Short Sale Newsletter Articles

---

5 Tips for Marketing A Short Sale

by Richard Eastern 

1) If it's only one lien, say so.

Buyers, and their brokers, can be reluctant to consider purchasing a short sale property because the transaction can be more complicated and time- consuming than a conventional sale.  A short sale involving just one mortgage has a much higher chance of closing, and closing more quickly, when compared to a property with multiple liens. You'll increase your pool of potential buyers by clearly stating in your marketing materials that the property has only one mortgage.

 2) Make sure the property is priced at a compelling, not just competitive, price point.

Pricing a short sale is a balancing act. You need to set a price that prompts someone to make an offer, but is also acceptable to the lender.  Price too high, and you get no offers; price too low, and the bank won't approve it. BPO brokers are given guidelines by the bank for pricing, for example, looking at three active and three sold comparables. What they normally don't take into consideration are things like listing history or individual characteristics of your specific property.  Has there only been one offer in four months? Does your property have the same number of beds and baths as a comparable home, but the layout is odd? Meet the BPO broker prior to their pricing armed with this information, and you can help set a price that buyers find appealing and lenders will accept.

3) Know the facts about each lien holder's process and timelines.

This is about managing expectations.  Most buyers know a short sale is more complicated than a standard transaction, and they're willing to accept the trade-off of less convenience to get more house for their money.  However, you can lose a sale if you don't correctly outline what a buyer should expect.  If you tell a buyer upfront that closing with Lender A averages 90 days, they can make a decision about whether that works for them.  However, if they're in a situation where they need to close in 60 days, and you tell them it's going to take 30 days, you've just lost the sale and squandered precious time on market for your client.            

4) Don't scrimp on listing photos.

I'm surprised at how many short sale listings have a single exterior shot of the property and little in the way of description.  There is a preconceived notion among some buyers that short sale properties are in poor repair. For the vast majority of properties, this is not the case.  You can alleviate those fears by showing the property to its best advantage and providing as much descriptive information as possible.          

5) Let the selling brokers know the sale will be professionally negotiated.

Selling brokers want a smooth transaction and a good experience for their buyer. Short sale properties that are represented by brokers with little or no short sale experience can result in transactions that are disastrous for everyone involved.  You want to alleviate any of the selling broker's concerns so they can confidently recommend that their client make an offer on your short sale property.  When we partner with brokers, we have them include this language in the Agent Remarks: This short sale to be professionally negotiated by Washington Property Solutions at no cost to the buyer or buyer's broker.   Washington Property Solutions' short sale expertise increases a selling agent's willingness to recommend the property to their client.

 FREE SHORT SALE ADVICE AND TRAINING

Washington Property Solutions has educated hundreds of brokers throughout Washington on how to navigate through the short sale maze so they can best serve their clients.  You can find out more about our free in-office short sales training here. 

 If you are working with a buyer or seller on a short sale and have any questions, I'd be happy to provide you with advice free of charge. My name is Richard Eastern, and I'm a Windermere real estate broker and a partner in Washington Property Solutions, a short sale solution provider. I offer my expertise for free because I hope it will lead to a referral or co-listing down the road, but there are no strings attached.  Our goal is to help brokers like you provide the best possible service to their clients in the short sale process. 

If I can be of any help, please give me a call at (206)612-5541 or email me at reastern@washortsales.com.  

 _______________________________________________________________________

Ask the Short Sale Expert
with Martin Goldberg

Q: Some of the listings in the MLS have a note in the agent comments that says, "This is a pre-approved short sale."  Can a short sale really be pre-approved?

Rick in Tacoma, WA

A: Beware of a listing that's labeled "pre-approved short sale".  Most lenders restart the transaction process for each new offer, so just because they approve the price on a property one time does not mean that same price is automatically pre-approved for future offers. Even if the lender is one of the exceptions, investors generally require a property to be revalued every 90 days. If it's past that three month window, you can be fairly sure that the process will need to start from scratch.  Here's an example of how lender short sale approvals work. 

