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Short Sale Leads Are all Around You. Can’t You See Them?

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Short Sale Leads Are Easy to Locate

Short Sale LeadsI came across an old colleague the other day, a top producer in her day, who is now semi-retired. We exchanged small talk and she grumbled about the current state of the real estate market. “I wish things would return to normal,” she griped. “I cannot seem to convert any leads.”

After we exchanged pleasantries and we each went on our merry way, I began to think more about her comment. What is normal in real estate these days? The way that my colleague generated and converted leads five or ten years ago is completely different from the way that we do so now. Short sale and foreclosure leads are part of this new normal.

My former colleague, like many real estate practitioners, apparently is finding challenges adapting to the way in which we conduct business right now. Leads, short sale leads, are around each and every corner. Working with these short sale clients is a great way to generate business and get your signs out there when our nation is in a recession. The news is filled with information about the perils of our economy. If your sign is everywhere in town, that might be a great way to send a message that you are still in the real estate business and that you are successful.

So, how do you find these short sale leads?

One way to amass short sale leads is to obtain a list of anyone who owns a property that has begun the foreclosure process. In my community, I can obtain this information through my MLS. This information can also be purchased from a number of recognized and respected websites. Anyone who has begun the foreclosure process and whose home is not already listed for sale may need the support of a qualified Realtor®. (By the way, when I say qualified Realtor®, I’m talking to you).

Another way to obtain short sale leads might be to identify a community where the market has declined. In my neck of the woods, many of the newer developments have seen a significant decrease in market value from 2003 to present. So, any homeowner in these communities who did not make a large down payment may owe more than there home is worth and may be in need of a short sale advisor.

According to Credit Suisse, the largest subprime mortgage product sold was a 5/1 ARM that was sold in 2005. Well, we have just entered the final quarter of 2010—that fifth year—and many of these loans are adjusting from Interest-Only to 30-year fully amortized. Even though rates are still low, the change from interest-only to fully-amortized has caused mortgage payments to increase. In some cases, borrowers may not be able to afford these payments.

These types of borrowers described here are folks who need your help right now. And, with our national unemployment rate above 9%, I’m sorry to say that a number of folks need your help immediately.

Oh, but I think you were the one who told me that you hate short sales and cannot wait until things return to normal, right? That’s okay, more leads for me.

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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23 Comments

23 Comments

  1. Bruce Lemieux

    September 14, 2010 at 5:12 pm

    I admire the agents who work these. I’ve recently had a couple great sellers who have done everything humanly possible to get a short sale through to avoid foreclosure, only to be thwarted by their banks over and over again. It’s an exhausting and frustrating process that convinces me that banks work as hard as they can to make the real estate market as bad as it can be.

    Even if the market can’t get back to “normal”, having banks operate like “normal” enterprises would be a welcome change.

  2. John

    September 14, 2010 at 8:32 pm

    I agree completely with Bruce’s comment (above) – My experience recently with short sales, I’ve noticed the banks seem to be a lot more cooperative and taking a lot less time with responding.

  3. Fred Griffin

    September 14, 2010 at 9:57 pm

    Greetings from Florida, “Where Every Listing is a Short Sale”. Well, maybe not quite, but it sure seems that way.

    When I first encountered Short Sales a few years ago, I spent months on the telephone, trying to find who the Decision Maker was, trying to get approval. Hopes would arise, only to be shot down by Lender #2 or Lender #3.

    My policy since then is to refer short sales out to another Brokerage. The problem is, a huge percentage (maybe half) of potential listings are short sales! Your article is giving me a re-think. Maybe I should start listing them.

    Thanks for the inspiration, Melissa.

  4. LesleyLambert

    September 15, 2010 at 11:13 am

    Melissa, do you have any suggestions for which websites to try for these lists? I have had on my to-do list a plan to contact these people and haven’t found a reliable source for the pre-foreclosure information in MA.

  5. Charlie Allred

    September 22, 2010 at 7:38 pm

    keep the leads coming! I hate to see homeowners struggling, but I love the fresh start I am able to help homeowners have. No more burden of the home they cannot afford.

  6. Nadina Cole-Potter

    October 17, 2010 at 6:40 pm

    Short sale leads (homes where the notices of foreclosure sale have been recorded by the lender) are easily acquired from the marketing person at your local escrow/title company. For those of you in states where escrow/title companies are replaced by closing attorneys — your guess is probably better than mine. The key is to acquire the leads as early as possible so you get there earliest with the buyer. The other key is to set up a tracking system. Some title/escrow companies provide their leads in spreadsheet form. Just know that when you receive yours, every agent that the marketing person is trying to get to open escrows with his/her company is also receiving the list. The most difficult part of contacting an owner is locating a telephone number and, if you are lucky, an email address. So far, the best source I have found is whitepages.com.

    You might want to specialize in homes owned by out of town or out of state owners: they could be investors who have more than one property in your location or, if you are in a resort-vacation area, owner of a vacation home. They need you to guide them through the process. Some lenders will work short sales for investors; others will not. I found the best way to reach an out of town owner is to send U.S. Priority Mail with return receipt requested. You can track its progress online. Send your letter and marketing materials in one of those pasteboard envelopes that looks like a FedEx “flat”. It’s attention-getting and sets you apart from the rest.

  7. Kris

    June 18, 2011 at 9:56 am

    Great Article Melissa. Given the proper research, any homeowner can improve their situation with time. It's a long road, but we have to help them get a foot hold.

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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!

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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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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:

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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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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.

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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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