“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” ~Darwin
Years of struggle have grooved today’s habits and practices. These grooved habits will wreck us if we don’t adapt to a rebounding real estate market.
While attending Prudential’s national convention, I listened to smiling real estate agents share stories of multiple offers, brisk sales and thinning inventory. I’m seeing it every day on Facebook, aren’t you? I practice in The Woodlands, TX and it’s definitely a seller’s market.
Hopefully the recovery tide is rising in your market as well. It’s exciting to see, but we must beware. In a rebounding real estate market, the slow-to-know and slower-to-respond often crash and burn. Even worse, their selling clients crash and burn as well.
Rebounding real estate markets require new conversations, expectations and explanations, and new habits for a new market.
How to avoid a rebound wreck
You check the mirror, adjust yourself, grab your tools and head for the front door.
You and your sellers wrestle. Begrudgingly lower for them, and at a handful higher than the your detailed analysis, you reach a
truce compromise and settle on a price. All ends well, everyone’s happy, holding hands and humming kumbaya, followed by a chorus of We Are The World. Life is good, the real estate biz is fun.
You dash to the computer, upload, and click submit.
Boom goes the dynamite! Two offers in twenty-four hours, one at full price! Whee! You do a happy dance, snatch up your phone to share the sweet news with your sellers. Their phone rings. Ut-oh. In a red flash, you realize that your sellers’ reaction may mismatch yours. You forgot the talk. Instead of giddy and gleeful, you are now glum and bummed. Instead of gratitude and atta-girl, fear, doubt, and apprehension are likely reactions. Why? Because fear of loss is natural and normal.
The talk is vital
Without proper preparation and education the sellers will naturally think:
“If my home sold in a day AND multiple offers are rolling in, we must have under priced! My agent sweet talked me into a lower price than I wanted, just so they sell it fast and collect a fast commission. I fear I’ve left money on the table. I’m getting screwed and losing money. I’m not happy. In fact, the more I
dwell and stew on itthink about it, I’m pissed! No way I’m selling at this low price. Either I’m going to raise my price or my agent can cut their commission!!!!!”
Who can blame the seller? Without proper preparation and counsel, a disappointing outcome is the most likely and natural outcome.
We can avoid this negative experience and wrecked outcome if we address the benefits of a fast sale during the listing appointment. Use your own words, but here is an example of the conversation I would have sometime between agreeing on listing a price and leaving. The exact timing is subject to your good judgement.
“Ok Mary and John, I’m gonna run to my computer and upload all the information into our MLS system. When I hit the Submit button, all that internet exposure we talked about explodes into action.
If we’re fortunate, a qualified buyer or two is out there lurking and poised to pounce on a cool house like yours the moment it appears onto the market.
There’s an unsatisfied pool of qualified buyers who have viewed every active listing that could possibly meet their criteria and none of the properties available to them are suitable.
These qualified, educated (they’ve seen, evaluated and dismissed everything on the market) and motivated (by their delayed purchase timeline and because they’re human, they’re also motivated by the Fear Of Loss) buyers are prepared to make an offer the moment a new listing matching their criteria tumbles on the market.
The realities of supply and demand, especially in a rebounding market work to our benefit, sometimes leading to the best of both worlds, the best offers (price, terms and timing) and a fast sale.
Wouldn’t it be a blessing and a minor miracle if we could get your home sold at your price and your terms the first day we’re on the market? It’d be great if we could eliminate all the hassles of cleaning up and clearing out for showing after showing at all hours of the day, day-after-day and weekends. We could avoid all inconvenience of showings and move on the down the road, fast, simple and satisfied?” I would pause right here and wait for an affirmative verbal response.
After they verbally agree, I’d end by saying something like, “Let’s cross our fingers, I’ll do my best to make it happen!”
After a conversation similar to this, when offers roll in (hopefully) quickly, because we’ve discussed the possibility and benefits of a fast sale with favorable terms, our phone call will unfold with the likelihood of a successful outcome and a positive experience for everyone involved.
The phone conversation might go something like this (use your own words, this isn’t a scrip, just an example):
I dial and John picks up:
” Hi John, this is Ken Brand calling, did I catch you at a good time?
I’m calling with awesome news, John. Remember how yesterday we were saying how awesome it would be if we could eliminate all the hassles associated with showings and get your property sold FAST at the price and terms you wanted?
Yeah, what’s up?
We’re in luck, your awesome house and my marketing worked like magic, we generated two offers, one full price and one at $___,___. When’s a good time to get you and Mary together to review all the details, secure preferred terms and get you two on your way to the closing table and to new beginnings?”
How your clients receive and perceive the good news will be massively improved if you’ve taken the time and care to discuss and mutually agree on their desired and possible outcomes before they happen, instead of after.
This wouldn’t work in a depressed market
In a depressed real estate market this conversation was unnecessary and might set false expectations. In a rebounding real estate market this conversation is necessary and prepares everyone to evaluate and appreciate the benefits of a fast sale with favorable terms.
That’s it, try it and let me know how it goes.
Cheers and thanks for reading.
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!
Mantras to help you cope with COVID-19 anxieties
Woven is the secret productivity weapon for remote teams
The neuroscience of respectful leadership – preventing professional disrespect
How to make sure your newly remote team stays productive
Why the world is looking at HEB as the model for preparedness
11 productivity tools for entrepreneurs that work from home
Ultimate list of Austin women who can speak at your tech event (or podcast)
COVID-19: List of Austin tech companies not sending workers home
COVID-19: Self employed Texans get some relief benefits
Sequoia ‘Black Swan’ memo could steer companies off of the COVID-19 cliff
Anti-surveillance mask – creepy, ingenious, or potentially illegal?
Amy’s Ice Cream founder on Austin’s business risks and rewards #WhyAustin
Turns out a lot of people are in between introverted and extroverted
P. Terry’s founder on the booming economy in Austin #WhyAustin
Ladies and gentlemen, the U.S. National Anthem
Our Great Partners
news neatly in your inbox
Subscribe to our mailing list for news sent straight to your email inbox.
Thank you for subscribing.
Oh boy... Something went wrong.
Tech News7 days ago
Will COVID-19 break the internet?
Opinion Editorials1 week ago
I just got furloughed. Now what?
Business News2 weeks ago
Debunking ridiculous remote work myths (and some serious survival tips)
Business Marketing23 hours ago
The neuroscience of respectful leadership – preventing professional disrespect
Social Media2 weeks ago
There’s a subreddit that is literally moving the stock market
Opinion Editorials1 week ago
How strong leaders use times of crises to improve their company’s future
Tech News2 weeks ago
Facebook “faces” false financial frailty
Business Marketing1 week ago
Easy email signature builder quickly updates your info