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Active Rain Masterminds - The Short Sale Process

By
Real Estate Agent with Keller Williams Indy NE 317-290-7775 www.marchantteam.com

Given that short sales have been steadily on the rise and are among the most widely discussed transactions in real estate, it's no small wonder that pondering on a solution was the first task for the MMC (MasterMind Challenge).

 

Our bRain Power team are Cindy Marchant (Cindy in Indy), Dan and Amy Schuman, Rita Fong, Jerry Newman, Liz & Bill (BLiz) Spear and yours truly, Charita Cadenhead(AMB from Bham). 

Without question, a key aspect of short sell success, would be to create a unified system of short sale practices.  This, I am certain, will be the recurring theme among all participants of the MMC.

Short Sales

ON ONE ACCORD:  STREAMLINING AND UNIFYING THE PROCESS
By unifying the process, sellers and real estate agents would know up front what was needed to successfully navigate through the currently murky waters of an attempted short sale.  Almost all banks have different requirements, timelines, procedures, documentation and criteria for considering, accepting and/or denying a short sale.  In essence there are three leading causes for the long short sales process.  They are:

1.      The uncertainty of what banks need upfront is in essence the first leading cause of delay.  This is a leading cause since providing documentation leads the way into the process.

2.      Secondly, the entire short sale process needs to be unified throughout the banking industry

3.      Finally the delay in ordering and receiving the results of the BPO

HOW CAN UNIFICATION OCCUR?

  • One such way is to provide an official online source (portal) of information that will lead directly to the appropriate institution (bank/mortgage company, etc).  Equator would be a prime example and since it already exists, it could be a requirement that all transactions are initiated here and it would serve as a short sale "clearinghouse" so to speak.
  • A single phone number for initial contact that could route us to the appropriate party and provide the appropriate phone and fax numbers.
  • Secondly all short sales being processed via the web portal would follow the same procedure, require the same documents, time lines would be identified and accurate contact numbers would be available
  • Standardize the percentage that the 2nd lien holder can get from the short sale.  By doing so there would be no need for the real estate agent or the 1st lien holder to negotiate with the 2nd lien holder (thus removing another obstacle from the process).
  • Communication is key.  Currently it is commonplace but unacceptable for inquiries to go unanswered for extended periods of time.  Streamlining the process could create the efficiencies needed to offset any manpower issues needed to meet the 24 hour requirement.  At maximum, turnaround response time should not exceed 48 hours.
  • Asset managers and negotiators should work in teams so that a transaction does not come to a halt when one of them is on vacation or takes a day off.
  • Online application for modification and short sale would be available and reduce completion time currently hindered by banks' insistence on mailing forms for sellers to complete and mail back.  Any specific forms to be completed should be available online and all banks should use the same forms.
  • By unifying the process, it would allow us to educate the seller and provide them with a uniform short sale package to get the process started instead of having to contact the bank first to find out their procedures and requirement and then return to inform the seller of such requirements
  • A definite time from for closing/escrow to take place (say 60 days or so). 

HOW MUCH IS THE HOME WORTH?How much is it worth
This is the big question.  Unfortunately this is a question that is not answered until the banks receive an offer and then they order a BPO.  This would not be a problem except for the fact that the home may have already been on the market for weeks or even worse, months.  Added to that delay is the fact that it may take several more weeks to receive the results of the BPO. This third leading cause of prolonging the short sale can be eliminated simply by

  • Banks should order the BPO as the time the Realtor provides the Authorization to Release the information (it helps pricing for starters and could streamline the process more). 
  • BPO Agents/Appraisers should be open to discussing their findings with the listing agent to validate current market conditions and trends
  • Once a BPO is received, the value should be good for a specific period of time 60 days, 90 days, etc.  But definitely more than 30 days.
  • The BPO value would serve as a guide to pricing the home and provide for a margin of acceptable pricing.  Far more offers would perhaps come in if the MLS could indicate that bank has approved "price."

WHAT CAN WE DO?
We are not void of responsibility in the process.  As real estate agents we can control and uphold our end of the bargain and here's how.

  • Only submit COMPLETED paperwork/files.  No excuses for not doing so.  With standardized forms/package, there should be a checklist cover page to use for verification of the package PRIOR to submission
  • Brokers should require their agents take MANDATORY class and obtain certifications for the short sale process with specific emphasis on processing paperwork
  • Take ownership when things go wrong
  • Keep the sellers engaged in the process
  • Keep a schedule of activities involving call backs, status checks, due dates
  • Maintain a file that consist of a conversation log, emails, phone calls, etc

 WORKING WITH BUYERS AND THEIR AGENTS
Even if the short sale process were to
be streamlined as we recommend, it will be a while before the process rids itself of the "anything but short" sale.  As it stands, the biggest hurdle with regard to buyers is keeping them in the game.  We're of the opinion that there are 2 solutions to this problem:

  • Communication with the buyer's agent is key.  Since much of the correspondence takes place online anyway or while at the computer, it would be easy enough to shoot the buyer's agent a quick email at least once a week.  An email letting the buyer's agent know that "investors are still reviewing" or "BPO has been ordered" or waiting for "BPO results" is better than NOTHING at all
  • Streamline and shorten the overall process
  • Additionally, don't create hysteria.  Patience is an absolute MUST.  If you are not a patient person, admit it and REFER, REFER, REFER.
  • If short sales are not your thing, complete a referral form and refer it to a short sale agent.  Twenty-five to 30 percent of a close transaction is better than 25 to 30 percent of an expired listing.

Our opinion is that implementing these items will provide a streamlined process that will enable ALL buyers to again consider short sales as part of the available inventory.  Additionally, easing the process for executing a short sale should ultimately save the banks expense by preventing many more foreclosures.

