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Should I be a Real Estate Loss Mitigation Expert?

Is loss mitigation the same as home retention?

foreclosureIn this economy there are a lot of opportunities posted in the loss mitigation field. I wanted to open this discussion and see what your feelings are on the topic.

I have worked as a Home Retention Specialist for Titanium, Inc. and have enjoyed that work very much. Loss mitigation isn’t the same thing as home retention, I have found.

When I was researching loss mitigation there seemed to be all sorts of “lucrative” opportunities out there.

What is loss mitigation?

As per wikipedia: Loss mitigation [1] is used to describe a third party helping a homeowner, a division within a bank that mitigates the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner’s lender. Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure.

A great idea, but…

It has been my experience that the large majority of these companies offering “loss mitigation” consultation are ineffective at best.

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I think we as REALTORS should do what we do best…help people buy and sell real estate. When the sale is a distressed sale, then we need to know the proper channels to turn to for help. In the instance of loss mitigation, it is my opinion that the seller is best represented by an attorney who specializes in this field.

I am hoping that you will all chime in with your thoughts and experiences in this difficult field.

Written By

Lesley offers 21 years experience in real estate, public speaking and training. Lesley has a degree in communications and was the recipient of an international award for coordinating media in real estate. In the course of her career Lesley has presented at international real estate conferences and state REALTOR associations, hosted a real estate television program, written articles for trade magazines and created marketing and PR plans for many individuals, companies and non-profits.

21 Comments

21 Comments

  1. bficker

    October 23, 2009 at 12:15 am

    I have to disagree with you on this. An attorney who specializes in this may help, but they (generally) are not great at keeping the deal together and doing the rest of the real estate transaction. You would probably be best served to learn from a guy named Lee Honish with ShortSalegeni.us and either following his method, or hiring someone to negotiate for you who uses his methods. The further you get away from the transaction/negotiation the greater chance you have of it falling apart.
    There are just as many scammers posing as attorneys as there are scammers/loss mitigation companies. If you truly care for your clients well being, do not just turn them over to an attorney. If you do not understand how short sales work, by all means refer them to someone who does.

  2. Bob

    October 23, 2009 at 1:31 am

    Jeez, advising people not to seek legal advice when legal issues are the crux of the matter (debt collection, deficiencies and judgemnets, tax liabilities). Yep, great advice.

    • Benjamin Ficker

      October 23, 2009 at 1:41 am

      I didn’t mean don’t consult an attorney when necessary. Also, those are mostly tax issues, not just legal issues. Obviously anything that we (real estate agents) are not qualified to advise on, we shouldn’t. Tax issues, legal issues, etc. Seek professional counsel. What I took from the post was basically to not work on short sales, when with the right knowledge you can be a great asset to your client. If agents were to avoid any legal issues then I guess they would have to stay away from anything with a contract, right? Every sales and listing contract would then need legal counsel, as well as anything else you ever sign your name to. I just don’t think agents should avoid distressed sellers because they are scared. Arm yourself with the right knowledge and help them out.

  3. Jim Gatos

    October 23, 2009 at 10:20 am

    Loss Mitigators for the most part take advantage on people’s misfortunes and charge them ridiculous amounts of money and USUALLY the same thing, if not better, can be done by the homeowner alone with their lender or some group like Hopenow. However, I think most lenders are acting very “predatory” now and want to squeeze the homeowner out of as much money as they can, even if the homeowner doesn’t have it; and Hopenow is pretty much not very effective. Short Sales are the only thing that most homeowners can do with some measure of success, aside from outright foreclosure. Most of the short sale negotiators I’ve seen (I used one a couple of times) are useless; I or an attorney could do better. I found attorneys that specialize in short sales are the client’s best bet; and also sometimes investors…
    What’s the goal? Everyone forgets.. TO GET THE HOMEOWNER OUT OF FORECLOSURE!

    • bficker

      October 23, 2009 at 3:10 pm

      Are you specifically talking about loan modifications? They are rampant here in Phoenix where there are really no guidelines set in place. We do help homeowners with loan modifications if that is what would work best for them. Most of the time a short sale is a better option. Yes there are scam artists out there, but there are also legit companies who do get much better results for homeowners who may not qualify for some of the standard gov’t programs. We’ve helped people cut $1,000 off their payment when the bank previously told them that they did not qualify for a modification.

      Unfortunately, your general statement is correct. Most loan modification groups do scam people for what they could get on their own (By the way, most people would say the same about Realtors). But there are some of us who really do help people stay in their home and avoid foreclosure.

  4. Lesley Lambert

    October 23, 2009 at 11:12 am

    For the record: it is my firm belief that if you have an attorney with experience in these fields, they are best. Secondly: loss mitigation IS NOT THE SAME THING as short sales. Sometimes one leads to another, but they are NOT the same.

    • bficker

      October 23, 2009 at 3:04 pm

      I might just be confused with the terminology used in your area then. I have never had a short sale that did not involve some negotiating on the sellers behalf (mitigating their loss). When we take on a short sale our company does the negotiating with the bank. There is nothing out of the sellers pocket (except a $500 retainer at the beginning that is fully refundable if it does not happen), all the fees are paid by the lender. I don’t see the problem with this. An attorney will get paid up front by the seller, who most likely can not afford an attorney.

