Real Estate Agent with CHANE REALTY INC 3230505

     Not a day goes by that I don't hear the same question from an agent, "Why would the bank do that to my short sale?"  It's really quite simple...BECAUSE THEY CAN!

     I could write a book about everything the lenders won't tell you about the short sale process.  However, it would be worthless the moment it is published.  The business changes every day, every hour, every minute.  The lenders, investors, collections agencies, government agencies and everyone involved in this mess are still trying to figure out what happened, let alone what is happening right now.


1)  The lenders still are not sure that what they are doing is right FOR THEM.  They are constantly changing their short sale and loss mitigation process to figure out what will make the most return on the loss.  It will change at the whim of those assigned to review the pipeline disaster that is their loss mitigation.  And, time and time again, the changes usually are not for the best.  They only further complicate the process.  The banks are in the business to lend money.  The whole loss mitigation and short sale business is still a blur to them.  Think about how absurd this business is...they will forgive $300,000 on the property without blinking, but will kill a short sale for the remaining $5,000.

2) The property is ONLY A WIDGET!  The lender will never see or visit the home.  The only one that cares about how the home looks is the homeowner.  The lenders and their investors DO NOT CARE ABOUT THE FEELINGS OF THE BORROWERS/HOMEOWNERS.  They have NO emotional attachment to the property.  However, they want to assure that the borrower absolutely HAS an emotional attachment.  Remember, those lovely photos in the appraisal are only seen by an underwriter that initially approved the loan.  The actual lender does not care for photos and will never see them.  THE PROPERTY IS SIMPLY A WIDGET.

3) Lenders and investors make secret deals for billions of dollars every day behind your back!  Many agents remain shortsighted on the housing industry, alltogether.  They only want to see and believe that their real estate transaction is the only way the lender can move the property.  In fact, this is not by any means the principal manner of unloading their inventory.  REO's, performing and non-performing notes account for the majority of their swaps.  However, those sales are never recorded in public records.  Most of them are sold for pennies on the dollar.

4) The housing crisis is NOWHERE NEAR A BOTTOM!  The biggest reason for this is the tremendous amount of inventory.  And I'm not simply talking about the inventory in the lender's hands.  I'm talking about inventory yet to be taken back.  There are millions of homeowners living in their homes for free.  I have clients going on 2 and 3 years without a mortgage payment.  The lenders and their investors are simply overwhelmed by this crisis and they would rather see someone in the property taking care of it.  Once they foreclose, they are responsible for all the bills on the house.  Only 30% of the lender inventory is even available for sale.  Nearly three times the current inventory is pending foreclosure.  And unless everyone behind on their payments gets back to work and starts paying their mortgage, the crisis will not be going away any time soon.

Be sure to read Part 2: http://activerain.com/blogsview/1183207/what-the-lenders-won-t-tell-you-about-your-short-sale-part-2

Comments (107)

Rancho Bernardo
Coldwell Banker Real Estate DRE#01410072 - Rancho Bernardo, CA
Gina@GinaYoungren.com (ABR,e-PRO,SRES) 92127,92128

I was very impressed with this article!

Having done some of the very first short sales in my office years ago, i was pretty on top of things with the lenders but got a major sting on one of my most recent short sales by a lender "rule" change!

We got hammered and no way could we get out of a bad situation. My Buyer walked and the Seller sulked but the bank "won!'

I needed to hear what you had to say so I would stop beating myself up over something that couldnt be helped...

Honesty by all parties is STILL the BEST poilcy! Go figure that!


Jul 29, 2009 10:54 PM
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Excellent points, Felix, especially #4.  It's nice to hear some positive news about the industry this week, but I also read an article this morning on RISMedia saying we are on tract for 13 million foreclosures in the next 5 years.

Jul 30, 2009 12:35 AM
Dawn Uselding - A New Dawn Real Estate Services

I agree with the majority of points made.  I especially agree that if someone says they have all the answers.... run.  I am a virtual short sale assistant and deal with up 100 short sales at a time.  You hit it on the head when you said it take persistence and patience.  One variable that you didn't mention is the high turn over rate of the loss mitigation negotiators.  They are in a high stress job - they individually are assigned between 150 -200 files.  I have one recently closed deal where the negotiator was changed 7 times during the short sale. They really aren't the ogres that they are portrayed to be.  Be kind, courteous and respectful and they will usually respond in kind.