Let's say Bank of America is the lender for your short sale listing.  You get an offer from a buyer for $250,000 in March, submit all the paperwork to the bank, they do a BPO and they approve the offer. Then the buyer backs out–  maybe there's a problem that comes up at inspection or they don't qualify for lending.  You put the property back on the market in May, and a month later get an offer for $275,000.  By now the home has been on the market for over 90 days, and the bank wants a current value, so they order a new BPO or appraisal.  Once they take that step any prior approval is void. BofA has recently instituted a new policy where a new buyer can step into the existing process, and they will honor the current home value as long as it is still within the 90 day window.  Even in the case of the HAFA program, which does the BPO upfront prior to the home being listed, the home is revalued if there's been more than 90 days between the initial BPO and an offer. 

Have a question of your own?  Call 206-612-5541 or email reastern@washortsales.com for free advice about your short sale.

__________________________________________________________

HOW DOES THE NEW WASHINGTON STATE FORECLOSURE FAIRNESS ACT AFFECT YOU?

If you have a client in Washington State whose home is at risk for foreclosure, the Mortgage Foreclosure Fairness Act has a big impact on both you and your seller.

The new state law was primarily designed to help homeowners try to keep their home and work out a loan modification in an effort to prevent foreclosure. It forces major lenders to engage in conversation and problem solving with borrowers. For homeowners who have been frustrated by failed efforts to attempt loan modifications and other negotiations with their lender, this is great news. It's also great news for you, since the mediation efforts can add critical time on market if your client opts to sell the property.

Here are details about how the Foreclosure Fairness Act works.  

________________________________________________________________________

BofA and GMAC/Homecomings Shorten Timelines...CAVEAT:  IF YOU UNDERSTAND THEIR NEW SYSTEMS.

Washington Property Solutions has been using the Equator Financial web-based system since December and overall it has been a great experience.  Our ability to communicate with these lenders directly through the Equator system is an extreme improvement on their execution and response time.  Although each lender has a different set up and use of the system, WPS has become proficient with each of them. 

Response Time in an Instant

The system can be difficult to maneuver through, but we have been successful in learning the intricacies of the system.  Previously Bank of America's short sale process could take up to 2 weeks for a file to be activated properly.  Through the use of Equator we are now able to initiate the short sale process with Bank of America in less than a minute.  We can upload the required documents directly into their system and get instant confirmation that they have been successfully received.  The use of Equator has also eliminated the need for repeated requests for updated financial documentation from the sellers.

 

Responsive and Informative

The negotiators working on files set up in Equator are more responsive and informed about where they are in the process.  The current response time by the Bank of America through the Equator system is 30-45 days for an initial review and response to an offer.  This is a vast improvement over their traditional method where it could be 60-90 days before a negotiator would even look at the short sale offer.   

 

Two downsides to the system:

1.  You can only see the tasks that are assigned to your account.  If there are outstanding tasks assigned to other parties those cannot be easily tracked.  To alleviate this problem, we are in constant contact with the lender to keep the file moving toward final approval and make sure that no tasks are missed.

2.  A new offer on the property starts the process over.  This means that the lender will require that the file be closed and then you must start the process from the beginning.  They will not allow a new offer to replace an existing offer in the pipeline.

 

Overall the use of the Equator system has allowed us to have more control over the transactions that we are facilitating with these lenders.  We know that the documents submitted are in the system; and we can view and review them at any time in the process.   This allows us to dispense up-to-date, accurate information to our agents and sellers throughout the short sale process.  The negotiators and support staff working with the Equator assigned files are experienced and seasoned employees so we are more confident that the information that we receive from them about the short sale is accurate.

 

Lastly, this new system does require that the sellers create an account and sellers do have required tasks assigned to them, but WPS is happy to assist all our clients to successfully navigate the system.  At the seller's request, we are willing to take care of the tasks required for them if they are having problems or other time constraints.

