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A short sale can be like the slowest read in the library



Buyer’s Agents Struggle with Short Sales

When I conduct one of my short sale workshops for agents, I always get a lot of questions afterwards. Many of these questions are about short sale drama (and boy is there ever drama when negotiating short sales). Who do I call when the bank has not received my fax? What do I do if the second lien holder wants more than the first agrees to give? But, the most common question that I get is from buyer’s agents. It usually goes something like this: “I submitted an offer six months ago for my buyer on a short sale and I call the agent all the time and s/he never calls me back. What should I do?”

Truth be told that buyer’s agents are in a tough spot when it comes to short sales. In many cases they have limited control over the transaction. However, there are certain things that buyer’s agents CAN do in order to attempt to insure that they will not be in the same situation as those buyer’s agents at my workshops.

Here are a few things to consider when representing a buyer in a short sale transaction:

Call the listing agent before you take your clients to the property. If the listing agent’s voice mail message clearly states that s/he will not return phone calls (and this is not uncommon in some areas of the country), then I respectfully suggest that you show other properties first. The absence of a return phone call is most likely a sample of the treatment a buyer’s agent will receive throughout the transaction.

Do you remember the word foreshadowing from high school English? It means “a clue about something that will happen later in the story”. Your short sale transaction is like that short story (or rather, a lengthy literary masterpiece) and you want it to be a good read, not a long drawn out book that you never finish.

Learn more about the listing office’s policies and experience with short sales. Find out who negotiates the short sale. Does the listing agent personally take on the negotiations or are the negotiations handled by someone else in the office? What is the listing agent’s short sale closing history? (You can probably look that up on your local MLS.)

More importantly, does this listing agent submit one offer to the bank? I’ve heard of agents who submit multiple offers to the banks. In representing a buyer in a short sale, I may not want to wait around for 10 weeks just to find out that our offer was at the bank with five other offers for the very same property. Buyer’s agents could use their state contracts in order to negotiate all sorts of terms for the transaction including requesting that only one offer be submitted to the bank.

Add an out clause. In the state of California, our Short Sale Addendum has a section where buyers can add a date by which they request lien holder approval or they will have the option to cancel the transaction. If you are a buyer’s agent in another state, consider some sort of out clause, just in case the transaction is not moving on as expected.

There are all sorts of things that buyer’s agents can do to help safeguard and/or bulletproof the transaction. These are just a few suggestions. If you have any of your own, please share!

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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  1. Michael Bertoldi

    May 11, 2010 at 11:22 am

    Thanks for the advice Melissa! My first transaction was actually a short sale and we were blessed to have a great agent on the other side of the deal. Things are moving along and set to close this month.

    One of the reasons we (my mentor broker and I) took on this short sale is because we knew the agent on the other side was a good one and the bank had already approved the short sale amount. Glad this one wasn’t a mess!

  2. Dean Ouellette

    May 11, 2010 at 3:38 pm

    Melissa, great post with some good advice. The key really is to interview the agent before you even show the the house and give yourself an out after 90 days.

  3. Mike

    May 11, 2010 at 6:34 pm

    I would never leave the contract open for 90 days. I would use 45-60. If it’s been approved already, then definately no more than 45. It can always be extended at the buyers request. Also, I use a, “Listing must be under contract within 48 hours of ratification, and remain that way” clause. You want to know that no more offers will be coming in.
    As far as the agents closing history, I’ve been saying this for a year at least. YOU MUST, check the MLS for closing history. Even if the agent has not listed or closed a SS, I want to see some closings from the listing side, and very few withdrwan/expireds. If you aren’t researching the history of the LA, then you simply are not representing your client in a professional manner.
    You should know as much as you can, and explain it to your client before an offer is made. There are too many agents listing SS that have no business doing it. Why put your client, and yourself in a losing situation?
    -Mike O’Hara

  4. Ricki Lynn Miller

    May 18, 2010 at 1:29 pm

    Thanks Melissa, You’ve always given me a new idea with each of your article’s. I appreicate you.
    My experience with Short Sales has been good compared to other agents in my office. The best piece of advise I can give my clients is to be Patient, and I’m not talking about a 2 week period of patience. This Real Estate Market is a learning experience for all of us. Our industry is changing on a daily basis and we must all learn to be flexible. Of course due diligence is a must for both client and agent. But anything worth doing is worth the wait. And remember, be NICE. You never know what’s going on, on the other end of the phone. We have the ability to change the future for ourselves and our clients.

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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!



magic eight ball

magic eight ball

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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
  5. 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.

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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:



short sales standoff

short sales standoff

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.

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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 sales

short sale approval

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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