Vkhomes,

I am curious. What happened to the bumped buyer and did the deal close with your buyer?

Van

Dugald, Leanne and Dugald agree x 2 ! I have to agree that short sales are fluff and stuff, and that the banks don't care. I"ve been wondering when the class action lawsuits will start from shareholders (Steve Berman, where are you?).

New developments in the short sale process. They're trying at least.

I know we were talking about the behavior of short sale listing agents but this is about the banks not negotiating thus all the short sales failing to close (and other mortgage industry related stuff)

http://www.thinkbigworksmall.com/mypage/player/tbws/20649/1096296

..."Put it on a billboard: Leanne and Dugald agree! :-) "

Say it isn't so!!!!!!

The banks don't really care if they close. The short sale process is a PR exercise. They are getting so much guarantee money from the FDIC and TARP money that they really don't care. What would be worse is the PR fallout if they don't show up and don't start processing them.

IMNSHO, the banks are making it difficult while they set up a request for mo' money. ...but that's just my opinion... :o

Dugald, I'm not talking about who I use. I'm talking about the entire market. First of all, earlier in my posts I said if the short sale listing agent is incompetent, out that house goes. I'm sure you agree with me.

My point is that only 35% of all short sales close -- and if I'm a buyers agent and we run across a short sale that the buyer actually LIKES well enough to consider making an offer on, the fact that I know right off the top is that most short sales won't close. So, if when I pick up my little phone and call the listing agent, I get someone, maybe YOU, yes, then I'll work that transaction. Again -- if the house is really, really worthy, given the longer hurry-up-and-wait timeframe.

So, if I think the agent is competent, and has already a process underway establishing communications with said bank, then sure, why not approach further? That still doesn't mean I think it's wise to hang out for a few months, waiting for a maybe-yes. Interest rate locks don't last forever, and every day there are more, maybe better, homes coming up for sale.

You are thinking more like a sellers agent - knowing YOU can get the job done, short or not. I'm thinking more like a buyers agent - knowing that unless I've got someone good like you working the sellers issue, I'm just going to recommend to my buyers that we keep looking.

See the difference in our thinking? I see only 35% of shorts closing. You see nearly all you come in contract with as a listing agent closing. Big, big difference.

And, you are 100% right, and I agree with you 100% on this: Yes, it's a business, but it's all about what's best for the client. I have more referrals from happy clients who *didn't* pursue a short sale than I have from clients who did. Put it on a billboard: Leanne and Dugald agree! :-)

As to ORT or anyone else handling short sales, I think shorts are pure hell, for all concerned, I'll bet even the banks think so. I think it's nice to have know there is a company that won't just say "no" -- that there is a company who will treat all referrals and customers/sellers/buyers with respect, and full attention, even if the end result is 99.99999% predictable: foreclosure. Life is rough out there, and people need options -- and agents need to know that options exist for their clients they cannot help, even if the bitter pill is to be told it just cannot be done. I guess it must be a little like what the oncologist feels like when he's still administering chemo and doing his job, even though he knows the final result.

Now, go out to area 705 and sell my Phinney Ridge listing. $599k. It's not short!

Leanne

Leanne,

Your points are well made and articulate, but if a negotiator is claiming a 35% success rate then they are not being successful.

Look, my point is: if their success rate is 35%, then don't use them. Don't give me excuses as to why it's 35%. If you have a 1-in-3 chance of closing, then we're all wasting our time. I don't care if the negotiator's price "looks" right... From another angle: How can you be successful? How much effort are you putting forth. Are you going to spend time on it if it's not going to close?

In my friend's example, the title company negotiator told them the exact OPPOSITE of what they needed to do. They would have incurred a HUGE income tax debt - potentially upwards of $40k. Since my friend wasn't a client of the lawyer (remember, the title co was) there was little or no recourse if my friend had gone down the bad path. The right advice saved the friend from certain doom.

I'm not targeting ORT - except that you named them specifically. I did not name the title company where the friend was almost harmed and I won't, as they are otherwise a fine company.