 

 

---

The Danger of Listing Your Property Too Low and Other Short Sale War Stories

 When I teach a class on short sales and the first words out of my mouth are, "throw logic out the window when you are working with the banks."  

 

Listing History is a Vital Tool in Working Your Short Sale

There are many, many problems with today's short sale process.  One that is inherent to the system is value determination.  Value is an art not a science, but there are ways to determine value.   For instance, if a property has been on the market for 90 days listed at $400,000 and it finally receives an offer at $375,000, market value has been established.  I understand that there may be "comparable" homes within ½ to 1 mile that have sold for $425,000 3-6 months ago, but this specific house is not selling for whatever the reason and the best and only offer it has received is $375,000.  The banks need to accept this as reality, approve the sale, clear their books and move on.  Logically, this would be the best financial decision for the bank.  The alternative would be to not approve the sale, continue to not receive any mortgage payments for another 6 months and finally put it up for auction on the courthouse steps for an amount significantly less than what they would have received in the short sale.  This makes no sense, but it happens every day.  Specifically, let the market determine value.

 

Utilizing listing history can be powerful evidence for demonstrating to the bank what the "true" value of the property is, but is not generally used in determining value by the banks.  The banks determine value based on an appraisal or broker's price opinion.  My thought, banks may actually appreciate receiving the listing history to assist them in determining value for the properties under short sale consideration.  

 

Listing Your Short Sale Too Low May Kill The Transaction

Keep in mind the current methodology used by banks in determining value before deciding on a listing price for your client's property.  Generally, the bank(s) will send a real estate agent and/or an appraiser to the property to take some pictures, walk through and around the property and provide some comparable sales in the area.  Sounds like a reasonable way to determine value, but the bank is forgetting one thing.  This property now has a stigma.  It's a short sale.  The buyer pool for a short sale is significantly smaller.  There is no mechanism to capture what this does to the value of the property except listing history.  You can't compare this house to the identical one next door that sold for $400,000 but wasn't a short sale.  But you have to because the banks do.  If the bank determines that the value is $400,000 they will take less, but not a whole lot less.  Listing the property at $325,000 because you are trying to attract interest will only get you a low offer that the bank will reject and you have wasted your time and more importantly your client's time which is running out. 

 

Right now, as a listing agent, you need to work within the "realities" as they exist within  the banks.  Identify market value without taking into consideration the material fact that this is a short sale and list the property accordingly.  If after 3-4 weeks you are not getting any offers or traffic then reduce the price.  Maybe the banks will come to their senses and look at the listing history once you do get an offer.  It is up to the person(s) negotiating the transaction to help the banks come to the appropriate conclusion.  

 

Loan Modification Track Can Lengthen Short Sale Process

 

Keeping people in their homes is critical.  Banks that can modify loans should, but the banks are too focused on loan modifications.  So much so that if the homeowner mentions loan modification in a conversation with the bank they are put on a loan modification track that is almost impossible to alter.  Okay I may be exaggerating a little bit, but the banks need to quickly determine if a homeowner can afford their home or not.  If not, the banks need to be upfront and let the homeowner know their other options.  If the homeowner determines that a short sale is their best, or only, alternative, then the banks need to put them on the short sale path.   Currently the banks keep the homeowners on the loan modification path for weeks and months even after a homeowner has clearly indicated that they would like to move forward with a short sale instead.

 

Word to the wise, homeowners need to decide what they want to do, loan modification or short sale before entering into a purchase and sale agreement.  Ideally, it is best if the homeowner decides before the property is listed.  Unfortunately banks can't consider a short sale and a loan modification simultaneously.  Homeowners should make their decision to sell or hold up front.

 

 

---

Reinvent Yourself

 

For real estate agents battling one of the worst housing market downturns in recent memory, the future holds two options: Get out of the business or figure out a way to adapt and survive. In the last 12 months, about 2,800 Washington agents have abandoned the business, a decrease of about 9 percent, and hundreds more have put their licenses on hold, according to the state’s Department of Licensing.  Many others are toughing it out by moving from well-known brokerages to smaller firms that allow them to keep 100 percent of their commission.

