We’re just a touch over 90 days into the current year, and as the flowers start to bloom, it’s a good opportunity to sit down and review your performance in first quarter 2010. One a scale of 1-10, where would you rate your performance thus far? One of the biggest challenges we face as Realtors is the volatile nature of the current market. How you handle this market turbulence is what separates the average agents from the outstanding ones.
In my business plan, I map out each quarter individually, projecting my sales goals month by month and tracking how and where I intend to spend my money in order to be able to achieve those goals. By breaking things down quarterly, I can catch gaps and mis-spending much faster than by simply looking at an annual review of my performance.
Meet Your Goals
If you’ve met your goals, that’s great! Ask yourself what your biggest success has been this year, and how can you replicate it? Being able to find a “groove” that works for you can be very difficult, and if you’ve already achieved that, use it as a tried and true springboard to increase your business further! One of your goals in real estate should be to work smarter, not harder. What can you do with your current business to make it more efficient to allow you to either take on more business or expand your market reach?
Exceed Your Goals
If you’ve beaten your goals, that’s fantastic! We would all love to be able to exceed our own projections, so keep it going! It’s possible that you may even want to revise your business plan or annual goals to compensate for the unexpected success. If you underestimated the overall buying power of the market due to last year’s performance, perhaps it’s time to look at the other three quarters and where you anticipate the market going. Historically, I tend to plan for 2nd and 3rd quarter to be my busiest periods any given year, but with the tax credits and low interest rates, I changed my 2010 outlook before the year even got started, anticipating Q1 & Q2 as my busiest time of the year.
If you didn’t meet your goals, don’t panic! Now is the time to figure out what went wrong! The easy response is: “Well, I set my goals too high, I should have lowered them”.
Don’t take that road!
With the market constantly changing, setting goals can feel like playing darts blindfolded, I get that. Reviewing your performance is all about helping yourself adapt to what happens in the market around you. I a very good friend of mine doesn’t like to do short sales. All of her numbers have been off for quite some time, and she can’t understand why.
The fact of the matter is most of the non-foreclosure market in her area is short sales, so refusing to handle short sales has severely limited her business. Instead, she refers them to another agent in the area who’s actually managed to bring on two other agents in the past 9 months to help her handle the increased business volume. As a matter of fact, the short sale agent doesn’t even worry about marketing herself to sellers directly! She simply emails all of the local agents, offering to pay 35% on any short sale referral she gets! It’s an attractive offer for agents like my friend because they know the deal has a better chance of closing, AND they don’t need to worry about the hassle of dealing with the bank. Bear in mind, it’s an even BETTER deal for the agent that gets the listing! (He who controls the listings controls the market!)
Everybody wins here until someone realizes they’re not doing enough business. At that point, it’s time to review options. Perhaps it’s time to take a CDPE course and start doing short sales, or maybe it’s time to completely overhaul your business objectives. Difficult decisions must be made from time to time in order to excel in this business. For many, the hardest part is making choices. As Gary Keller says: “Success is not about the chosen few, but always about the few who choose.”
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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