It is so important to have a well organized and COMPLETE package.  You need to respond to any requests in a timely manner.  Always anticipate when your financials or estimated HUD become outdated.  A package won't get into the system for something as simple as not having each page of the short salepackage labeled with the loan number. There are so many details and so much phone time involved in short sales that use of a short sale assistant/negotiator can be a good decision.  However if they tell you they have the secret, close them all or any other outlandish claims say thanks but no thanks.  Then interview the next company on your list .  There are alot of companies and individuals out there that do what I do.

Always make sure that they have a system in place to keep you updated on your file.  Nothing is more frustrating than to not be able to answer your clients questions as to how the short sale is going.  Also make sure that you ask to talk to other Realtors they have worked with.  There are new short sale assistants popping up everyday.  Make sure you work with some one that has experience. 


Dawn Uselding - A New Dawn Real Estate Services




Jul 30, 2009 12:38 AM
Ed Vogt
Midwest Properties of Michigan - Grandville, MI
Grandville, MI Midwest Properties

One thing that is certain in a short sale, is that nothing is certain.  The transaction can change even within the bank, depending on who you talk to.  Some can be relatively painless, and others can drag on and on...

Jul 30, 2009 02:13 AM
Deborah Varelis
Sato Real Estate, Inc - Anna Maria, FL

I've been involved in 5 short sales and only one has closed so far.  I don't think its worth the hours I put in for the cut rate commission the lenders give us.  The first thing they go after is our commissions, I know the mortgage broker got paid.  The one I'm working on now is a cash deal, the offer only 8k under what he owes, the bank told me their "appraisal software" tells them the property is worth 30k to 50k more.  I sent them comps that surely will tell them that their software is wrong, I'm not holding my breath.  What really makes me laugh is the taxes and insurance are due soon and thats a sweet 22k!

Jul 30, 2009 03:18 AM
Lorinda Ward
Keffer Realty - Norfolk, VA
Serving, Hampton Roads Virginia. Norfolk, Chesapeake, Va Beach

I agree, banks will make the decision that they are comfortable with.  This is such an excellent post! 

Jul 30, 2009 05:29 AM
Melinda Hoff
Bradley & Brown Realty - Copperopolis, CA
Keeping the Real in Realtor!

WIDGET! I love it and will use that in my next Buyer / Short Sale warning speech I have to give. Great reality post too!

Jul 30, 2009 05:42 AM


Sadly I think that you are right in everything you have stated.  I am sure the banks are overwhelmed with all the loans that are delinquent and in the foreclosure process.  They certainly did not have huge departments with staff trained to do this type of work a couple of years ago, and people have probably been retrained to try to tackle the job at hand.

Your statement about how they do not care about the feeling of the homeowers, I have to tell you as someone who many years ago was the manager of a bank collection department who had to write recommendations for loans to go into foreclosure, you cannot become attached to each and every borrower or you would probably end up losing your mind.  You have to just look at it as the job that you were hired to do.  You have to just look at the facts and do what has to be done.  It's not cold, it's self preservation of your sanity.

I can not imagine what it is like working in these areas in the current environment!  Think about that when you are dealing with some of the bank reps on these deals.


Jul 30, 2009 09:50 AM
Nina Rocus, Koenig & Strey Schaumburg, IL

Oops, forgot to put my name and e mail on the comment above!

Jul 30, 2009 09:52 AM
Michael H. Sasano

Thank you Dawn for adding your comments.  I fully agree about the change of negotiators and mitigators.  It happens all day, every day.  Also, as a helpful tip, whenever you're sending any trailing documents to them, be sure to put the loan number on each and every one of those pages.  Paperwork gets shuffled and can be lost within their piles of files. 

Also, one mitigator rep I spoke with told me that because they have piles of files, each are assigned a specific file number that's used internally.  If possible, get that file number if you can.  Anything that will help your deal move along faster will help to benefit you in the long run. 