  5. Jim Gatos

    October 23, 2009 at 3:59 pm

    “Unfortunately, your general statement is correct. Most loan modification groups do scam people for what they could get on their own (By the way, most people would say the same about Realtors). But there are some of us who really do help people stay in their home and avoid foreclosure.”

    Yes, I am talking about loan modifications…

    As for the public thinking they can do our job, I now am a recent convert of the “Russell Shaw methodology of listing”, one of says, if you think you can do my job, go on and do it! ‘
    So far, none of my listings sold by themselves.. So I’m not THAT worried..

    • bficker

      October 23, 2009 at 4:11 pm

      “As for the public thinking they can do our job, I now am a recent convert of the “Russell Shaw methodology of listing”, one of says, if you think you can do my job, go on and do it! ‘
      So far, none of my listings sold by themselves.. So I’m not THAT worried..”

      I have the same feeling towards loan modifications…

  6. Michael Patton

    October 24, 2009 at 3:27 pm

    I think what we’re discussing here are a couple of different issues:

    1. Loan Modifications – I will gladly provide any property owner with a BPO and a referral to the various “no charge” avenues (ie: HopeNow) that may be able to assist them in their quest to get a loan modification.

    I track activity in my area as closely as I can and am simply not seeing much in the way of modifications that actually benefit the homeowner to a large enough degree – and most are deciding to go to a foreclosure or short sale once they realize they’re not going to get a principal reduction.

    2. Short Sales are where I can help out the most. I’ve been certified (not that most of them are worth the paper those certificates are printed on) by 5 different teacher/associations on performing short sales – and I’ve concluded that the biggest disservice I can do for my client is for me to attempt to negotiate the short sale with the lender.

    Yes, I’ve done dozens of them with success over the past 25+ years and never had one “stick” my seller my a deficiency note… but things have changed so much over this past 6 months or so that I now refuse to list a short sale unless the seller will retain an Attorney that specializes in these types of negotiations. If a seller will not spend a couple thousand dollars to protect their future then I pass on the listing.

    It’s my belief there will be literally thousands of E&O claims against agents/brokers in the coming years. When the seller is pursued for a deficiency (all the forums I read indicate this is becoming quite the norm) they’re going to turn to every “deep pocket” they think had a hand in their misfortune.

    Let me be a REALTOR and focus on those areas of the transaction that I’m best equipped to deal with and let the Attorney’s negotiate the areas that truly fall outside my area of expertise.

    As to affordability – I’ve found that most people that aren’t making housepayments have thousands of dollars “tucked under the mattress” to help them get on with their lives – preserving what they can of their credit and assets is simply an investment towards that more successful future.

  7. Krista Johnson

    November 6, 2009 at 9:41 pm

    I am a Real Estate Broker in California. The recent law changes mandate that we must put in 14 point bold that the homeowner/client can complete a modification on their own and that they do not need to hire legal counsel. That being said, I now work in a law firm that specializes in loss mitigation: loan mods & short sale negotiations, debt settlement, collections and BK. Loan mods and debt settlement seem to go hand in hand. In some cases, they cannot get a mod due to their high debt ratios. I refused to list a short sale and negotiate it myself. I do not know as much as the attorney and I am sticking to listing homes and referring mods & short sale negotiations. I also have a hard time with agents trying to do a modificaiton for no cost and then listing the home when it does not go through. I think that it is not in the best interest of the homeowner to use a Realtor to do a mod because the Realtor will benefit from them not obtaining a mod. I have heard it from agents themselves that this is their mindset. Stick to what you know, refer out what you don’t. The owner who pays a third party will not come back at you if it falls apart.

  8. Krista Johnson

    November 6, 2009 at 9:44 pm

    For clarification, the disclaimer specifies the owner does not need to hire any third party to negotiate their loan modification. Also, I am an active agent and do list short sales. I just don’t negotiate them.

  9. Michael Patton

    November 8, 2009 at 2:06 am

    I absolutely agree – our Real Estate licenses DO NOT empower us to negotiate the “release” of liability when doing short sales.

    I’ve been successful in the past – and by the “skin of my teeth” been able to get every prior short sale listing completed with a total release of liability – but times are changing and the lenders aren’t being so agreeable anymore.

    So, I will not take a listing unless the seller is willing to retain an attorney to negotiate… let me be an Agent, let the attorney do the things he’s better equipped to handle.

    The fee’s are negligble in the big picture – and I’m keeping myself as far from being sued as possible.

    Just think of how many agents/brokers are going to be sued when a seller is pursued for collection of a deficiency – whether you told them or not isn’t gonna matter a whole lot when they turn to an attorney for help… they’ll sue everyone involved!

    It’s simple – I don’t want to be one of the targets.

    Do what I’m good at – list and represent sellers in their SALE of property.

    Refer the things I’m not good at – short sale negitations, home inspections, appraisals, escrow and loan applications/funding.

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