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Wasting Everyone’s Time

Wednesday, May 28, 2008

Well, the headline is somewhat blunt, but it’s honest.  As short sales are a plenty, buyers who think they can get a “steal” are everywhere; well buyers, those days are over.

Although some lenders at the onset of this short sale debacle allowed large shortages to get through their system, it seems that those deals are now gone.  Having assisted listing agents in the negotiation of numerous short sales, the lenders have finally realized that they can call some of the shots and actually counter offer any contract offer.

Over the last few days, I have received calls from payoff lenders with “their” terms to the offer.  In essence, they have calculated their “bottom line” and are cutting everything to get there.  The lender begins with a counter to the offer and then hits the commission (reduced, not removed), the utility escrows, the home warranty, the transaction fee, etc. Getting a lender to this point in the offer-acceptance process is very time consuming. Getting a lender to the point of a counter-offer is like trying to get a nine year old to eat broccoli, it’s a constant struggle to get them to the dinner table and once they are there, you can’t get them to open their mouth!

Once all the paperwork gets submitted is when you think the negotiations are going to begin.  Nine times out of ten, your Negotiator is separate and apart from the Loss Mitigation Department and it’s next to impossible to get a hold of that person.  Leaving numerous messages can backfire as well.  I had one individual call me back to tell me what an annoyance I was and then hung up without discussing the case. I had  in another instance, communicated the negotiation of all of the re-adjusted terms other than the sales price, thinking the sales price was acceptable.  Once the terms were agreed to, the negotiator then addressed the sales price and counter offered $75,000 higher than the offer.  Obviously, the deal died at that point.

Make the best of your time (and mine).  Stay away from low offers as those offers are a waste of everyone’s time (and money).  Our Metropolitan market is not as soft as other markets and lenders are fully aware of this.  Keep in mind, that as a listing agent, your fiduciary duty applies to your seller.  In upholding your obligation to the seller, you must continue to attain the highest possible price for the property with the goal of reducing your seller’s possible exposure to their lender.  Although not federally taxable at this time*, any amount of reduction by the payoff lender could easily affect the financial future of your client.  Selling agents, prepare buyers for a long road ahead, although I believe that buyers with the patience have more to gain from short sales, I have had too many purchasers get frustrated and walk away from the opportunity to purchase a home at a reduced price.

Here is what I would suggest:
  1. First and foremost, have a COMPLETE seller short sale package completed truthfully. The information provided will be verified and compared against a credit report.
  2. The lenders/investors are willing to negotiate on certain terms.
  3. Work with BOTH first and second trust holders.  The seconds MUST approve your sale before the first can approve the transaction.
  4. Try your best to find out the BPO (Broker’s Price Opinion) which the lender will give you if you ask them.
  5. Keep on top of the payoff lender; continuously communicate with them so they know the progress of the transaction.  Some will continue with their foreclosure proceedings if they know of no other options.
  6. Accept or write offers that will net the lender 85 to 92% of the BPO. (The latter percentage applies more so to Fannie Mae Guidelines).
  7. Stay away from “bottom feeders.”  Those are the people who insist you write ridiculously low offers and waste everyone’s time.
  8. Do not write or accept offers from buyers who have a “tight” timeframe.

These are just some of my suggestions through my experiences.  This process is not simple and quick.  Although sometimes frustrating, the reward in the end is worth it for those that are actually trying to be a part of the solution.

* The foregoing information is not intended as legal or financial advice and cannot be used as such. Any tax advice included in this communication was not intended or written to be used, and cannot be used, for purposes of avoiding U.S. federal tax penalties.  

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