My initial consultation includes a frank discussion of the state of affairs with regards to second mortgages,, first mortgages, deficiencies, collections tactics and other options than short sales. I do refer people to lawyers and accountants and sometimes they find other solutions.

Yes, it's a business, but it's all about what's best for the client. I have more referrals from happy clients who *didn't* pursue a short sale than I have from clients who did.

There are other cases where the liens will make the short sale simply impossible - large assessments from HOAs who won't negotiate or IRS tax liens for example. In some cases, there is no way to stop foreclosure and our job is to slow down the process to see of we can find a solution. Experienced negotiators will know that and I will have a frank discussion with the client.

This is not a time for hints and skillful niceties. A negotiator should say NO if it's simply not going to close.

Dugald, even if we just look at shorts with offers in front of banks (nevermind all the shorts simply for sale with nothing happening on them), I'd love to see your stats that show more than 35% of shorts are closing.
Frankly, if shorts were closing at a higher ratio, there'd be a lot more capable real estate agents listing those shorts ... I'm not seeing anything like that "out in the field". What I'm seeing are enthusiastic agents who are excited they have a listing! Yay! I have a listing! But too many have no clue how to get it sold ...

Obviously, a good short sale negotiator, or a good listing agent can easily determine where WE will spend our efforts - and you and I and they can and will control saying yes or no to a fruitless exercise. I wouldn't call it cherry-picking for good negotiators to choose to only take on transactions they feel are worthwhile -- that's just smart business.

But - in market terms, we have to look at pure stats. To suggest that 80 or 90% of shorts close is wrong. Only the shorts that are being handled by skilled professionals are likely to hit those numbers. Add back in all the shorts and yes, we have 35% or maybe fewer that can or will close.

As to ORT doing a "grave injustice" to the community, I think not. I think that they give advice as politely and as skillfully as they can, but at least they are an honest service who exist for those sellers or agents who are windmill tilters, and for those sellers and buyers who take hope where there should be none. They fulfill a niche in the market. This couldn't be a profit center for them obviously, but you know what? It's a fair service that is good to have in a very unbalanced market. And, just like negotiators who close 80 - 90% of what they choose to take on, ORT can close a closeable deal.

I don't quite get your wrath against title escrow companies -- I tend to trust them far more than some of the attorney negotiators I've met. When an industry badgers unknown people about how they work, that's a flaw. Let's not do that, Dugald.

35%. I stand by that statistic. The buying public needs to realize that working with a top-notch agent for themselves (buyers agent) and a top-notch agent for the seller (sellers agent) makes a huge difference to a positive outcome for a difficult transaction.

How to find out if a sellers agent is good? First things first: are there errors in spelling and grammar on the professional marketing pieces you see? Are there good photos? Does the sellers agent return your agents' phone calls or emails? Do they answer your agents' questions? If it's a short sale, have they started a formal process with the lender, or are they "just waiting for a buyer to come along"? These are good clues.

Another point too is the reaffirmation point. Sellers selling as a short sale really need legal advice regarding their potential future liability, especially since in Washington State if a primary residence is foreclosed through a Trustee’s Sale, Washington law typically extinguishes any right of the foreclosing lender to pursue you for a deficiency. Real estate agents handling short sales need to be ultra clear with their seller clients: see an attorney for advice before agreeing to list or to sell as a short sale.

Most sellers think they are helping protect their credit by trying to accomplish a short sale. That could be true, or it could backfire, see an attorney, or at least your tax advisor first. Clearly, Dugald and I agree on this major point.

Leanne

Leanne,

You've hit one of my hot buttons here. I have been doing short sales since 2002. The whole cottage industry sprouting up around short sales this past 24 months is the new "wild west."

35% is way off if you're dealing with a professional, organized short sale negotiator. The number should be more like 75~90% or more. If they're quoting 35% then they should be out of business. RUN AWAY!!!!

I have a good friend who is currently negotiating 47 different short sales (he's a short sale negotiator by trade since 2002 as well) and his win ratio is 75%. He doesn't pick and choose his deals, either, but he adequately educates his agents what to look for and is TENACIOUS in his work and followup. You have to be. My success rate is close to 90%. I spoke to another trusted colleague about a week ago who is running over 90%.

If ORT is taking every short sale, then they are doing a **grave injustice** to the community. The sellers should NOT be held up to some vain hope that the short sale can/will be successful. It's a gross dereliction of an agent's duties if they have not had a serious discussion about short sales with their clients, including tax liabilities, other options and the likelihood of sucess. If they don't know what to say, then they should find someone who does.

We're easy to find in these times. :)

For those reading this: it's EXTREMELY important to know who the negotiator represents. It's pretty clear that lawyers working for title companies represent the interests of the title company - not the seller. BIG RED FLAG!!!!! I have a good friend who just completed a short sale where exactly this scenario was in place (title company "representation") and was NOT able to complete it. The lawyers made it clear where their loyalties were. The sale was successfully completed using a different team. The title company legal team wanted money even though they didn't complete the task. They got the title business, but it was ugly.

Fixed price negotiators will give up. Especially the lawyers who gauge their time as an hourly rate. We all do, to a certain point, but we are hearing more stories of fixed-fee negotiators giving up when it gets tough - having been already paid a retainer.

You should engage a good, experienced third party negotiator who can show you bank approvals & successes from recent transactions. They should also have experience dealing with properties in foreclosure and bankruptcy. They should have referals to legal and accounting folks who can advise their clients. They may demand a partial fee up front, but should have some financial reward at the back end based upon their - and the seller's - success.

I hope that helps.

VK, I just got this reply from Tom Kellogg at Old Republic Title and Escrow ... it clarifies a lot! Good work on hanging thru your current short sale transaction too!

"Leanne, It looks like about 35% are closing between 90 and 120 days. Where everything get skewed is that Old Republic has a policy of accepting all short sale properties, even if they are overly encumbered with tax liens etc and have an almost zero chance of closing."

Agents, before you agree to list a short sale property, you really need to order a preliminary title report, and review the mortgages, leins and other information with your seller. Consider asking Old Republic's short sale experts if they feel a particular property really has any chance at closing. Wanting to help your clients is commendable, but wasting time tilting at windmills is frustrating, and really isn't a good use of your time, plus it often provides false hope to the property owners.

Buyers, if you want to write an offer on a short sale, make sure you have a chance to review the preliminary title report, and can reject buying the property if the total of the amounts owed appear exhorbitant. Be realistic, and don't get stuck too long being in love with a property that you cannot realistically hope to close on. An "almost zero chance of closing" is really not worth your time, not when there are so many other viable properties just waiting for your agent to open the front door to show you!

Hi VK,

The stat about short sales came from an agent who specializes in foreclosures. I'm checking with Tom Kellogg at Old Republic Title & Escrow to see what his short sale experts are currently seeing. ORPT has an escrow division that will handle the details of short sales, and only charge a fee for the short sales negotiations if the transaction closes. You can find Tom in Bellevue, WA.

I'm pretty frank with my clients, both buyers and sellers, and you'll see that in my comments here too :-).
My rule of thumb on short sales is pretty stark: If I think the listing agent is competent, then possibly I will recommend that my buyer clients move forward with making an offer. If I think the listing agent is stupid or not asking a manager for advice/help (see, I really do mean stark), we are NOT making an offer on that property. The listing agent is in the drivers seat on shorts -- and while I'm happy to pitch in and help when needed, a buyers agent doesn't represent the seller, and cannot negotiate on the sellers behalf with the lender. I don't like it when I'm forced to sit around and wait ... and if I feel there is incompetence from the other agent, or the bank involved ... I can't live with that, it's not in the best interest of my clients to watch incompetence shatter their ability to close a sale on a property they want. If that's the scenario, my advice to my buyers is simple: move on.

Frankly, there are a great many homes for sale that are not short sales, and have very motivated sellers. So far, the majority of my sales have been with sellers who have equity, and are offering their homes in much better condition than what you typically see with most short sales. Seller motivation is a huge factor when negotiating, and while you have short sellers who are very motivated, their hands are tied by their lenders. I'd prefer to deal with the source: the actual seller who can make a yes or no decision.

As to bank REO's, it's random for value for those too. Last weekend I showed about 12 houses under $350,000. 4 of them were REO's, and 3 of the 4 were at least $75,000 overpriced. Really. The 4th was priced ok, but my clients just didn't like it. The 3 that were overpriced left me shaking my head -- none of the listing agents were doing what I call a competent job in marketing those homes. Are they not doing a better job because they aren't being listened to by their property owners -- or, are the banks choosing to work with agents who aren't doing a good job, but are willing to do a poor job for a very low fee?? I just don't know. I never know what a listing agent is going to earn on any property I sell, so this is just speculation on my part.

To be honest, I hope that bank managers who handle short sales and REO departments read these forums, so they can have a chance to hear what is happening "out in the field". Experience matters, and so far, I'm not seeing the lenders are paying attention to those who have the experience.

So what can I say? Use your head, be choosy, and instead of waiting around for several months to find out if a particular lender might say "yes" to a short sale, why not use that time instead to keep hunting? I like to have 1 or 2 "standing" appointments each week with active buyer clients. During the dark, short days of winter that's much more difficult than in the longer daylight of summer, but keeping your clients actively looking, out in the field (not at their desks in front of a computer) will pay off for all of you. I like the hunt, and I especially like the look on buyers faces when we pull into a driveway of a home that really looks good.

Leanne, yes I have heard short sales are a nightmare, leaving buyers in that hated state of limbo for who knows how long only to be rejected. I have steered clear of them and discouraged the ones that are so obviously going to be nightmarish. This one stunk in the beginning when we didn't have the seller signatures, we were told they were out of town but meanwhile the bank was reviewing the offer (which I thought weird and totally wrong). Where did you hear the 35% closing ratio? I'm curious about that.

In my case, we have an almost happy ending. I say almost because we haven't closed yet--2 weeks away. But happy in the sense that the bank we are dealing with is EASY. The contact person has always been accessible. We got a $9500 credit for closing costs to offset the cost of repairs. We had bank approval within a couple of weeks initially and it only took 2 days to approve the closing cost credit.
Appraisal came in just fine and no work orders required (took only a week!) and the home is beautiful. My buyers are thrilled because they've looked off and on for the last 3 years and this was the only home they really felt was right for them.

So hopefully we will close with no issues and this will be one for the history books! I've tried to tell them this has been a dream situation as far as short sales go, especially when they were getting antsy or finding that the porch needed repouring, etc.

Thanks for your response! I love this forum :)

Kary, I agree with this 100%: As an agent, however, I will comment on the fact that this is yet another reason agents should not resort to the stupid ploy of not having their seller clients sign contracts until after the bank approves. Buyer clients, IMHO, should refuse to deal with such agents/sellers, and quite frankly I don't understand why any buyer's agent would expose their clients to such a ploy. And it's also a practice the NWMLS should prohibit.

It is a ridiculous practice. Buyers - if you don't have a seller signature on your offer, you have no mutual agreement. Verbal does not count. Better to have a short sale offer that is signed, subject to the lenders full approval. There is specific language already written for that particular clause. Of course, even if you have signature from the seller, there is no guarantee you'll get the short sale approved by the lender.

I figure that short sales are a waste of time - if less than 35% of them ever close - is that worth your time? Couldn't you go find several other homes to buy at just as good or better value than waiting around for many months just to hear 'no' ?

Of course - if there have been a few rejections on a particular property by a lender (re: buyers), then maybe the 3rd-time-around rule applies .... you know, the 3rd time is the charm! :-)

Still and all, short sales are an elusive dream, and usually are a nightmare for time consumption.

