broker, Realtor- Seattle WA & Seattle Suburbs Real Estate (Cooper Jacobs Real Estate Services )


    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.  

    03/26/2008 10:12 AM by Bryan Maynes - Dwellings Real Estate (Dwellings Real Estate)


    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.

    03/26/2008 11:17 AM by Bob & Carolin Benjamin - E Phoenix Arizona Real Estate (The Benjamin Team - Keller Williams Integrity First Realty )


    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!

    03/26/2008 11:32 AM by Midori Miller-Daytona Beach Florida Real Estate Training (CENTURY 21 Sundance Realty)


    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.

    03/26/2008 11:41 AM by Mary Pope-Handy, ABR, CRS, ePRO, SRES (Keller Williams Realty)


    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...

    03/26/2008 12:12 PM by Focus Professionals, Inc.


    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.

    03/26/2008 01:06 PM by Angela Clark Graviss, ABR, GRI Owensboro Kentucky Realtor (Tony Clark Realtors, LLC)


    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.

    03/26/2008 01:10 PM by Ruthmarie Hicks (Nelson-Vrooman GMAC)


    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. 

     

    03/26/2008 02:05 PM by Lenn Harley, Homefinders.com, MD & VA Real Estate


    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

    03/26/2008 02:21 PM by Kevin Whitehorn - Loan Modification/ Short Sale Experts. Let Us Help. (EXPO Home Savers)


    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 quali