I wish to thank all the members of the bRain Power team for all your suggestions for the Short Sale Process, and a special thanks to Charita Cadenhead for putting it all together. Perhaps, in the near future, many of these suggestions will become a reality to help us all in the Short Sale Process.
Thanks bRain Power team.
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).
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.
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?
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: