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Representing buyers in short sales? Iron out your business



Do you iron your own clothes? I mean, do your really press your own clothes with spray starch and the like? The other day I heard a story about a gentleman who always wears a sport jacket over his shirt. So, when he is pressed for time (pun intended), he only irons the front of his shirt. Who cares, right? That’s the only part of the shirt that anyone is going to see anyway. So, the visual impression is that he is well put together, yet I just told you what is really going on behind the scenes (on the back side of the shirt).

What if you were writing an offer on a short sale and you were under the impression that the real estate agent was well-organized, professional and experienced, yet you later learned that the back side of the agent’s shirt was not pressed? That is, while the agent appeared to be on the ball and in the game, what if you later learned that the agent did not know how to write contracts or negotiate short sales?

If this happened to me, I would be disappointed. First off, I would be disappointed in myself for not doing my homework. I think that it’s best to do a little bit of research on all of the parties involved in the short sale transaction. It’s my goal for the deal to close; otherwise I may lose a client.

Representing buyers on short sales is a real challenge. Not only do you have to familiarize the buyer with the short sale process, but you also need to make them aware that nothing is set in stone until the bank approves the short sale. And, even then, if the seller does not like the terms and conditions offered by the bank on the approval letter, the deal may go bust anyway.

So, aside from ignoring all of the short sales when out home shopping, what can an agent do?

Buyers’ agents need to do their own ironing of the backside of the shirt.

By this, I mean that due diligence is important when representing buyers in short sale transactions. Buyers’ agents can look up the number of liens and confirm that all liens are being addressed as part of the short sale negotiations. Buyers’ agents can also be mindful of any pending foreclosure dates in order to assure that they are postponed, if necessary. Buyers’ agents can also work with listing agents in order to assure that there are no other items that may hold up the closing—such as HOA liens, IRS tax liens, unpaid child support, etc.

After all, you do want to get to the closing table and see that when the listing agent takes of his (or her) jacket, the back of their shirt is just as well-pressed as the front.

(Pressed shirt story courtesy of Jeremy Blanton)

On another note: I just wanted to wish all of my Agent Genius friends and colleagues a very happy holiday. For those of you who are regular readers and follow my short sale adventures, I am grateful to you for your thought-provoking comments and your loyalty. Happy Holidays!

Photo: Flickr Creative Commons by lohb

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. Jessica Bradfield

    December 21, 2010 at 10:25 am

    As a brand new agent, I would fall among the inexperienced in pretty much everything. I do, however, have a very helpful mentor and broker who are very willing to support me in my early transactions. Yes, do your homework, but remember that you can’t be experienced without having a way to gain that experience.

    • Bob Wilson

      December 28, 2010 at 4:23 pm

      “I would never put my buyer into a short sale purchase contract when the individual doing the short sale negotiations did not have experience.”

      Along the lines of Jessica’s point, this is a slippery slope when it comes to ethics as making a judgment on competency or experience is purely subjective.

      • Melissa Zavala

        December 28, 2010 at 4:40 pm

        When you’re right, you’re right. I’ve changed my language a bit. Thanks for the feedback.

      • jeffroyce

        December 28, 2010 at 4:47 pm

        Judging experience is not subjective. There is a big difference between a listing agent doing their first or second short sale, and one who has successfully completed 25. Buyer agents need to give their clients that information.

        • Bob Wilson

          December 28, 2010 at 7:07 pm

          What if the new agent is using Melissa’s company to handle the short sale? Are you still going to make what IS a subjective opinion about the agent’s ability to get the transaction closed? I read all the time where agents make what amounts to illegal statements about refusing to show certain properties for a multitude of reasons, including the fact that some agents use 3rd party companies like Melissa’s to handle their short sales*.

          Regardless, that is an area of ethics and agency (at least in California) that needs to be handled delicately.

          *note: I would use Melissa’s company in a heartbeat, but like agents, not all of these types of companies are created equal.

          • jeffroyce

            December 29, 2010 at 7:42 am

            Bob…I agree with you that there are certain situations that have a better chance of closing (like using a good short-sale negotiator), but there is nothing like seeing that an agent has been successful.

            Also, I am not saying not to show those houses. I’m saying that our buyer clients should get all relevant information before they jump into a situation that could have them sitting and waiting for nothing for six months. If there is a negotiator, we should get stats on their track record.

            I do this on “regular” sales as well. When you are negotiating with an agent, it is good to know how experienced they are, at how much of a discount they typically sell homes, and how busy they are right now. This is information a buyer needs to make decisions when they are negotiating.

  2. Rob McCance

    December 21, 2010 at 2:01 pm

    Representing a buyer in a short sale closing tomorrow at 2pm ET.

    I won’t really believe its going to happen until I walk away with the check.

    I have ridden ALL parties like cheap rented mules for the last four months. There have been plenty of incompetent parties in this dealio.

    Even the Listing Agent “short sale specialist” tried the ole “we didn’t know about the HOA” last week, a week before closing. Tried to get me to chip in.

    Ha ha – no.

    I told her, we ALL know about HOAs and at this juncture YOU can pay it, not me, my client or their parents. If you are listing a short sale in a HOA community, you can bet there’s a HOA balance that needs to be dealt with and you can start finding out the details FOUR months ago. Not seven days prior to closing.

    Can I get an a-men?

    How bout a wha-whaaaat?

    Ok, forget it.


    • Melissa Zavala

      December 21, 2010 at 2:30 pm


  3. Jeff Royce, Frankly Real Estate

    December 21, 2010 at 5:12 pm

    The most important factor in getting a short sale to closing is the skill of the listing agent. The best thing a buyer agent can do for their client is to investigate the skill level of the listing agent.

    A buyer agent should tell his client the number of short sales the listing agent has closed in the last year. The client should also be told the average time the listing agent’s past sales have taken between the contract date and the closing date.

    As agents, we have all this information available to us on the MLS. We need to give this to our clients before they write an offer on a short sale so that they know what they are getting in to, and they know what the chances are that the short sale closes.

  4. Agent for Movoto

    December 21, 2010 at 6:56 pm

    wow, that’s pretty brave. what if it gets hot and he needs to take the jacket off? what then?

  5. Brad | Home Loan Artist

    December 28, 2010 at 7:06 pm

    great analogy Melissa. I was actually preparing to write a post on choosing a loan officer and was going to use the image of the wizard of oz to illustrate a point. Once you look behind the curtain and see who’s really behind the big name (all powerful OZ), the borrower’s warm and fuzzies may go bye bye real quick about how well their loan approval goes. Awesome post.

    • Melissa Zavala

      January 1, 2011 at 10:32 pm

      I love your analogy better than my own. Did you write that post? If so, I’d love to see it.

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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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