Some buyers touched base with my wife and me over the weekend to take a look at a $600k short sale property. We lined up a time to take a look but before heading out to show the house I dropped the listing agent a line.
The short sale was being marketed as an “Approved Short Sale” so I wanted to make sure what the listing agent meant as the answers you get to that question really vary. Just a pet peeve it should have been listed as a “Previously Approved Short Sale” but I digress. I asked the obligatory questions of who’s the bank, what do you mean by approved, is the file still open and active with the negotiator at the bank, etc. I “foolishly” asked if any buyer closing costs had been approved…the listing agent went into a big rant about Bank of America not EVER agreeing to pay any buyer closing costs. I tried to tactfully convey that they do but quickly realized I was dealing with an “Expert” who wouldn’t accept any questioning of her authority on the short sale process, BofA short sales, and on who came first – the chicken or the egg. I tried to chalk it up as someone having a bad day, on an ego trip, etc. but then confirmed my suspicion that this expert hadn’t closed too many short sales and surely not too many with BofA. 9 … 9 short sales total closed and she was the authority on BofA short sales?
I bit my tongue and headed out to show the house.
I arrive at the house and who is at the house – none other than the “Expert” listing agent (this is not customary in ID for the listing agent to be at the house during a showing). Turns out she was waiting for the water company to turn on service to the house. It was a 6,000+ sqft house on a fair size lot so we spent an hour or so checking out the property with Ms. “Expert” Agent hovering, trying to interject in conversations, and watching us through the windows as we walked the grounds. As we were wrapping up the showing Agent “Expert” was hanging around the door and quickly stated that the house was approved for “x” and that to write an offer for anything less than that would be a waste of time. Wonder if her Seller would like to hear of that? She then went on bad mouthing her seller clients and also another agent that had presented an offer lower than the previously approved offer. Classy. Then as the buyers went back through the house to check out a couple more things I stood there talking with the “Expert”. She told me short sales were all she did and insinuated she had a sizable number of short sales currently listed (4 times the actual number she has listed). She then told me all about her expertise and reiterated that short sales are all she does and that oh by the way she teaches short sale classes. yeeesh…..
After she finally left the property my clients chuckled at how big a head the agent had and I gave them the low down on her actual numbers and explained the reasons that she may have said some of the things she had, etc. Needless to say my buyers were not impressed with this agent, we both knew she was full of it and herself.
As I drove away I wondered how someone gets paired up with an agent that discourages offers, bags on her clients, etc. I felt sorry for her clients and then later in my drive I felt sorry for for Ms. “Expert” as it seems a rough existence to be so full or yourself and/or delusional to twist closing 9 of 42 short sales into a performance that qualifies her as an “expert” all the while helping clients down the road to foreclosure.
Don’t be fooled when looking for an agent to help you short sell. Coming through 22% of the time won’t keep you swinging a bat in the big leagues even if you look and sound the part. If foreclosure is what you are trying to avoid you want an agent that bats far better than .220 – give me a ring.
As of Feb 2011 FTC’s rules regarding the MARS disclosures went into effect. We scrambled to adjust contracts, agreements, and disclosures to meet these disclosure guidelines as our local association had not created anything to address MARS. As of the beginning of July our association came out with forms to address this ruling and as of 7/15 the enforcement of the guidelines were adjusted as to how they would relate to real estate agents in good standing. There were some parts of MARS that were poorly applied to the process of agents helping home owners but a fair amount of the regulations in my opinion were nice to see for the protection of homeowners.
The original MARS ruling outlined the following:
Advance Fee Bans (follow the links above for details)
Disclosures (follow the links above for details)
The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:
- the likelihood of consumers getting the results they seek;
- the company’s affiliation with government or private entities;
- the consumer’s payment and other mortgage obligations;
- the company’s refund and cancellation policies;
- whether the company has performed the services it promised;
- whether the company will provide legal representation to consumers;
- the availability or cost of any alternative to for-profit mortgage assistance relief services;
- the amount of money a consumer will save by using their services; or
- the cost of the services.
In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.
The above sentence “Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.” is one of the items that is very important in my opinion based on my communication with prospective Sellers when they are looking for a qualified agent to help them and/or their agent when I am bringing one of my buyer clients to a short sale.
I cannot tell you how many times I have a prospective short sale seller call me to discuss the process, interview me, etc. and they mention to me that another agent is telling them they have closed X amount of short sales and their close ratio is X% of the short sales they take. According to our MLS’s data I have closed more short sales than anyone in our MLS excluding one agent (with a far lower closing ratio than me); being in the thick of our short sale scene it is relatively easy for me to know off-hand that the home owner in distress has been lied to by an agent. A quick 30 second search of the MLS will confirm this.