So, when you call them you can use that file number to reference your questions or concerns to.  And, do whatever you can to build a nice relationship with whomever is handling your file.  As Dawn mentioned, they change out mitigagors and negotiators quite often so getting frustrated with one over past experiences will only cause your file to be put at the bottom of the pile and your deal will take far longer than you are prepared for.  They don't want to work with an agent who's complaining all the time.  It'll only make matters worse.  I know that some of these people can seem rather imcompetent or unpleasant themselves.  However, they're dealing with rude and obnoxious agents every day from all across the country AND they're the line leaders in the transaction so anything that will provoke them to not want to help you and your client will be to your detriment and not to you or your clients benefit. 

Jul 30, 2009 10:36 AM
Laurie Clark
Realty Professionals Heartland - Lee's Summit, MO

Felix, what a great blog. So many true points here. I am working 2 with BOA right now. One file is smooth the other almost 6 mo and they tell me another 35 days for investor approval as of July 27th 2009. Wait a minute... The file was in 2nd phase negotiations as of June 30th 2009 was kicked out of the short sale process without one word to me. If I did not call every 3 days and avoid the automated update "Your next update will be on BLAH BLAH BLAH date and IF YOU CALL BEFORE THEN YOU WILL DELAY THE PROCESS" gee I would have never known. This is when I was told give it 24 to 48 hours and it will be restored to where it was originally. (Apparently there was a bill past and files are automatically being kicked out for loan modifications without any questions first. When I rtold them my client was unemployed as it SHOWED in his file, they knew the loan Mod would not work). Now over a month later...Today I had to be very firm with Leslie and show a bit of temper. Hey it got me to the supervisor Miscael. He tried to blow me off and tell me it is with the investor and there is nothing he can do I insisted in talking with the supervisor. He was quick to say his supervisor was not available. I said i have pages of names, dates, times, and notes of the discussion with everyone I have talked to since Feb., "What is your supervisors name so when I decide I will no longer attempt to help clients that have BOA I will write a huge blog and explain why and everything that transpired from beginning to end." Miscal asked me to hold to see what they can do to rectify the situation Mrs. Clark. WOW what a turn around. I was the put into a VM but I kept hitting zero so i could speak to a live person. I did this 3 times and his supervisor answered Carolina (SP). Let's just say there are things that can be done, no one can rush the investor but she is snap shot-ting the file, writing a note to get this to the investor. the A/C has already been stolen and this file really needs priority not ball dropping.

 I hope this is a turn around and things will get done and and answer given soon. I don't recommend losing ones temper as you get further with sugar but sometimes you have to add spice. Today was that day for me.  I feel like persistence did pay off today. It really is rare to speak to a supervisor of a supervisor because they will do everything they can to not let that happen. This file has been escalated by me over 10 times and this was the push that I used. I told them that I have done my part and we need to work as a team here. I could understand if it was because of a different buyer but this is the same one from February. It was an hour long ordeal but I had a chance to read every ones comments on my 5 hour trip home from vacation. The comments here helped me get as far as I did today. Thank you all. I love Active Rain and the camaraderie here.


Jul 30, 2009 11:56 AM
Paula Wyatt


Finally, someone mentioned the 90 day "flipping" FHA rule.  I was about to come unglued because no one had mentioned it and I think that is where everyone was getting their drawers in a wad.  I understand what you were calling transactional lending but as long as there is full disclosure and the appropriate doc's were signed (as is Colo law here) you are fine and as in the FHA "flip" you cannot sell to a buyer within the first 90 days of the last purchase date you should be fine.

I have been working short sales for a number of years and I have found that generally the magic number is 3.  Three what?  Three buyers you typically have to go through to get the sale done.  You have a good strong offer on the first buyer.  You have disclosed on the MLS that you are in process with all the seller information submitted to the bank but they are so back logged that they don't really care how long it takes.  It takes as long as it takes is their mantra.  The second buyer comes and it is less than the first offer and the buyers are a bit more patient but the bank process continues because your deal hasn't been in process as long as seller a, seller b and seller c so you call often and find yourself frustrated.  Then you find yourself stigmatized and buyer 3 comes and it is much less than the first two offers but you didn't tell the bank you lost buyer 2 and they have been plugging along and now you are on top of the pile and you have a new buyer with a lower offer but now the bank is ready to deal.  Thank goodness because you are totally ready to be done with it all.

