When banks play hardball on a short sale, should we play hardball back?

By
Services for Real Estate Pros with And the United States of America AZ SA543893000

We know how stoooopid loss mitigation departments can get.  They take forever to make black and white decisions, they answer the phone when they want to, they put us on hold while they play Freecell or Solitaire on their computers pretending to be looking up our file, etc.

 

Last week, we get an approval on an offer written months ago.  The listing agent is excited, I'm excited, client is excited, etc. is excited... 

Problem is, they approved it for $11,000 less than we needed and they didn't bother to tell anyone.

Although the contract had included concessions to my buyer, the loss mitigator decided to cut my clients closing cost concessions out of the picture.  If he doesn't get the concessions, he can't buy!  Not so smart on the banks part to play hardball like this!  If they don't give us the concessions that we asked for and my buyer walks away, this home will go into foreclosure.

 

What to do?  What to do?  Well, certain items were found on the home inspection, lack of proper insulation, fire code violations, unpermitted work, etc.  My client is fine with these items and knows how to correct them.  The bank played hardball, so now can't we?  Once this home goes on the market, we plan on informing the listing agent, immediately of all of the found deficiencies on the home, forcing the agent to either disclose these items to potential buyers or run the risk of losing their license.  These items will affect the value of the home and as such will become known material facts.

 

We knew we were buying, "as-is", "where-is".  We knew the seller couldn't affford to make repairs.  Now, if the bank won't deal, they better be prepared for dealing with the public and having to disclose the defects we found.

It may be cheaper for them to just take our offer.  In times like these, how hard should we play?

Posted by

Mark Organek

A guy taking down Mt. BHAG one day at a time.

Thank you for taking the time to read this post.  Maybe one day we can be friends on facebook.  If you would like to visit my facebook business page you can do so at www.facebook.com/realtorsatpeace.  Beyond that, I cannot discuss anything else here as that is not allowed...directly or indirectly.

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  1. Paul Francis 08/12/2008 07:28 AM
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Tags:
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Rainer
132,319
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

There are a lot of agents that have more patience than I do in working with banks.  Personally if I never work with another one.. that's ok.  The problems I've experienced include:  banks will dictate every aspect of the sale, bank addendum are one sided, banks will charge per Diem penalties even if they are the cause of delaying closing and causing you to go out of contract, they will make no repairs, they will generally sell as is, etc., etc., etc.  They will even reduce the listing agent's commission... and you might even have to pay a third party.....

One would think that banks (with large inventories of foreclosed homes) would be easier to work with; but they are not!

 

Aug 13, 2008 12:43 AM #80
Rainmaker
168,860
Robert J. Russell
Robert J Russell Companies - Dallas, TX
IRES, ICREA, GMA, LAS, LUTCF, Sales Trainer

Thank you for those comments ! Good Information !!!

Robert J Russell - http://www.robertjrussell.com

Aug 13, 2008 12:44 AM #81
Ambassador
458,571
Terrie Leighton
Ferrari-Lund Real Estate - Reno, NV
Reno Real Estate Agent ~ Selling Homes in Reno

It does feel like we are at the mercy of the bank when working a short sale. Trying to speak to the negotiator directly is sometimes....well let's just say seems impossible. I have often wondered how many ego's are involved when trying to close a short sale.

As far as playing hadrball....you never really know  how the bank will react do you? I would ask my clients if they want to play the game or somply get the house and the deal done!

Aug 13, 2008 02:35 AM #82
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Diane - That's true that it's impossible to tell which direction the bank is trying to go.  Haven't they heard of teamwork?

Antoine - Amazing, but true!  We should point out to the public, as often as possible, how much damage is being done to the market because the banks have no protocols for handling transactions properly.  So indifferent.

Neal - Leave it to their actions to let us know their intelligent ways.

Deb - Thank you for the suggestions and comments.  We use a repair form but the hard part about this transaction is that even without taking the repairs into consideration, we are still going to net them thousands more than they would get through sheriff's sale.

Aug 14, 2008 05:47 AM #83
Rainmaker
517,582
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Mark:

Nice blog article on When banks play hardball on a short sale, should we play hardball back?  I think we should take the high road and stay away from the bank hardball tactics.

Harrison K. Long, Explore Properties Group

Aug 17, 2008 02:02 PM #84
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Kathleen - It's more that the list of material defects will be sent in to the servicer and/or the bank if it becomes an REO after the bankruptcy filing is discharged.  This way, they cannot plead ignorance to the new buyer's lawsuit for non-disclosure.  If they get away with it, they basically cheated the system.

Justin - You would think that losing profits would make you tighten up and tidy up instead of being loose and sloppy.  Not so, it's almost as if the banks want to continue to drive the market down.

Russ - We've got to pull out all of the stops on this one for certain.