My purpose here is not to bag on anyone, rather I am tired of hearing of agents overestimating their knowledge and success rates at the expense of a homeowner. If you are looking at doing a short sale on your house you can ask the agent to provide to you a list of all their closed short sale transactions to back their claims. It is also a wise idea to ask the agent if they are the one that is working with the bank (Many agents outsource their short sale listing bank work to “experts” that in my experience are a 50/50 scenario). Maybe it’s just me but closing 50% of the time doesn’t strike me as a ratio that would suggest any expertise. As a Seller I would want to know if the agent telling me they had closed a certain number of short sales at a given close ratio was being straight with me or just looking for another listing.
Apart from the items discussed above the are a number of other things you might ask an agent that may help you in making the best decision for the best possible outcome.
Lately most of the folks that are selling are upside down in their properties and need to do a short sale. Many of these sellers purchased rental properties and have landed themselves with a property worth 50% of its value during the boom. Times are tough and whatever the hardship maybe they need to cut loose of these rental properties that are dragging them down and avoid a foreclosure.
As we work with owners of rental property we also involve their property management company in gaining access and cooperation of the tenants to get the house sold and avoid foreclosure. The way that a lease agreement and management agreement are structured initially are very important items for a seller to consider looking to the future when they intend to sell the property.
Recently we are finding that a few property management companies have created leases that do not allow a property to be shown as is generally customary with 24-48 hours notice given to the tenants. Most recently one of the management companies that drew up a lease like this had no real explanation for why the lease was drawn up this way but they were adamant that even though the property owner is just a few months away from a foreclosure auction there is nothing that could be done to change the inability to have the house shown. The central flavor of the conversation being bitter because the management company was losing a property that they manage (monthly income).
As this whole conversation is taking place I am thinking in the back of my mind how much differently the person on the other end of the line at the management company would be feeling if they were in their clients shoes – staring down the barrel of a foreclosure.
In light of running into this situation a bit more as of late if you are talking to a management company to handle your investment properties and draw up the leases for you one important question to ask of the management company might be “Explain to me the process when I am ready to sell the house whether a tenant is in the house at the time or not.”
Make sure you are not painting yourself into a corner.
Hopefully when you sell you are in a positive equity situation on the property and not staring down a foreclosure with a management/lease agreement that has your hands tied keeping you from being able to actively market and sell your property.
The HAFA short sale program has been going “strong” for nearly a year now and there is still quite a bit of fuss about it. Guidelines have been modified a bit effective February 2011. But no real changes have occurred. So what exactly is all this fuss about?
Seller’s are excited about the possibility of receiving up to $3,000 back for completing a HAFA short sale, the bank has to agree to release the borrower from any further liability, and the bank cannot ask the borrower to contribute any cash at closing or require the signing of a promissory note. These are all really great for a borrower – no doubt – if they happen.
Real Estate agents and other mitigation companies are advertising the heck out of the program – generally this presents itself with some marketing material that tells homeowners in default that they can get paid up to $3,000 to complete a HAFA short sale – nice marketing hook.
Real Estate related “trainers”, real estate related associations, companies that sell designations agents can tag behind their names, market area short sale “experts”, etc. are marketing seminars, conference calls, manuals, training programs, three and four letter designations, etc. – nice opportunity to talk like an expert, look like an expert, and sell the image of being an expert.
So is HAFA fabulous or a flop? Word on the street is in a grand total of 661 HAFA short sales total were closed in 2010. For all the racket it seems to be a flop.
Alternatives to Foreclosure
You may be facing foreclosure… so what are your options?!? Try to look at the situation more from a financial standpoint rather than an emotional standpoint. This way you can more successfully analyze which option might best suit your needs and desires to move you towards resolving your financial difficulty. One very important thing to remember: Time is of the essence. Take time to think through your situation and make a decision. Then, take action right away so you have enough time to complete the solution you choose.
Nine options when facing Foreclosure
1. Do Nothing – If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information. Not the best option.
2. Payoff/Refinance – Completely paying off the entire loan amount plus any default amount and fees. Usually this is accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.
3. Reinstatement – Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
4. Loan Modification – Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payment.
5. Forbearance – Lender may be able to arrange a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.
6. Partial Claim – A loan from the lender for a 2nd loan to include back payments, costs and fees.
7. Deed in Lieu of Foreclosure – Give the property back to the bank instead of the bank foreclosing. Banks generally require the home be well maintained, all mortgage payment and taxes must be current. Most loan applications ask if this has ever happened.
8. Bankruptcy – This option can liquidate debt and/or allow more time. I can refer you to a qualified bankruptcy attorney.
–Chapter 7 (Liquidation) To completely settle personal debt.
–Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
–Chapter 11 (Business Reorganization) A business debt solution.
9. Sale – If the property has equity (money left over after all loans and monetary encumbrances are paid). The homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale. On the other hand, a Short Sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your Real Estate Professional if what is owed is MORE than the property’s value