It probably depends on your point of view. Are you looking for a quick nickel or a slow dollar? Do you want a job or a business? How about in “this market”? Isn’t it better to have a buyer than a listing now?
I’ve written before that my expertise is in getting and getting rid of listings. In some of those posts I’ve seen comments to the effect that I forgot to mention working buyers. I didn’t forget. To sell a house you need a buyer. Each time and without exception. It just goes with the territory. But if your goal is to have a long-term stable business then you are going to want to learn to list. Period. If you disagree – even a little bit with anything you’ve read so far, please do yourself a favor and set aside those disagreements and read on.
The biggest single barrier to increased production is FIXED IDEAS. We all have them in one area or another. You have certain ideas about “how much business is possible”. Those “logical thoughts” are the very thing holding you back.
Is is easier to get a buyer and sell them a house than it is to take a salable listing? The correct answer is yes. If this were not a true statement new agents wouldn’t have a prayer of ever getting any business. Reason? Buyers are seldom ever looking for an agent. They are looking for a house; they are willing to tolerate talking to an agent in order to see the house. Most buyers are almost never “shopping for an agent”. If you wanted to buy a car can you imagine saying to your partner, “I sure hope we meet a charming and fun car salesman today. Someone who is a lot of laughs we can really bond with.”
Sellers are different. Most of them are looking for an agent to hire. Totally different mindset.
Why does it take more skill to list than to work buyers? Simple: because you don’t have to ask the buyer to pay you. It is a “free” service you are offering to them. The seller is going to give the listing agent a high enough commission that there is a paycheck for both agents. It is the listing agent who goes in and gets that agreement signed. Please understand that I am not saying it is “harder work” – because it isn’t. In fact, it is a lot easier work, with no heavy lifting of any kind. But that isn’t the good part. Lets pretend that your goal was to do as good and as efficient a job as possible and to make as much money in the same amount of time. Just pretend that with me. How many buyers can you work at once? Without help and if you are amazing? How many at the very same time? Two? Three? Could you juggle 4 or 5 at the same time? And keep doing all of the necessary actions to have 4 or 5 more for next week because you will sell all of the ones you are working with right now? Could you keep doing that week after week? Month after month? Year after year?
I don’t think so. I’ve seen one agent here in Phoenix do around a hundred buyer sides a year for 2 – 3 years (without meaningful help) before hitting the wall. Finally a heart doctor told him he was going to have to slow down. The best buyer agent I’ve ever seen or heard about (he had a remarkable system for working buyers) did (with help) about 500 buyer deals the year before last. This year he isn’t even in his companies top 10 agents. (Hint: none of his companies top 10 agents are doing 500 deals this year). Am I saying one can’t make money working buyers? Nope. What I am saying is that I personally know (or at least know of and what they are doing) most of the top agents in North America. The pattern for almost all of them who enjoy long-term stable success is they have a listing based business. Even though most of them do about as many buyer sides as they do seller sides, their businesses are listings based.
Do you have to have a listings based business? No, you don’t. One of the wonderful things about this business is you can set it up any way you want to set it up. Further, you can change it anytime you feel like it. My first 12 years in the business I primarily worked buyers. I “took listings” but wasn’t very successful at actually selling most of them. The only meaningful thing that separated me from the pack was I continued to know that I was an incompetent dolt on the subject of taking listings. I didn’t figure out explanations of how it was “better” to keep doing it my way. I knew there was something to know that I didn’t know yet. Was it hard for me to figure out? Well, yes and no. The biggest obstacles were the stupid (anything I believed that was unworkable) ideas I had about how it should be done. If an idea is really “right” that “rightness” is easily tested: it works. Again and again and again, without variation. My own fixed ideas were what got in my way. If you think you already know all about something there would be no good reason to then work on finding out about it. You already know. Once you know you don’t know you then can actually know – or at least start to know. So one has to first come up to not knowing.
Nothing about the subject or learning it is complex or difficult. Like most subjects, this one too, just reeks with false data and moron ideas. Our industry is chock full of people who don’t do it or never did it who (for only X dollars) will tell you how to do it. But it can be done and (if you want) can be done by you. I’ve written all about it here.
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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