Why walk away??
I work with many agents who will tell me that they walk away from listings when there is a high probability of there being a short sale.
They are walking away from business, leaving money on the table, so I am prompted to ask, “why?”.
This is what they tell me:
#1- I don’t understand how short sales work. It is too confusing.
#2- I don’t want to work all that time and have my commission lost in the expenses at the end.
#3- Short sales take too long.
#4- I sold one once and it was too frustrating.
WHY LEAVE MONEY ON THE TABLE?
Now, of course, we would ALL prefer to sell a ton of traditional real estate, but in this marketplace the odds are very high that you will be called in to evaluate a short sale. Since we can all agree that short sales are here to stay for awhile, doesn’t it make good business sense to learn how to work with them?
To answer these most mentioned issues above:
#1- Educate yourself about short sale process. There are great resources on the internet or ask an attorney who works with them to meet with you for a primer.
#2- There is a small chance that your commission might end up reduced at the end of the transaction. Much of this depends on your broker’s stand on payment of commissions and how hard they bargain with the lenders. Even when the commission is reduced, isn’t a reduced commission better than none at all?
#3- Short sales can take longer. Not every short sale will, but it is common. Prepare your seller and the buyer or buyer’s agent with reasonable timelines handed down from the lender. Keeping everyone informed will afford more patience in the transaction.
#4- If you were involved on the buyer side of a short sale and didn’t understand the process, I am sure you were frustrated. Education is key here.
It is a good idea to have a short sale attorney involved from the very beginning of the listing process. Massachusetts Attorney Nyles Courchesne offers this tip to real estate agents working on a short sale: “I would suggest that Realtors gather the usual requirements (2 years’ tax returns, 12 months bank statements, last two paystubs, hardship letter, etc. . .) before the property is sold so that we are prepared to submit the entire package without delay when we have a contract.”.
Realtor.org has a wealth of information for agents needing assistance in short sale training.
Realtor Magazine has covered the topic at length, as well. This is a helpful article about disclosures in short sales.
The Huffington Post is weighing in on the topic with Dispatches from the Displaced.
NAR posted this helpful short sale flyer with good information about the work NAR is doing with lenders.
I wrote a post called Short Sale vs Short Payoff with a link to an e-book that explains a lot, too.
This is just a drop in the bucket of information that is out there for agents and sellers who are facing the realities of short sales. There is an opportunity out there for agents to specialize in helping people out of this distress. The business is out there, the sellers need help and you are perfectly suited to give them the guidance and care that might save them from foreclosure or huge personal loss.
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I have never understood why anyone would walk away from the possibility of making money. That just seems illogical to me.
But, I do understand how frustrating a short sale can be…and the reasons why some agents want to avoid them. As you mentioned, most of them have to do with reasons that can be rectified.
Improvise. Adapt. Overcome.
Great advice. In our office, our broker REQUIRED that we use an attorney experienced in short sales to lessen liability. This sometimes helps if your clients have been less than forthcoming.
Lesley – nice post! It makes sense that many agents turn away because they are intimidated by the short sale. You make a great point that with a little bit of research and the right legal connections they can make it through just fine. I mean, what’s the downside to chalking up another ‘WIN’, and at the same time helping your neighbors out of a sticky situation? Double bonus!
“Improvise. Adapt. Overcome.” Haha Clint, my Dad used to say this to me all the time, except with a more Army-like bark: “Adapt and Overcome!!”
Unfortunately I understand short sales very well. At least how they work in my market. I call them liar listings because the price they are listed for is not the price that the seller can accept. We need some more rules and regulations. As of last November I will no longer even show short sales to buyers. There is another agent who will do it for me if needed. I don’t represent sellers on short sales any more either. I do take foreclosures and all other types of listings. I am happy to let others specialize.
Lesley,
Great article. I am, also, astound by the number of agents who will take the listing, do nothing to solve the sellers problem and let the listing expire without so much as a referral.
I am a cash buyer and my biggest gold mine is the expired listings designated as “short sales” on the MLS. I used call the agents of these expired listings and 9 time out 10 they would refuse to even let me write an offer.
I just don’t get it. I have cash, I am willing to do the short sale negotiation and all they have to do is put my offer in front of the seller.
If someone figures it out please let me know. I just want to help people avoid foreclosure.
If there any agents in the Western US who want to give their sellers closure, but don’t want to do the hard part – send me an email. I want to buy 100 properties before the end of the year.
Jay
One of the reasons that short sales tend to take so long is that so many agents who handle short sale listings have not taken the steps that you recommend. In San Diego the typical short sale taking 6 months to a year from start to finish. Agents who do their research and accurately prepare thorough short sale packages can cut the time down to around 3 months. The shortest I’ve seen is 40 days. It does take work, but work smarter to avoid working harder.
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Lesley – Good article. One point that is not clearly brought out – is qualifying the short seller. It may have been glossed over in point number one.
A study done over an 18 month period showed that less than 10 percent of potential short sale properties actually closed. I don’t know how this stat compares to other areas, but it could prove many agents in field really do not understand short sale transactions. Which greatly supports the learning process you noted.
As an agent that works mostly with buyers at this time (too many individuals wanting to do a short sale, based upon the qualification process are not true potential short sellers), the short sale is dreaded by myself, hence the reason for my study.
There are too many unknowns on the buyer side to determine, if the seller is a true potential short sale candidate. This results from a lack of qualification of the seller.
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I did forget to mention in the earlier response – agents if they understood the qualification process and process they would not be saying “I do understand why the lender/bank approve the transaction when it was full price.
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Lesley, there is a new model out there in Real Estate. In my area, you have to do short sales, and I mean YOU not some short sale negotiator who doesn’t understand.
When they first came on the scene I said, “no”. Now I embrace them. The only time we don’t show short sale homes is IF the buyer has to be in by 30 days.
Educating yourself on how to get them done is critical to their success.
I have to agree with Teresa Boardman here – short sales are turning into liar listings. I recently spoke with an agent who has a short sale listed at a price so low that every time they get an offer (and they have had three, all over the asking price), the bank has disapproved the sale. What good is pricing the property like that if it can’t/won’t result in a sale?
Lesley, thanks for sending folks to so many of the resources at REALTOR.org. There’s one link where we’ve gathered all of NAR’s resources on the topic: http://www.realtor.org/realtors/basics_short_sales
In Orange County, there’s little choice when 50% of the inventory in the under $500 market is a short sale. This is the price point for the investors, the first time buyer. To be unwilling to work that market would seriously hamper business in my neck of the woods.
The real struggle is education because what was true yesterday, may not be true today. It’s always changing and evolving. To really be educated, it seems that we must really keep our ear to the ground.
Someone once said, “Half of being smart is knowing what you don’t know”.
I equate the term ’short sale’ with the word ‘operation’ – a generic term used to describe a wide variety of procedures with differentiating factors and outcomes with varying degrees of risk and consequence. Some are successful, some die on the table. Some pull the plug themselves.
It is important to remember that a short sale is basically a negotiation of secured debt which may or may not have legal and tax consequence – something not everyone should attempt to do.
Diane – hats off to your broker.
Jay – any agent who allows the buyer to negotiate the debt liability of their client should be shot. In California, if you attempted to do this as of July 1st, 2009, you would be in violation of a new state law that carries penalties of up to a year in jail and a $25k fine.
Linsey – dead on.