Coaching
For effective short sale negotiations, get good walking shoes
People say that I have a shoe fetish. I’ve even been accused of that fetish by folks who read my articles regularly. Yes, I’m a girl that has trouble avoiding the shoe and handbag areas of the local department stores.
Today I am also going to discuss shoes yet again. As the proverb goes (and there are many variations):
Before you criticize a man, walk a mile in his shoes.
Translation: Do not criticize someone until you have actually been in their position, doing things as they are doing them.
Never has this proverb hit home for me more than in the last four years. Over the last few years, I have negotiated hundreds of short sale transactions. I have also read hundreds of blog posts attacking banks and mortgage lenders for being inept, irresponsible, unprofessional, and disorganized.
I have also personally experienced much of the turmoil discussed in the articles that I read. Just like everyone else working short sales, I have been hung up on, yelled at, bullied, and disconnected. Yet I realized early on in my journey through the wacky world of short sales that it is not about me. It is about understanding the overwhelming nature of the short sale from the point of view of the mortgage lender.
- I sometimes have difficulty hiring one or two employees who are well-qualified to negotiate short sales. The bank must be required to hire hundreds of them.
- I sometimes have difficulty with our office telephone system and its 30 extensions. The bank must have a telephone system 1000 times more sophisticated than my own.
- Our six negotiators in house sometimes have difficulty with our 200+ files. Individual negotiators at some banks have over 400 files.
- If I take a few days off and don’t read the news, I miss out on the latest information in the short sale arena. How can the banks possibly fully educate their staff on all of the latest short sale programs and procedures?
Once you can understand the bank’s position, you can successfully strategize to get the job done for your client. Yes, I have learned to walk a mile in the mortgage lender’s shoes. And, it doesn’t matter to me whether they are made by Manolo Blahnik or Nike.
Photo: flickr creative commons by Paul Keller
Coaching
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.
Coaching
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.
Coaching
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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sfvrealestate
July 26, 2011 at 11:50 am
Sorry, Melissa, I'm not buying it. I've done my own short sales, too, and have used pro negotiators on some as well. (And I've always had pleasant experiences with bank negotiators, believe it or not.) First, re the banks hiring hundreds of negotiators: they've had three years plus to do this, plus lots of TARP money to do it with. At this point, there should be no excuse for banks to not be fully staffed-up with well-trained people who have manageable work loads.
Second, as far as missing info: the banks are creating that info. There's no reason for them NOT to be able to educate their employees.
Peter
July 26, 2011 at 4:57 pm
Most of these employees that service short sales are paid $10-12 an hour to handle a transaction that can either greatly aid families or ruin them. Having connections with higher-ups within banks greatly help in successfully executing a short sale. An expert negotiator should have these connections and should be able to deal/work with those employees that lack the proper incentives to handle each individual transaction with effort.
John Michailidis, GRI, CRS, JD
July 26, 2011 at 9:50 pm
The undeniable fact is that the criminal banking syndicates are guilty of massive and systemic fraud, which has bankrupted this country. I have no sympathy, ZERO, for such blatant criminality.
The housing catastrophe is 100% the fault of banksters and their supporters in Washington — take a walk in THOSE shoes . . . the PEOPLE's Shoes.
Arthur Chatroo
July 26, 2011 at 11:45 pm
Do you want to know the real reason why short sales are so difficult and take so long? Then read the October 2009 Report published by the National Consumer Law Center (a non-profit organization) entitled: "Why Servicers Foreclose When They Should Modify And Other Puzzlers of Servicer Behavior" Its posted on their website at
nclc.org/images/pdf/pr-reports/report-servicers-modify.pdf. I also suggest reading the trascript of a speech given by Federal Reserve Board Governor Sarah Raskin in November of 2010. (The transcript can be found at: federalreserve.gov/newsevents/speech/raskin20101112a.htm) As noted in the NCLC report and in Sarah Raskin's speeck, loan servicers make more money the longer it takes for a short sale (or a foreclosure) to be completed, and they tend to make more if the loan goes to foreclosure than if it is modified. Quite frankly, I believe that the reasons that have been given by loan servicers (inlcuding the major banks who only own 10 to 20% of the loans that they service) have simply been attempts to cover up for what is really going on. Many of the issues they have raised are matters that are well within their control (i.e, staffing, training, and the form over substance complexity of the short sale and loan modification processes.) Also, in case you didn't know, loan servicing seems to be a very profitable business. In September of 2010 OcWen acquired HomeEq (another loan servicing company) for a price that was reported to be $1.3 Billion. (See housingwire.com/2010/09/03/ocwen-closes-homeq-buy-more-than-1000-job-cuts-possible.) Enough said.
tabjohnson
August 3, 2012 at 8:47 am
A short sale is almost as damaging as a foreclosure to a consumer’s credit. The sooner the foreclosure is consummated the sooner the consumer can renter the housing market. By the time a short sale is completed, the borrower would be well on their way to restoring their credit. As noted, short sales are just political eye wash and are very profitable for the servicers.
” Mr Wall Street Bankster, do you want the keys or should I leave the house open?”