From the “Ask the Broker” inbox:
Help. I am headed down the foreclosure road with a house in Mesa that is now vacant. How do I find an agent that is willing to take on the tedious job of a short sale? I find that once I mention my situation no one wants to help me even list my home. I am no longer living in the home so restructuring the loan only seems like pushing off the inevitable. Please help. I dont want to foreclose, but I dont know how to find someone that will help me. Thank you for the opportunity to ask my question.
We are so sorry to hear about your situation. You are not alone when it comes to trying to locate someone who will list your property as a short sale.
There are likely a few reasons you are having difficulty finding an agent to list your property.
Short sales are painful to list!
The main problem boils down to financials. Short sales can take an enormous amount of time, effort and money on the part of the Realtor, and 90% to 95% of short sale properties never wind up being sold - they end up in foreclosure. Real Estate agents must pay their expenses up front and they are going into the listing with less than a 10% chance of earning a commission. If a buyer can be found who is willing to go through the 8 to 16 weeks it often takes to complete a short sale purchase, the lender typically cuts the commission to the point that it only covers the agent’s costs with nothing for their time and effort.
In short, there is a very high probability that an agent that takes a short sale listing will wind up working for free. That prospect simply isn’t very appealing to many people, Realtor or otherwise.
Selling a home in a short sale also requires knowledge of the short sale process that many agents lack. Preparing and presenting an offer package to the lenders loss mitigation department is very different from presenting an offer in a normal transaction. If more than one lender is involved, it further complicates matters, often significantly.
Because of the low prospect of selling the home, the sometimes drastically reduced commissions, and the expertise required, some brokerages simply won’t list a short sale property under any circumstances.
Thompson’s Realty has to be very selective about the short sale properties we list. If the property is in superior condition, there is only one mortgage company involved, and we feel the home can be priced and sold at a point the lender may be interested in, then we will seriously consider listing the property. If the property has condition issues, there are multiple loans on the property with different lenders, and/or the current market value is significantly lower then the loan amount, then we must require a non-refundable retainer fee of $250 in order to list the short sale. This fee helps offset some of our up front costs. We understand completely that most people in a pre-forclosure environment can’t afford to pay a $250 retainer fee. But we have a business to run and we can’t afford to continue to list properties with a low chance of returning any profit to the business. Working for free (or more accurately, working for a loss) is not an effective way to run a business.
We also recommend that you consult an accountant or income tax professional before you list your property as a short sale. There can be some tax consequences when you sell your property short.
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{ 16 comments… read them below or add one }
Curtis Reddehase 08.09.08 at 9:25 pm
I have noticed agents that are good at listing short sales get burned out. the whole process requires a great deal from all directions
Michael 08.10.08 at 7:58 am
Thank you for the direct communication about the short sale process. It’s refreshing to read about what some would assume to be “last chance” options - note to self….what NOT to do.
James Boyer 08.10.08 at 11:26 am
I totally agree with what you have to say here. I have been very selective with just regular listings. If they don’t want to list within 5% of what I think it will sell for, I tell them exactly that, and that I cannot in good conscious take a listing that will not sell.
Monica 08.10.08 at 12:35 pm
There are real estate companies that will perform “fee for service work” and will list a house for sale for a flat fee instead of the more widely known contract where the realtor gets a percentage of the sale price. You pay the realtor up front for the service.
You might want to contact the mortgage company and inquire about doing a “deed in lieu of foreclosure” if you feel foreclosure is unavoidable.
Steve Belt 08.10.08 at 5:15 pm
Monica-
A deed-in-lieu will tag your credit for 4 years (per current Fannie Mae underwriting guidelines). Sure that’s better than 5 years from a foreclosure, but not nearly as good as 2 years from a short sale. A short sale should always be pursued if it’s viable to be successful. If it can’t be successful, then a deed-in-lieu is the next best answer.
Austin Real Estate Blog 08.10.08 at 7:21 pm
I have found the most difficult part of short sales is dealing with banks. They don’t call back and can take forever to just assign someone to the case. In the long run they are hurting themselves. More and more realtors are now avoiding short sales which in the end will hurt banks as it will cause the number of short sales to down and the number of foreclosures to go up.
Jonathan Blackwell 08.10.08 at 8:45 pm
I believe FHA guidelines count a Deed-In-Lieu the same as a foreclosure. 3 years for FHA before you can purchase again.
Joseph Bridges 08.11.08 at 10:30 am
I think one of the hardest parts of short sales is telling people you can’t help them. I also charge up front fees on short sales and the environment is completely changing. Banks continue to change their process and they are extremely time consuming. I frequently tell sellers to try everything in their power with the bank on their own before they consider listing it with me and to make sure they view me and short sales as a last resort.
