Please welcome Agent Genius’ newest contributor Brian Block (you’ll love his bio at the end of this article). He’s a Realtor hailing from northern Virginia, he’s an attorney and can kick ass with his Krav Maga skills, so pay attention folks, because he’s also a smart guy and great writer! -Lani Rosales, New Media Director
Cold Winter + Obama Inauguration = Vacation!
The other week, my wife and I decided to get out of town. Winters can get awfully cold here in the Washington D.C. area. Add to that the millions of people streaming into the region to attend Barack Obama’s Inauguration, road and bridge closings, creating a recipe for a paralyzed real estate market. With some of the main highways closed to traffic, it wouldn’t have been possible to show homes to clients even if I tried.
So a few weeks before, we booked a vacation to sunny Puerto Vallarta, Mexico. I won’t make you jealous with photos of us on the beach and tales of whale watching, resorts, and relaxation. That’s not what this story is about.
The oldest rule in the book:
As anyone who’s been in the business for some time knows, business inevitably perks up and in fact becomes crazy right before you leave on a vacation. This time was no different. Between a ratified contract, another offer pending, waiting for bank approval on a short sale (and a regional lockbox exchange), I was working right up until the time I packed my bags late the night before departure.
While some agents have a team to cover for them while they’re gone, like hundreds of thousands of REALTORS around the country, I’m working solo.
What I Did Right
- Coverage – I made sure to have another agent in my office cover my business while I was out of town. I briefed him on all the pending transactions that I had and provided him with the contact information for all the parties involved. The night before I left on my trip, I e-mailed him all the documents that he’d need in case things happened on any of these matters.
- Alerted Clients – In the days and weeks leading up to the Mexico trip, I alerted my current clients that I would be away. I told them who to contact if there were any questions or issues they needed addressed while I was gone. I told them that we’d talk when I returned.
- Told Other Agents – My clients informed, I made sure to let the co-op agents on pending transactions know that I would be out of town and gave them the contact info for my covering colleague.
I thought everything was all set. Time to pack my bag. Time to go to sleep and catch a 7 a.m. flight (my wife always swears that she’ll never wake up at 5 a.m. except for an international flight). A week without e-mail or cell-phone.
What I Did Wrong
- Forgot to Change My Voicemail – When I returned from vacation, I had 23 voice-mails waiting for me! In the last minute rush to inform my clients and other agents, and to brief my colleague, I neglected to change my voice-mail to let potential clients and other agents that I was on vacation.
- Didn’t Set Up Vacation E-Mail – While everyone hates getting these vacation replies in their inbox, I realized that they at least notify people that you are away so they don’t expect an immediate response. I had to apologize to several potential clients when I returned for not getting back to them sooner.
- No Pre-Vacation Blog Post – I had a potential buyer send me an e-mail when I returned from vacation that said “I love your blog… but some of your posts are looking dated.” I had to explain that I was away on vacation and hadn’t had the opportunity to update the blog for a while.
It may seem easy, but because the days leading up to a vacation tend to be busy and stressful and many people forget to make the necessary preparations be sure to create a vacation business to-do list for yourself. You already have your grocery list, your pre-listing appointment list, and no doubt many other lists. Here are some of the things you need to do before you go on a vacation and leave your business for a week or more:
- Change your voice-mail. Have it reflect the fact that you are away and inform callers who they can talk to regarding their real estate needs. Alternatively, you can have your phone forwarded to someone else in your office.
- Take stock of everything – EVERYTHING going on in your business. Your listings, your buyers, your potential business, your blog, your unanswered e-mails, your leads, etc. Write down everything.
- Get someone in your office to cover for you. If you don’t already have a team or work as part of a team, find a competent and professional agent who has the time to handle your business while you are away. Many agents will do this for you with the hope that you reciprocate when they go on vacation. Sometimes you can have a referral arrangement, or just buy them one of those “My friend went to Vegas and all I got was this lousy t-shirt” shirts.
- Alert all your clients and all other agents with whom you currently have a transaction. Let them know you’ll be away and who to contact.
- Set up a vacation e-mail alert. This is easy to do in most e-mail programs and will avoid embarrassment when you return from your trip.
- If you have a blog, let your readers know that you won’t be blogging for a while.
- Most importantly… Relax. Have fun & enjoy your vacation. Your real estate business will still be there when you get back.
Disputing a property’s value in a short sale: turn a no into a go
During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!
It’s about getting your way
Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?
When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.
After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.
Value Dispute Process
While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.
- Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
- Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
- Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
- Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
- Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.
It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.
Short sale standoffs: how to avoid getting hit
The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:
What is a short sale standoff?
If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.
Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.
Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.
How to Avoid the Standoff
If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.
Here are some ideas for how to get out of the situation:
- Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
- Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
- If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
- Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
- In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.
One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.
Short sale approval letters don’t arrive in the blink of an eye
Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.
Short sale approval: getting prepared, making it happen
People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.
Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.
Experience dictates that agents that learn about the short sale process
have increased short sale closings.
Short sale education opportunities abound
There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:
- Classes at your local board of Realtors®
- Free short sale webinars and workshops
- The short sale or foreclosure specialist designations
As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.
The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.
Don’t take on too much
And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!
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