Janine - I've got two listings I won't take pictures for until the bank orders the BPO.  If at any point they become unreasonable, I'll escalate it as high as I have to go.  Since when do they have control?

Aug 17, 2008 03:24 PM #85
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Kathleen - It's more that the list of material defects will be sent in to the servicer and/or the bank if it becomes an REO after the bankruptcy filing is discharged.  This way, they cannot plead ignorance to the new buyer's lawsuit for non-disclosure.  If they get away with it, they basically cheated the system.

Justin - You would think that losing profits would make you tighten up and tidy up instead of being loose and sloppy.  Not so, it's almost as if the banks want to continue to drive the market down.

Russ - We've got to pull out all of the stops on this one for certain.

Janine - I've got two listings I won't take pictures for until the bank orders the BPO.  If at any point they become unreasonable, I'll escalate it as high as I have to go.  Since when do they have control?

Aug 17, 2008 03:27 PM #86
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Sharon - I've never seen an offer come back where the commissions were cut.  I have seen higher requests for payoff but I haven't seen it written out as a cut in commissions.  I simply send it back and tell them to revise their numbers to what makes sense.  Same thing we have to do here on this one with the buyers' funds.  What difference does it make if the buyer is doing down payment assistance?

Gina - Great suggestions as I always value your opinion and advice.  This bank is really giving the run-around.  The HUD was submitted properly.  The listing agent isn't getting any help.  The sellers gave an authorization for release of information so I could try.  No luck getting a call back from Popular Mortgage.  Their indifference just shows their level of care.

Susan - Unfortunately, that company and their representative, in relation to the proverb seem to be lacking in all form of sense/cents!

Katerina - Great suggestions on escalating this file.  I wll have the note holder on the phone this week.  They probably have no clue what the loss instigator is doing over there to hurt the value of the note.

Aug 17, 2008 05:18 PM #87
Rainer
32,164
Elena Martinovici
MY HOME GROUP 602-321-1273 - Phoenix, AZ
Associate Broker- Phoenix , Arizona

Mark,

 

You should print this  blog and forward to the  note holder as well as the negotiator.

Aug 18, 2008 03:35 AM #88
Rainmaker
1,078,873
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Mark, we hear stories every day where commisions are cut. Last week the bank wanted to give us HALF the commission because we were doing both sides. This time the attorney stepped in and we got some of it back. A lady in our office only got half the commission when she had both sides.

We also belong to another real estate board and their MLS made a rule that the commission in the MLS had to be the one paid after so much abuse by the banks. I'm really surprised you haven't heard of this because we are dealing with banks all over the country.

Today I received a couneroffer on a short sale, cash deal, and they countered cutting our commission 1%. I'd say here it's the exception when they don't dock our pay or try to.

Aug 18, 2008 03:06 PM #89
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Sam - You're lucky to have a title company that you work with that can get things done with the bank.  It's the talented people, not the industries that get things done.  Good job forming such a relationship!

Renee - I'm glad you found it interesting.  Now that the banks have leverage, we've got to keep them in check.

Chris - There is no counter on this short sale.  It is only the bank modifying the original offer.  The selling and buying parties know that the home isn't worth what the bank thinks they can get for it.  The BK has already been discussed with the sellers.  Maybe it's the better option.

Jon - I will never forget the stupidity of the banks that used to beg us for business that have now hired front line people to run intereference.  I can't wait to remind clients in the future the potential perils of dealing with servicers like Popular Mortgage unless they can get their act together and do the right thing.

Robert - You seem to have enjoyed the read.  It has turned into somewhat of a frustration venting zone.

Terrie - We're not going to crumble on this deal.  There will be many more, especially since down payment assistance programs are going away.  These banks will be stuck with many a foreclosure unless the homeowners get smart and extend their free stay until the servicer wises up.  It seems harsh but they just aren't playing fair.  It is downright ignorant.

Aug 21, 2008 07:15 PM #90
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Elena - Thank you for the suggestion.  Some of the posts that I make serve as a sounding board to make sure I've got the right idea.  I would forward the blog but I don't want any backlash from them because of the bankruptcy filing strategy.  Great idea!

Sharon - Great job holding your ground.  Now, I won't lift a finger for the bank unless they confirm that they understand that we all have to do it as a team.  If they won't guarantee my professional fee up front, they can find someone else to list and market the property.

Aug 21, 2008 07:43 PM #91
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Sharon - Did they give a higher payoff or did the flat out document that the commission was getting cut?

Aug 24, 2008 06:40 PM #92
Rainmaker
1,078,873
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

They flat out document a lower commission than what was advertised in the MLS. They do it all the time here and listings specify that the commission will be split 50/50 between listing and selling agents.