Carolyn Gjerde-Tu 08.11.08 at 7:26 pm
This is my first go around as an agent in a down cycle so I do not have previous experience working with short sales. There are negotiators who for a fee specialize in speaking directly with the banks. They charge a hefty fee but I and other agents in my office have had success getting these done with a negotiators help.
Yalda Alawi 08.12.08 at 3:09 pm
I have done a few short sales with other negotiators until it go to be too much to manage the negotiators. So I got my short sale negotiation certification and now I handle all of my own short sales. I don’t charge anything upfront. If financially I can’t help them, then I won’t waste their time or money nor mine.
I have a team of short sale negotiators ready to assist at a moments notice and we have had a lot of success with assisting other agents in closing their short sale deals.
Jay - The Phoenix Real Estate Guy 08.12.08 at 3:22 pm
“I think one of the hardest parts of short sales is telling people you can’t help them.”
I agree Joseph, it pains me every day. There are some very sad stories out there. Yes, some “got what they were asking for” but many are just in the wrong place at the wrong time. I hate not being able to help. On the other hand, there seems no point in “blowing smoke” and telling people what they want to hear. Brutal honesty, even if it’s the last thing someone wants to hear, is always the best policy.
Yalda - I’ve had virtually no luck when dealing with listers using short sale negotiation services. I deal directly with loss mitigation when we list a short sale and almost want to run away when we have a buyer interested in a short sale being handled by a service. Carolyn seems to have had good luck. I suspect as is with anything, it depends on the company…
Melissa | Talk San Francisco Real Estate 08.12.08 at 4:03 pm
Jay,
I have to say. Fabulous approach. I just saw your comments in response to other people’s comments, and I completely agree. Let me give you a different perspective as well. We have been on the other side of the coin as buyers’ agents for short sales. I cannot state how much I agree with your statement that brutal honesty is best. There are agents out there who are listing short sales and do not have the knowledge or expertise to do so. There have been situations where an agent has listed the property at a price that the bank is not willing to even consider. This is just a waste of everyone’s time. I think it’s great that you charge the $250 fee in certain situations. We, in real estate, spend a lot of money at times and there is no one that is going to bail us out, so you’re right, you have to profit to stay in business.
Jim Gatos 08.12.08 at 9:00 pm
I’ve tried to keep a positive attitude about short sales but I must admit it tires me out; and I use a short sale mitigation company that takes only 1% . (if the commission is 7% they keep 1% and the listing company gets 6%; how they split it with the selling agency is between the two.
I use ShortSalesExpress.com (By THE Roger Butcher). I gave him 3 short sales. One is closing next week, another I don’t know because the lender wants the seller to sign a promissory note for between $24,000 to $60,000 depending on how much cash the seller can bring to the closing table (duh? Most sellers are penniless, duh?) and I still don’t know on the third (Since April)…
I can’t imagine dealing with these banks. Most of them are jerks, and some of them simply cash in on the mortgage insurance so they don’t care. I don’t know if the lenders go after the owners for the balance not collected after a foreclosure and an eventual sale but I can tell you even though I tried very very hard to be positive and upbeat but the short sales are taking their toll on me. To add to this, in my area I see a LOT and I mean A LOT of listings are all short sales. It’s unbelievable. My MLS is now requiring they be identified as lender owned (bank owned) or as lender approval required (Short Sale). Although I disagree with this (this is to me a form of “segregation) I go along with it. I did short sales before but this is ridiculous. I don’t charge anything upfront but maybe I should. Problem is there’s too many that will take a short sale listing and NOT know what to do with it. That is the kind of “real estate Malpractice” that hurts sellers and gives real estate agents a bad name.
Monica 08.13.08 at 5:08 pm
I found myself in the unfortunate position of having my house listed for sale for over two years, with NO OFFERS. Then my hubby was in a bad car accident and we could not continue making the mortgage payments because of the loss of his income. I am collecting a pension from a previous job, and I am working a full time job, and three part time jobs, but still can’t pay the mortgage and pay our other bills too. We asked the CountryWide mortgage company for a special hardship forbearance because of the accident, and they refused. We offered to let them put a lien on the settlement of the accident, and they refused. After a couple of months, we got three short sale offers, and CountryWide refused them. CountryWide has agreed to a deed in lieu. We don’t have much of a choice at this point, so that is what we are doing.
Jay - The Phoenix Real Estate Guy 08.13.08 at 8:41 pm
Monica - Thanks for sharing your story. I hear things like this frequently, and it is very sad. (I hope your husband is doing OK now).
Countrywide seems to come up frequently in conversations like this, but there are many other lenders who take similar actions. Hang in there!
pepe padilla 08.16.08 at 11:44 am
Can anyone tell me if the owner of a property has to pay any money when they have to: a] forclosure b] short sale or c] deed en liu and if so, what amount?
Also why do we nned to get in to late or no payments on our mortgage so Chase mortgage can start considering re-negotiaring our loan? thanks to all who comment to the above matters