 

Here are the members of bRain Power: 

 

Dan and Amy Schuman from Cleveland OhioCindy in Indy Marchant from FishersJerry Newman from San Antonio TXRita Fong from Marion ARBill and Liz Spear from Cincinnati Ohio

 

 

Charita Cadenhead from Birmingham Alabama

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Comments (11)

Rita Fong
RE/MAX REAL ESTATE TODAY, Executive Broker 901-488-9590 - Marion, AR
Realtor - Marion Arkansas Homes for Sale

From my limited short sale experience, I learned it is very important to do it right from the get go and keep in touch with everyone in the short sale, that increases the chance to get short sale approval from the bank.  Educate the home owner and prepare them the process and need them to understand we need their co-operation to make this work.  That's what I did with my most recent one and we got a short sale approval in 24 days.

Jan 31, 2011 06:04 AM
Cindy Marchant
Keller Williams Indy NE 317-290-7775 www.marchantteam.com - Carmel, IN
"Cindy in Indy" , Realtor, Fishers Real Estate

Our team had some amazing clarity and suggestions for this solution.  The one that strikes home with me is to have teams assigned to cases...just last week we hadn't heard from our negotiator in 10 days which for her was unusual...come to find out she was seriously ill and not returning to work.  And their her files sat....until we got ahold of the supervisor...yikes!!

Jan 31, 2011 06:08 AM
Liz and Bill Spear
Transaction Alliance 513.520.5305 www.LizTour.com - Mason, OH
Transaction Alliance Cincinnati & Dayton suburbs

As a collaborative effort, we tapped into each of our experiences with this niche market.  We've learned (often the hard way) what the obstacles are to a successful short sale, what the pain points are, and what HAS worked well.  Incorporating those lessons into a proposed, unified approach should produce a pathway that is less unique on a bank by bank basis.   Provide standardization and some of the fear and objections will disappear, and with it, clear expectations on how and why the process proceeds.

Jan 31, 2011 06:09 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

WORKING WITH BUYERS AND THEIR AGENTS:  Keeping the buyer's agen in the loop was one of the first things that came to mind.  I immediately recalled how keeping the buyer's agent in the loop help to ease the anxiety of the buyer and aided in building a rapport at the same time.  The buyers and the buyer's agent remained calm and appreciative throughout the process.  Many perceive constant calls from the buyer's agent as a nuisance.  I view it as an opportunity to build trust and keep the buyer in the game.

Jan 31, 2011 06:11 AM
Dan and Amy Schuman
Howard Hanna Real Estate Services - Solon, OH
Luxury Home Specialists

We are firm believers that taking on short sales can be a disservice to your client if you are not properly trained to do them. There are a lot of things you need to know and legal pitfalls as well. Since this has really become a somewhat specialized field,  education/certification as a minimum to enter into such a transaction could be helpful for both the agent and consumer. Partnering with an agent who is experienced in short sales or referring them out creates a better situation than trying to "learn on the job" at your clients expense. Communication is also critical on both ends, even if there is nothing new to report. Many buyers who enter into a short sale lose patience quickly, so being proactive is key to keeping them engaged in the process. 

Jan 31, 2011 07:19 AM
Jerry Newman
Brown Realty, 210-789-4216, - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

I have been on both sides of the transaction with Short Sales.  As a buyer's agent it was very frustrating for me and my clients when that listing agent did not communicate often with me. It was also a disappointment to find out that some listing agents were very new to the short sale process, and I had to educate them from the few courses that I had previously taken. Now, on the listing side my problems have always been with the banks.  In the beginning, it took several phones calls to actually get to speak with someone in the loss litigation department, and I never got to speak to a negotiator until I had a contract from the buyer's agent. Therefore, I welcomed this challenge question for our Master Mind Group. I certainly agree with education and communication process. I also decided that referring was my Best Option.

Jan 31, 2011 12:30 PM
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

Lots of good ideas here.  One of the toughest things to address in this question is those things that are process and can be mandated and standardized. The others are those that are less tangible, such as how a listing agent keeps the buyer's agent in the loop.  Some just don't do it.  I'd love to see processes that occur transactionally on the bank's process side, that engages all parties in the equation.

Jan 31, 2011 03:55 PM
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
Realtor®, Springfield Mo Real Estate

Having worked short sales for the past 2 1/2 years, some bank's systems have improved, while others are still lagging behind.  Knowing each bank's system before starting a short sale is the secret.  I currently have one home that took over 3 months to get approved and last week, after waiting, the buyers purchased another home only to get approval 2 days later.  This type of problem happens every day and there should be timelines so this does not happen as often.

Feb 01, 2011 02:48 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Can you post this in the ActiveRain MasterMind Group?  THANKS!!

Feb 01, 2011 04:35 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Good stuff Cindy!! A trick I use to keep my sellers involved in the process is that I create a Google calendar specific to their transaction. I then "share" the document with them. Then I use this calendar to document any conversations or actions I take related to their short sale. The seller automatically receives an email every time I make an entry letting then know what was done.

This not only keeps them in the loop but it also give sme a record of everythingh I have done related to that short sale.

Buyers agents get updated once a week through out the process.

It is so impoortant we keep the parties to the transaction involved and motivated.

Feb 02, 2011 12:18 AM
Cindy Marchant
Keller Williams Indy NE 317-290-7775 www.marchantteam.com - Carmel, IN
"Cindy in Indy" , Realtor, Fishers Real Estate

Carla...sent you a note...glitch I think on being able to post to the group.

Karen, all good points!  We all learned a lot on this question.

Kay, which begs the question...why can't that be standardized. 

Bryant...EXCELLENT point!

Feb 02, 2011 12:39 AM