When it comes to a short sale, it is a clash of cultures . . . the real estate industry versus the banking industry.
The real estate industry has to be flexible and nimble because it is a “usually” industry. What that means is this: While the buyer and seller mutually agree to price, terms and conditions in a legally binding contract, weird and unpredictable events visit themselves upon the transaction at unpredictable times. For example, everything is going along perfectly. The day before closing the buyer does a final walk-through of the house they are buying. Guess when the water heater decides to spring a leak? Or, everything is just fine, but about four days before closing the buyer’s lender discovers an anomaly in the buyer’s credit. They need an extra 10 days to arrange funding. Sure there is a contractual closing date, but it will have to be extended to accommodate these unplanned, unforeseen events. So, when someone asks when a real estate transaction closes, the answer is usually on the closing date.
On the other hand, the banking industry is run by somewhat rigid rules and regulations. If a depositor opens a three year CD and is promised 5% interest, both the bank and the depositor know, to the penny, how much interest will be earned. Or, if a borrower signs a fixed rate, 30 year mortgage, both the bank and the borrow know, to the penny, how much the monthly payment will be (assuming no change in moneys set aside for hazard insurance and property taxes).
In terms of personality styles, real estate agents are an independent bunch. Their compensation is commission-based and they are independent contractors who work with a brokerage company, rather than for a brokerage company. Nobody is writing them a pay check. So they can do their magic on their own time schedule without direct oversight of their daily activities. Be assured, the office’s broker carefully reviews all of their paperwork as part of the quality control responsibility. But the real estate agent is free to what they want, when they want.
The banking industry is just about all the way at the other end of the spectrum. Banks are very hierarchical, departmentalized, and monolithic. They operate with a very specific delineation of scope of authority. Certain departments do certain things and folks aren’t allowed to do things that are not in their department. Some have compared banks to military organizations.
These comparisons have an impact on a normal real estate transaction. Now add the complexities introduced by a short sale and it is a perfect recipe for miscommunication, slower response times, and frustration experienced by all parties.
Usually versus Rules-and-Regs
Banks are swamped with many, many requests for short sale approvals. So many so that most banks have hired thousands of new staff. Many of those newbies have not been adequately trained. Rather, they are given procedure manuals and told that they have to follow the rules-and-regs EXACTLY. And, it seems to me, the newbies are told that unless the real estate agent cooperates, the bank employee has the authority to simply decline the file. And many of the newbies have gotten drunk with that perceived new found power.
So you have real estate agents who are accustomed to the flexible “usually” world of real estate running smack into folks who are told to operate robotically. No real latitude is given for creative solutions or problem solving.
Result? What seems like crazy behavior by the bank, is perfectly logical to that bank. For example, a file gets rejected because the seller’s name is not typed EXACTLY the same way on all of the documents. In one place the middle initial is used and in another it is omitted. From the procedurally oriented, robotic world of banking, that is cause to decline the file. To the real estate agent, it is simply the same person with a minor insignificant difference that will be covered by the escrow officer at the closing table.
And so the too-frequent rides on the train to crazy land continue.
Solution? The real estate agent has to bend. The bank employee is not going to risk losing their job. Real estate agents simply have to pay attention to all of the microscopic details.
So, real estate agents this is what I have to say to you … go buy a lot of chap stick because you may find yourself kissing a lot of butt!