foreclosureBuying  a new home is almost always a positive emotional experience. Selling a home though, can stir up complex emotions and negative feelings about leaving behind cherished memories and a sense of security. This is commonly true of even the most ambitious sellers who prepare for the decision months in advance... and are excited about the prospect of the change. Now, can you just imagine the emotional state of a distressed homeowner?!

I got a phone call yesterday regarding a letter I had sent to a homeowner in foreclosure...

We talked for a few minutes and went over some of the things he could do avoid the foreclosure, and try to keep the house. Quickly my list of options for saving the house were eliminated for one reason or another, and he asked me to meet with him today to list the house for sale.

When I got there, I presented him with closed comps the area from the last 6 months that would help him decide on a selling price... he didn't want to see them.  He already had a price in his head before I got there based on an appraisal for a re-finance over a year ago, (re-fi appraisals always seem to come back higher than traditional purchase appraisals...). I tried to explain how using that number would be fine, but that it wasn't a good idea to inflate that estimate by $20K.

Not only do I imagine it won't sell at that price... but even if it did, I don't know of any bank will lend money $20K over the highest comp in the neighborhood unless the buyer pays the difference in cash. We are not seeing the same kind of appreciation in the market here in Plainfield, IL that we did a few years ago. Could it have happened in 2004, 2005, and even the first half of 2006, probably. But now?

He needed to see an equity sheet for the breakdown in the cost of selling his house. He needed to see exactly where he stood financially, in relation to how much he could realistically sell the house for. After doing the numbers based on where he stood today, the outlook was grim. He really does need to sell the house for much more than it is worth... just to break even.

I don't believe the house or the neighborhood warrant the asking price he needs to get... but I can't make him understand, what he doesn't want to see. He really needs to do a short sale on the mortgage just to get out from underneath it... the problem is, isn't really the owner of the property. The house is in his fathers name and he won't consent to a short sale because of the implications to his credit.

I was extremely frustrated by the experience, but none the less enlightened. I know this experience will make me be more prepared the next time I come across this situation. I need to develop my ability to overcome objections, especially when those objections are the very things keeping my clients in their current undesirable situation.

I will most likely not earn a commission for the listing on this house, and I'm okay with that... really.  I know it will come back to me in some way... and  because the process I went through to get it, taught me a valuable lesson...which may be payment enough for me! 

How would you have handled this? 

 
Post is included in group: Chicago Area Foreclosure Investors
Post is included in group: Consumer Foreclosure Help

33 Comments on It's all in the state of mind...

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MAR
11
2007
764,623 Points 2 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Julie,

 

     You will learn when to walk away.
7:24pm • #14

I've walked away from 'over priced' listings and very glad I have.  All we can do as Realtors is tell the seller the truth about the market conditions, price according to the market and show them the comps. Like it or not....that's the market! It gives them food for thought and usually most sellers see the benefit of what you are saying if they truly are motivated to sell the house.  Otherwise, forget it.

 

Patricia Aulson/Seacoast REALTOR/NH & ME

patricia4realestate.com 
7:24pm • #15
130,378 Points

Not to beat a dead horse, but I took one of these just before Thanksgiving.  I knew the seller in better times and he called and asked me to list his house and then dropped the F bomb as we were finishing up the paperwork.

I had to fire him, he would not cooperate with broker tour, video shoot, open houses, etc.  Julie - don't let this one eat you up.  Find a way out gracefully!
7:44pm • #16
694,894 Points 39 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master
Have to agree with all the comments here.  You can tell someone that you will do your best to sell their property for the best price the market will bear but that you won't lie to them and then let them decide which outcome they want.  You can't possibly be a hero for everyone so chose the ones you can help and take a pass on those you can't.  It's painful at times and it's never easy to see someone in need that you can't help but it's a fact of life.  Good luck to you and I'd say you took away a valuable lesson from the experience.
7:48pm • #17

YOU CAN SAVE THE CLIENTS CREDIT RATING!!!!

My wife and I did many short sales in the late 80's, and part of our focus was on maintaining our clients credit!!  REMEMBER THE "ART" OF NEGOTIATION!!  The bank does NOT want to foreclose!!!  They want the non-performing asset OFF their balance sheet! 

I am assuming with your post of the short sale, that the payments are late, and both borrower and mortgage company are facing the fact of foreclosure.  This is a necessary element of doing a short sale!

Last time we dealt with short sales, the cost to the lender was 22% of the foreclosed value!  Tell the lender the only way the borrower will agree to sell the asset, and GET THE LENDER out of their situation is to allow a Short Sale, with no negative credit reported AND (this is a big one) NOT to report the loss as a TAXABLE EVENT to the borrower!!!  TAKE CONTROL of the situation.  The lender is in the worst position!!  They are the one that is about to loose a lot of money!!

TAXABLE EVENT!?!?!  YES, if you borrow $200,000 to buy a home, and you agree to a short sale payoff of $150,000, this COULD create a $50,000 INCOME to the borrower (we learned this lesson the hard way with one of our clients, we thought we helped, only to have the IRS later slapping liens on the family)

AS FOR WHAT YOU SHOULD DO in this situation - Your listing appointment should have been with or at least involved the FATHER!!  Someone WILL sell this home, and it will be the one that DAD talks to!!!

CALL DAD!!!  He is clearly making the decision
8:34pm • #18
8 Featured Posts

Thank you all for your input!!!

You have all helped me make a very wise decision.  The listing is not active at this point since I am waiting on some papers to be signed.  If I were speaking to, or had a way of contacting the father directly, it would be a different story.  He would be motivated to sell, whereas his son is not... he's only trying to buy some time.  I'll try to gracefully let him know that it's not going to beneficial for either of us to hold on to a listing without any hope of actually being able to sell the house.  