"like finding a rat infestation in a moldy meth house"

That's hilarious but...I have clear cut and dried answers for that type of thing. This is mucky. I had the whole Contingency, Bump Notice and Reply thing down but throw the bank in the mix and nothing's been done the right way.

Thanks for the advice and I'm sending the whole string of agent to agent emails and the offer to my broker. Plus I'm having my buyers sign a Withdrawal of Offer to have on hand just in case. Since I posted, the listing agent told me he's trying to get sellers signatures but that it's been difficult because they are out of town until the 10th.

I actually thought this would be the easiest short sale ever. Newer home, vacant, local bank...should've known!

Rob, that's too funny. I really don't think it's THAT bad... We've got some interesting "standards of practice"...

Your question is a sign of the times. Remember the good old days when we all hated contingent offers because they were so complicated. Many of us took classes explaining contingent offers several times because it was so messy. Then the recession hit and now we are all dealing with short sales and wishing we could get some contingent sales in the pipeline.

But that wasn't good enough for you. You had to go and combine the two. Yuck. A contingent short sale?! Sounds like finding a rat infestation in a moldy meth house. I don't envy you. Proceed with caution. Consult with your broker and your company lawyer. This is a mine field and you don't want to end up in court explaining that you consulted an on line forum to help you make your decisions.

I was assuming this was one of those short sale listings where the agent doesn't submit the offer to their client for signature before submitting it to the bank so that they can leave the listing as being in active status the entire time the bank processes the short sale. If this listing is contingent now, maybe that's not what they're doing.

As to the attorney review, yes there are documents to review--the contract your client signed. But beyond that, I do think you should get an attorney opinion on if and how your client can back out if that's what they want to do.

VK,

Kary's right about the legal advice, BUT... you need to talk to your broker again, who should probably bring in the brokerage legal eagles to give you the appropriate advice. I'm not a lawyer, but we are always taught that you have nothing until you have a signature.

IMNSHO, The other agent's being dumb if they haven't accepted/responded to your offer with the appropriate bump paperwork for you as the second buyer.

I hope that helps.

Thanks for the comments. I should clarify. There aren't any documents to review yet, just an offer I submitted on my buyers behalf. The SS is currently Contingent; our offer price was lower. The listing agent submitted ours to the bank immediately to get approval on the price, and we have nothing back signed. Not a lender approval letter nor the sellers signatures accepting our offer. He did tell me that he sent the Bump Notice to the first buyers. I haven't heard back from him whether or not the sellers have accepted our offer. As far as SS's go, this one has been easier in the sense that it is a local bank and they approved our offer price 11 days after submitting (yet nothing in writing yet)
My buyers actually want the option of not going thru with the sale so they don't mind the 5 day bump period to giv e them time to think. I just think its weird that a Bump was done without having a fully accepted offer signed around.
I didn't realize this was a practice amongst listing agents on SS's, to submit an offer to the bank without mutual acceptance between buyer and seller. I thought our case was special because of our offer price being lower than what was already accepted and the property being Contingent.

Again thanks for the comments. Kary, do you think I still need to pose this question to an attorney? We don't have a signed around contract, period. I just thought it weird to have the bank "approve" our offer first before procuring any signatures. Unchartered territory for me and my broker's not much help.

This is yet another question that real estate agents should not be answering. It's a legal question and legal questions should be left to attorneys who have reviewed the documents (so I won't venture an answer either even though I'm also an attorney).

As an agent, however, I will comment on the fact that this is yet another reason agents should not resort to the stupid ploy of not having their seller clients sign contracts until after the bank approves. Buyer clients, IMHO, should refuse to deal with such agents/sellers, and quite frankly I don't understand why any buyer's agent would expose their clients to such a ploy. And it's also a practice the NWMLS should prohibit.

Michaelle is correct, you still need seller signatures. Until the home is actually foreclosed upon, it still belongs to the home owner.

Dear Short Seller, Indeed the banks are powerful, however let us not forget that the homeowners are still the owners of title. Nothing else to say, Michaelle