The Real Problem with Short Sales
I’ve been a short sale investor for over six years and from the start, even when I was a newbie investor I was shocked at the lack of knowledge the real estate professionals have regarding short sales. There were many times that I had to explain to realtors what a short sale was and the bank process. Although with these current times, realtors are forced to be more informed on short sales. Understandably realtors are trained in conventional real estate and, if they want to learn a niche in the business, they can take a class or two. Because short sale investing was my focus, I was continually reading information and attending every training event on short sales that I could get to. I invested heavily in a coaching group so that I could network with other short sale professionals, have short sale experts, including attorneys in the specialized field provide the highest level of training.
I’ve negotiated many short sales and attended multiple BPO’s. I’ve comforted distressed homeowners and helped provide them as much information as possible to ensure they were comfortable with the decisions they made. I’ve been to many closings where I get hugs from the sellers/homeowners and hugs from the buyers. I’ve also had my share of failures. Unfortunately we can never guarantee the success of a short sale and if someone says they can promise a success my suggestion would be run and run fast.
It is so frustrating when I see so much incomplete or misleading information on short sales in the various media. The short sale process is not easy but simple if you have these systems in place.
1. Don’t send the short sale packet until you have an offer included.
2. Make sure to be in attendance when the BPO or appraisal is completed. Provide the BPO agent or appraiser with your listing history, feedback and, if repairs are needed you MUST include contractor estimates. Most BPO agents will fly through the house and take pictures. I’ve encountered some agents that sent their wife, daughter, friend, etc. to get the pictures for them. How are they supposed to know what it will take to fix the house up by pictures?
3. Follow up with the BPO agent and ask them questions. Do they think you have the house listed at a fair price? Did they take into consideration all the repair costs? Can they give you their value they sent to the bank? Most likely they won’t give this information but don’t be afraid, it doesn’t hurt to ask.
4. The bank will almost ALWAYS counter the offer lower. I don’t care if you have a full price offer, actually that might even set you up for failure. Although I have encountered one time that the bank actually accepted my first offer. I was dumbfounded. That is extremely rare. Be prepared to prove to the bank why the offer at hand makes sense. If the schools are bad, find articles about the schools. If there’s a lot of crime in the area, provide statistics on the crime. If there’s going to be a power plant development in the future near the property, provide information about this. You need to really think about everything involved with the property. Is it close to the airport and you hear low flying jets on a regular basis? Are there train tracks nearby? What are potential buyers saying about the house? Collect that information and provide it to the bank.
5. Don’t get impatient with the bank negotiator. Be nice, be respectful and, if possible, make friends with them. They have a tough job. They have to deal with stressed out people on a regular basis. Make it a breath of fresh air when they speak with you.
6. Contact the bank on a regular basis for status updates. If you’re busy and don’t have the time, then hire someone to contact the bank for you.
Unfortunately many realtors get it wrong and send the short sale packet to the bank before they even have an offer, then that triggers a BPO which then has them stuck in a value that no buyers have interest. Or, they submit multiple offers to the bank and just cause confusion. Plus, once the seller signs off on one offer you have a legal binding contract and you can get into some trouble by submitting another offer. The agent may feel their obligation is to the bank but it is not, it is to the seller and the seller wants to avoid a foreclosure so they need to consider the best approach to help the seller with a successful outcome. So getting the highest and best offer may not be the best attempt for a positive result.
I’ve had many realtors shut the door in my face judging me as someone who’s taking advantage of some poor distressed homeowner with the intention to make myself a fortune. This is so far from the truth. Investors help realtors, homeowners and buyers. They get our neighborhoods back to where they need to be. I will be the first one to say if it feels uncomfortable or different, get it checked out by your broker or attorney before you work with an investor. But don’t judge and shut them out, ask questions, read their documents, find out how long they’ve been in the business, ask for references and prior transaction take time to get to know them. Short sales aren’t going away anytime soon. Get educated and commit to the highest level of success for your client.
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