Aug 24, 2008 11:07 PM #93
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Sharon, that stinks that they would do that out there.  All I've seen are payoffs with a reduction in the amount that the bank is willing to cover.  I hope you remember the action of these banks so when this market turns, we can turn our backs on their requests for business.

Aug 25, 2008 02:37 AM #94
Rainmaker
1,078,873
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

I agree, Mark. We will remember and one bank has lost my business in the future. I still remember the builders who were giving $2000 on a $500,000 house when the market was hot.

Aug 25, 2008 03:03 AM #95
Rainer
6,714
Kevin Batdorf
Kevin Batdorf (Batdorf & Associates, Inc., St. Pete, FL) - Saint Petersburg, FL

Hi Mark,

 

Sorry to come so late to this blog. I'll admit that I have not read all of the comments, so I apologize if I'm repeating information. I've done a lot of short sales recently, and I've noticed several trends with the lenders.

They are looking for a loan payoff from the borrower.  A lender will NOT pay closing costs for a buyer. The loss mitigator's job is to stop the bleeding.  This process is not designed to "help" the borrower. Most lenders will not pay a full commission.  Most loss mitigation departments are simply processing companies who work for a multitude of investors.  Common sense does not play a part in negotiating.

Although it makes sense business wise to negotiate with a buyer, loss mitigators are not in that mind set.  Their task is to dispose of a bad loan by accepting an amount that is reasonable based on the current property value.  The current property value (based on a BPO or appraisal) is key to the transaction.  The investors give strict guidelines to the loss mitigators.

A buyer's agent needs to know how the process works.  If your buyer needs assistance, don't look to the lender for help. Short sales are always AS-IS.  The BPO or appraisal should reflect the condition of the property.

REO, or bank owned, properties are completely different.  Here, the bank owns the property and is trying to dispose of it as quickly as they can.  Negotiating for repairs, closing costs, etc. are acceptable.

I know how frustrating all of this is.  It goes against everything we have learned and practiced in our careers.  However, once you understand how the system works, the process doesn't seem so foreign.

Aug 25, 2008 04:02 AM #96
Rainmaker
216,875
Mark Organek
And the United States of America - Mesa, AZ
On a journey to accomplish one huge goal.

Kevin - I've had every short sale transaction pay closing costs and/or down payment assistance.  The bank's true loss mitigators simply weigh out what they would get at foreclosure vs. short sale.  This is the way it's presented to them.  We window shop short sales with clients when we know we have an idiot loss mitigation system handling a transaction (like this particular company).  My client isn't in any rush so once the deadline passes, we'll just wait and pick this up when it becomes an REO.

Loss mitigators usually cannot identify future downward trends in pricing so that's where the difficulty begins.  I can tell the difference when I have a Jr. or Sr. decision maker on the phone.

Much also has to do with the state that your in.  I know that Florida and Arizona have two completely different processes regarding taking a home back.  Out here, the bank has very little leverage over the borrower.

Thank you for the input.  Much of your comment probably applies in judicial foreclosure states and readers should take note of what you wrote.

Aug 25, 2008 04:11 AM #97
Rainer
32,164
Elena Martinovici
MY HOME GROUP 602-321-1273 - Phoenix, AZ
Associate Broker- Phoenix , Arizona
1 Featured Post

I have one now with National City as a second.  They want 10 % ( 5,500 )  to release the lien and another  $ 4,500 to release the debt as well.  10 K on a 55K note .

The first lender ING will only pay  $ 2,500 to the second and does not want to see the second get a penny more.   National city wants the seller to pay 3,000 upfront for a lien release  before they send a letter that states 2500 will be suficient from ING and another 4,500 for full settlement....

 The seller was going to pay the  $ 4,500 even tough he lost his job and moved to Europe to look for a job as the prospects here are grim. He has a divorce and a job loss as hardship yet he is being asked for unreasonable settlement cost . In light of all this he decided to just let the home foreclose then he will be protect from deficiency lawsuit. Everyone is loosing with that:  is a loose loose situation but with 2 unreasonable lenders there is not much we can do.

I always stress to the lenders that a short sale will bring them more $$$  and they can dispose of the home faster... is has been proven over and over again more loses are to be incurred by lenders that foreclose.

I  tought ING was a  reasonable lender, I got them an offer 5000 over the market and the BPO value so the cost that was going to be paid to the second is already built in but NO they don't want to pay.... I also disclosed to them that National city needed a minimum of 10% to approve the short sale.  oh well , they can just get 30% less in 6 to 7 months from now if the are lucky.

Jun 27, 2009 06:31 PM #98
Anonymous
Cheryl

What if a person does have cash and the "offer" has been accepted by both banks... Why would there still be no closing date, a desire for a third appraisal, and three months down the road- yada yada?

Aug 06, 2009 02:46 PM #99
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Mark Organek

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