You have jumped through all the hoops so your legs are sore, your phone bill is high for all the phone calls you have made and you have cauliflower ear for being on hold, your sellers is tired, you are a bunch less that what you could have gotten the bank 5 months ago, you have gotten the foreclosure put off, and your superhero cape is now tattered and torn but you are almost to close.  Thank Goodness.

Do we do it for the money?  Not entirely.  Like the old joke goes.  Why do runners run?  Because it feels good when they stop.  Same concept! :)

Jul 30, 2009 03:05 PM
Toronto's 2 Hounds Design: Decorating + Staging
2 Hounds Design + Home Staging - Toronto, ON

Wow, very interesting and as someone else said, frightening!

Could you explain in more detail what 'performing and non-performing notes' are and how they 'account for the majority of their swaps'. 

Sounds light there is a lot going on behind the scenes...if you could shed some light it would be appreciated!

Dane Caldwell


Jul 31, 2009 01:46 AM
John DL Arendsen
CREST "BACKYARD' HOMES, ON THE LEVEL General & Manufactured Home Contractor, TAG Real Estate Sales & Investments - Leucadia, CA
Crest Backyard Homes "ADU" dealer & RE Developer

Great information. If I might expand just a tad, however, there are banks, B of A being one of them, who are actually leveling brand new homes in brand new developments because squatting has become so pervasive and the liability that goes along with it can end up costing a lender a lot more than just clearing the lot. Once you get these squatters in it's almost as tough getting them out as a standard renters eviction.

You're definitely right about the banks wanting someone residing on the property but even at that they will eventually have to face the music and when they do finely issue a final eviction notice the residents tend to retaliate, as we all know, by trashing the home and stealing everything and anything bolted down or not including the kitchen sink.

Aug 01, 2009 04:03 AM
Deborh Gallagher

Wachocia is the only bank I know that has a streamlined short sale process.  From an agent in my office it works very well.  Of course they'll participate in a short sale if it makes sense to them, but at least they have a process, a manager who will meet with the agent, the homeowner, at the property.

In California it's illegal to charge a transaction fee. 



Aug 01, 2009 04:25 AM

Hi Deborh,

Just to clarify, Transacational Funding has nothing to do with transaction fees charged on a closing, which may be prohibitive in some states.  Transactional Funding is short-term gap lending for commercial and residential transactions.

Aug 01, 2009 06:55 AM
Tatyana Sturm
Exit Realty DTC - Aurora, CO
Denver Realtor, GRI, Denver/ Aurora CO Relocation

heck ya I totally agree about #4, i have people call me to list thier home for short sale and I pull up that there home already went to foreclosure sale 6 months ago.  The question I have for you in this case is if there was an offer to purchse presented to the bank in this instance, with no REO company involved yet, would the bank consider accepting that offer, sort of like a short sale but I gues after the foreclosure sale??????

Aug 01, 2009 07:16 AM
Michael Layton
RE/MAX Desert Properties - Palm Springs, CA
Experience and Trust

Great Post!  About a month ago I tuned in to NPR and there was a man speaking about how the banks are not motivated to approve short sales because this results in an immediate write down on their balance sheet.  Whereas dragging it out and eventually going into foreclosure entitles them to more favorable ac procedures, tax credits and the ability to deny the asett lost value. Bad debt vs. bad investment (my words not his) It sure sounded good. Alas, I was not able to find out who it was speaking or what his credentials where.  Did anyone else hear this?

Michael Layton, GRI, e-PRO
Keller Williams Realty Palm Springs CA

Aug 01, 2009 10:43 AM

Now Available: "What Lenders Won't Tell You About Your Short Sale! - Part 2"

Just click the link below:



Aug 05, 2009 08:23 AM
Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes

It's amazing how few real estate agents are bringing up exactly what you are pointing out concerning the banks holding out...

Sep 14, 2009 04:56 AM