Thanks again! 

 
9:00pm • #19
9 Featured Posts
Julie, if you've already taken the listing I guess you've got to make the most of it. Keep dialoging with the seller (and Dad if possible). Hopefully the listing will at least bring you some new buyer business from sign calls - maybe that will make up for a lost commission on a no-sale listing.
9:05pm • #20
I too would walk away. I don't know what you expect to learn from this. It sounds like a losing proposition. This is a business and we need to concentrate on the possible and the doable. It sounds like even if you sell the property there will be no commission. I don't think my broker would allow this deal.
10:15pm • #21
762,525 Points 91 Featured Posts
Julie, when you go speak to the client to let him know that you're not going to do this with the inflated price, please let us know how he responds. Why can't you get to the father?
10:41pm • #22
I don't know why it is so hard for some people to see what sometimes seems so obvious.  If you could sell the house for the additional 20K, you surely would.  You would make more money!  In this case, you probably won't sell the house and the seller will most likely lose the house.  Now what implications will the father's credit suffer. Good luck.
11:04pm • #23

Great market niche to be in right now Julie.

I disagree in regards to the overpriced listing. I have had my share of 'em....everyone has. The whole point of the listing is to stick your sign in the yard..I had a dead listing for 12 mos, but guess what...of the 50+ sign calls I received (who laughed at the price of this particular home)I sold 7 buyers a home and listed 4 more properties that did sell...

Stay in front of the public and your career will blossom quickly.

Those who list, LAST!!

If you should have any clients moving to Phoenix please send them my way..www.kristareising.com
11:15pm • #24
Julie - Sounds like quite the situation there. Overpriced listings can be a blessing or a curse,it just depends on how you handle and advertise it.
11:28pm • #25
MAR
12
2007
1,582,978 Points 429 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Julie - Well, good luck. Might have been better to say "Mr. Seller I would rather disappoint you now (not take the listing) than disappoint your later (not selling)." If it doesn't sell and he won't do a short sale, it sounds like he will end up with the foreclosure anyhow. And that will be worse for the credit. Why can't you sit down with the father too? And didn't he need to sign the listing agreement since he is the owner? He might want to chat with his CPA too.

Jeff
1:22am • #26
5 Featured Posts Outside Blog
I think sitting with the seller and his Dad is necessary and make them understand that if together they have no alternatives to losing the home that they will have no other choice but to work with the bank towards a short sale. A short sale will not affect their credit. But a Foreclosure will affect the credit of both and that is an option they do not want. If you over price it and it sits on the market to long you will lose all interest of an potential buyers. Then it may be to late to do the short sale. This seller and his Dad need to make a reasonable decision and they need to make it soon.
2:19am • #27
292,874 Points 19 Featured Posts Outside Blog
I totally understand Krista's take on this and have seen several agents in my area do this but is it ethical to use the sellers property simply as advertisement, giving them false hope and knowing in your heart that you'll never sell their house, meanwhile milking them for more buyers & sellers in the process?
12:27pm • #28
MAR
15
2007
2 Featured Posts

Julie:

 You can work anywhere for anyone for free.  Why work free for this seller?  It was hard for me to say no at the beginning.  But the more I learned to say no when it was necessary, the easier it became.  Julie, Just Say No.  :-) 

9:37am • #29
8 Featured Posts

UPDATE....

I thougth about this a lot... quite a few days in fact.  I ulitmately decided to contact the seller and refered him to a company that charges a fee for listing the house on the MLS. 

I did my best to explain why I couldn't justify listing the house so high, and the implications of not being able to get the listing closed because of an appraisal.   In the end,  he was probably just as relieved as I was.  It seemed to be a bit of a power struggle in the end. 

I'm going to be posting about this in a separate post later tonight.  I just thought I'd share the ending of the story with you.

Thanks again!  You all helped me make a great decision!

~Julie 
9:10pm • #30
292,874 Points 19 Featured Posts Outside Blog
Julie, I'm so glad to hear it's working out for you. It's never an easy decision to make but it sounds like you've made the right one for both you and the seller. What better example of truly looking out for your clients could you use the next time you go on a listing appointment? I'm looking forward to reading your followup post.
9:19pm • #31
600,280 Points 45 Featured Posts Outside Blog
Great post, Julie. Blog about what you know, both as a buyer and seller and as an agent. You've learned why you need to be talking to the principal (the Dad) and decision maker. Also, when you know the property won't sell and appraise, don't waste your money or your time, turn down the listing. You learned some lessons from the preparation and presentation - you don't need to keep suffering through the listing.
9:53pm • #32
MAR
17
2007

Julie

I am an investor and auctioneer in Maryland and I have problem situations like this all the time. I could write many words on this type of deal, but for now, I will address how the son of the owner can turn this deal around:

You mentioned "short sale", good idea, but too much paper work and it could be a negative to the owner.  I would suggest making an offer to purchase the mortgage at the same discount the short sale would yield.

Make a fee by having an agreement between you and the son (consultant agreement) for an acceptable fee.  Your service as a consultant would be to make the offer through a title company or lawyer to purchase the mortgage.

Let's say the defaulted mortgage is $100,000 and the bank would accept $75,000, make the offer to the bank through a third party for the assignment of the mortgage to take place within 30 days (to do title work).

Have the son 1. place that amount in escrow to buy the mortgage, 2. list the property on the market at the market value.

Sell it at market value and the son still gets higher than value due to the discount of the existing mortgage form the mortgagee. Oh, you will also get a commission for selling it.  But make sure you get a fee for puttig this deal together.

This may sound complicated, but it really is not.

Charles Parrish www.CharlesParrish.com  

 

 

 
7:53pm • #33

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