Yesterday, the world collapsed.
Ok, so maybe I’m being dramatic, but for me…it did. You all know, I’m still rather new to real estate and my past, well…I wouldn’t call that a “job.” I’ve never worked in a corporate type setting (unless you count the time I worked for my dad one summer). Most of my jobs have been of the cooking variety or music. It took some getting used to for me. Having an office was actually an exciting part of the new career for me. Going into the office, seeing other agents, drinking horrible coffee, answering a multi-line phone – these aren’t things you do opening for Metallica in Germany. For me, this was uncharted territory and it definitely added something new to my daily life. It helped me progress quickly, learning more than I thought I could, gaining insight from Reggie, and feeling like I was part of something bigger. I love the office.
I blogged about it yesterday over at ActiveRain. It was a members only post, so in case you’re not a member, I’ll sum it up here. My broker stopped by my office (private office, not a cubicle) and announced we were packing up the office. Just our upstairs offices mind you, but packing them up none the less. Rent is high in our building and we were taking a beating on the monthly lease with less coming in the past few months. I was crushed. I felt like it was a bad omen…a bad sign. My head whirled with thoughts of “is my broker stable,” “can we survive,” and “is this the shape of things to come?” Those thoughts raced through my head through out the rest of the day as I dismantled my office and packed my stuff. I felt like I was being kicked out or worse yet…fired. It was a really odd feeling for me as I’ve never had to leave an office.
A few hours later…
Most of those thoughts were initial reactions…panicked thoughts. My brain rushed to sort it out and made snap judgments that sent all sorts of negative thoughts through my head. Would I now need to find a new broker or at least consider the possibility? I like my broker, I like the people I work with, and I like what I get from the experience. I didn’t want to even consider it, but in my first hours of mulling it over, it definitely was something to think about.
So where’s the positive in all of this you ask? It came out of nowhere and settled into my overworked mind. Here’s the facts: I like my broker and think his training is excellent. His office is always open and he always answers my calls. He looks over every bit of paperwork to make sure we’re all doing what we need to so that we don’t all get sued into the ground. He knows just how to push me. He spends extra time with every agent to see how we’re doing and what he can do to help us grow. He really cares. He gave me my first crack at real estate and it even comes down to how our splits work. I don’t get nickeled and dimed every step of the way, I get paid on time, and he is constantly showing me ways to increase my income over time. What is bad about this situation?
The answer is nothing.
I’m very happy where I am and although I fear some agents may leave us, I think we will only become a tighter unit in my office. Sure we all work independent of each other, but we do all work together. We believe in what we’re doing and have a broker who believes in us. Maybe we are struggling a bit, but I do know that my broker will have my back through it all. And I will have his. I am not tying myself to a sinking ship, but rather placing a vote of confidence in a man that truly pushes me to be the best agent I can be…and not just for his bottom line, but for the good of real estate in general (and yes, I do believe that about him). With his guidance, we will make it past the material-ness of having our own private offices for a bit and come out leaner, meaner, and stronger. Instead of feeling beat up about it, I have come through the last day with a bigger sense of purpose and a dose of new confidence. Perhaps he’s just done it again…and figured out just how to push us all to bigger and better things. Whatever it is, those of us that answer the call, will be rewarded down the line.
This is what a broker should do for you…these are the feelings you should have when faced with the question, “do I want to work with this broker?” When you have confidence in them and are energized by them, you know you’ve found the right place. I like my home. I think I’ll keep it.
photo courtesy of Chregu
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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