How to
Are you a Shadchan?
It has been said that people don’t want to be SOLD, they want to buy. Years ago when I first started my career in real estate, I was interviewing different companies around Ann Arbor, and Saline, Mi. I was looking for the “right fit” for me. That meant “no cold calling”, “no knocking on doors”. Shortly after, when I started working with buyers, I discovered this wonderful little secret.
Fall in Love
My little secret that has made my life fun is that my job was to just introduce people to the homes that matched their criteria and they would either “fall in love” with the right house or move on.
It completely takes the pressure off. There is nothing you can do to fall in love and there is not much you can do to stop it. The experts say that the first thing we fall in love with is the physical appearance of the other person, the way they walk or talk, their personality. It is a strong instinctive attraction. It is very physical, and often times we don’t really know why at first.
Is house hunting any different?
Buying a house is often like that. You have been out showing homes all day, and found a couple of “possibilities”. Which means they would work for them as far as the floor plan, location and price.
Then it happens, Mr. and or Ms Buyer walk in a home and bang it hits them over the head. This is it ! Excitement is all over their faces. Gone is the logic, of yes this will work, it is the right location, the right price. Sometime it is even higher than they wanted to go. But, they have “fallen in love”. People buy with emotions and then justify the price.
Often the decision makes no sense to us, because we’re not in love. In fact, logic many times goes out the window. Do you whip out a purchase agreement? Do you say, “Lets, go back to the office and write this house up, and get it under contract?”
This is not some new revelation, we have all experienced it with our buyers. The lights go on, their pulse increases. At this point, all logic goes out the window. Sometimes like in a relationship it is really not the right house for them. But, nothing will stop them. They have found their house and they are in love.
What have I learned over the years as I discovered this, “little secret”.
1) One man’s junk is another man’s treasure. Many houses I have sold over the years, didn’t appeal to me at all.
2) Keep my mouth shut about certain features that they may love and I would never live with.
3) Keep looking until the lights go on.
4) For my sellers, I encourage them to take every offer seriously, even a low ball offer. If they care enough to sit down and write an offer there is some emotion involved.
5) There are all kinds of people and tastes, and internally they know when they have found the “right house”.
6) Unless there is some major requirement that is missing, don’t try to talk them out of it. (like we need to be 10 minutes to the hospital). Then I would point it out, “this is over 10 minutes to the hospital, are you ok with it being 20 minutes)
7) I am not a salesperson, but a match maker. In Jewish literature called a shadchan.
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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Ruthmarie Hicks
June 12, 2009 at 8:46 pm
One thing is very true…my “junk” might be another person’s treasure. I just had a listing like that. UGH! I could never live in a place like that! But some people love that look – all a matter of taste. Unfortunately, I live in one of the most EXPENSIVE areas in the country. My first three years, I’ve dealt mostly with “entry level.” There is little “falling in love” for this group of buyers because even now – many have to settle for “potential” that looks like junk – to ANYONE with eyes! In fact, I think that’s why working with buyers has been so difficult. The look of disappointment and disbelief that their money didn’t stretch further has been a very, very hard sell. I had to get people to “picture” what a kitchen with peeling wallpaper from the sixties and a vinyl floor that was half torn up would look like AFTER they gutted it.
Now that prices have dropped a bit – its a little better – but it is still astounding how little you get for your money in this area.
Jim Little
June 12, 2009 at 10:30 pm
Missy, I have always been a believer in going back to the basics, and this post is an excellent example of that. With disclosure rules, issues of having shown a particular floor plan often only to have EVERY prospect saying the same thing about the kitchen, etc… it can be so easy to forget the wisdom you have posted today.
Elaine Reese
June 12, 2009 at 10:51 pm
When I bought my current home, my agent knew the specific criteria I wanted, and only showed me those homes. Nothing hit my hot button. Then we drove by THE HOME. I said I wanted to see it. I took 3 steps inside and told him I wanted the house!
I had some out-of-town clients once who gave me basic criteria, then the wife finished it off by saying, “I want to walk in the front door and go ‘WOW’. I found them a great house with a full view of a golf course through a wall of windows that was the view at the front door.
How NOT to do it: Got feedback from an agent with a buyer’s broker. He said buyer really likes/wants the home, but he told her it was too big for her. He said it was “his duty” to keep her on track with what she “should” buy, not what she “wants” to buy. So he’s going to not allow her to buy the home she wants. If I were her, I would fire him.
People have to be able to see themselves living in the home – having coffee in the morning – relaxing on a Sunday afternoon – celebrating the holidays, etc. It’s such an emotional decision.
Missy Caulk
June 13, 2009 at 8:16 am
RuthMarie, Ann Arbor is now affordable for buyers, prior to the downturn the first time home buyers had to move further out. Now those outer area’s are suffering the most.
Jim, thanks for your kind remarks, I love to see the lights come on when they emotionally attach to a house, ready to make it a home.
Elaine, this happens often. It has been said many buyers have a wish/dream list but when they find one it doesn’t matter. I had a client a teacher who wanted to be in the country but one day after finding nothing they liked. I suggested looking at a specific neighborhood home I had been in. They fell is love. They are still there 4 kids later. So much for the country. That buyer agent needs help in closing the home.
Steve Trang
June 13, 2009 at 1:18 pm
There is a whole lot of truth to this, and not knowing this secret cost me dearly in the beginning part of my career. I would often interject things I thought were wrong with the home, or that the property may be overpriced. In the end, the buyer wants what the buyer wants. Our job is not to sell. Just show the buyers what they want to see.
Dan Connolly
June 13, 2009 at 5:23 pm
I totally agree with this approach, I tell people not to bother writing anything down. When they find the right house they won’t be able to forget it. I tell them to wait for bells and whistles and if something feels wrong, we don’t need to get out of the car.
Keeping quiet about personal taste issues is very important. One time as I was pulling into the driveway I said “Oh I am sorry if I had known this was the house, I wouldn’t have brought you here. They said “what are you talking about? we love this house!” and they bought it, insisting on offering full price.
Another time when silence is golden is when they object to something. (like the living room is too small) Frequently if you react with dead silence, they move on and don’t mention it again, and if you talk about it, you force them to entrench themselves in the feeling.
Missy Caulk
June 13, 2009 at 10:53 pm
Steve, all of us make mistakes at the beginning, that is how we learn.
Dan oh yea…silence is golden. Learned that one too.
Lisa Sanderson
June 15, 2009 at 6:36 pm
Usually after showing a couple of homes to people, I can hone in on what’s gonna move them. After awhile you get good at the match-making thing. And occasionally, you can nail it over the phone and find them ‘the house’ on the first time out. I love when that happens.
Ken Brand
June 15, 2009 at 9:30 pm
So, you’re saying it’s not Rocket Surgery, it’s love making…or rather match making?
I couldn’t agree more, people, emotion, desire and attraction + conversation not “selling”.
Yes, it’s a great business for the Shadchan.
amen.