There are other ways to survive in this ever-changing real estate environment.  As I speak to agents and brokers around the Puget Sound area, the one message that seems to resonate is the need to reinvent their business.  Getting back to the basics and reaching out to targeted audiences in a creative way. 

 

We have a national housing crisis and, despite what the media will have you believe, Washington State is no exception to the rest of the country.  But often times a problem can present a business opportunity.  This solution requires realtors to roll up their sleeves and get back to the neighborhoods through creative marketing techniques. 

Identify a specific neighborhood or development and come up with a customized solution.  If the neighborhood is relatively new and many of the homes were purchased using an option ARM, then consider hosting a town hall meeting to discuss strategies for selling no-equity homes.  Advertise with door hangers, flyers and postcards that talk about the valuable resources that will be available at the meeting.  Include Washington Property Solutions as one of the speakers on a panel or as a resource that will be available at one of the private stations that evening.  We can help shed light on how we can make these solutions come to life.  You may also want to consider offering a free comparative market analysis as well.  (Have a table where the homeowners can get a customized comparative market analysis to take home.)

Other ideas:

1. Study the demographics of where most foreclosures or payment problems are cropping up.  Web sites like hotpads.com and realtytrac.com.

 

 

 

 

These are just some suggestions.  If you want to sit down together and think about some more or have us expand on the ideas given, please give us a call to schedule some time at 1-866-732-9725.

Get creative, get out there and good luck.

  

---

Calling All Real Estate Agents:  Using a Short Sale Negotiator

 

Two weeks ago I received a call from a realtor whose own residence was unfortunately headed to foreclosure.  I am not unfamiliar with that type of call, but this one was unique.  It was 8:56am on a Friday morning and the house was scheduled for auction at 10:00am that same morning.  He had a mutually agreed upon sales contract in hand and the negotiator assigned to the file was out of the office for the day.

Last week I spoke to a woman who told me that she was trying to sell her house by way of short sale.  Her realtor had submitted the paperwork to the lender, but the lender rejected the offer.  She couldn’t understand why.  The house was priced at what she and her realtor had agreed was market value, but her lender determined that the house was worth more than the offer presented.

Recently I spoke to an agent who relayed a story about a short sale listing of theirs that was priced at $500,000.  The house was on the market for 6-7 months.  Finally, an offer was received for $480,000.  The offer, along with all the relevant paperwork, was submitted to the lender.  The lender hired an appraiser to place a value on the property and the value came back at $550,000!  The deal was dead.

In the first story, Washington Property Solutions was able to get the foreclosure postponed, the short sale approved and the transaction closed.  The ending to story number two is still being written, but Washington Property Solutions is working with the realtors that admittedly made mistakes on the first attempt at the short sale to correct them and bring a new offer to the lender.  Sadly, in story number three Washington Property Solutions was not involved in the transaction and was not able to creatively assist in bringing a solution to the transaction and the home was sold at a foreclosure sale.

Each of these transactions has its own nuances.  Every house has a special story with a unique human element associated with it. Short sales are not properties owned by the bank and deserve each realtor’s best shot at finding the optimal solution for their anxious client.  Save yourself time, money, stress and do what’s right for your client.  You’ll get paid and you’ll have a client for life.

The best analogy I could come up with is that you wouldn’t do an inspection yourself, you’d hire an inspector.  It’s in your client’s best interest to hire a professional to inspect the property and assess its faults, right?  The same is true for a short sale, but the stakes may be higher.  Once the bank obtains their value, it is unlikely they will change their mind.  The negotiator at the bank is looking for “low-hanging” fruit - deals they can close relatively easily and without a hassle - not a transaction that requires an additional appraisal and needs multiple levels of approvals.

Focus on what you do best:  marketing properties and putting buyers and sellers together.  Let the short sale consultants, appraisers and inspectors do what they do best – make all your hard work pay off.

 

 

---

Is a Short Sale Better Than a Foreclosure and Other Questions

 

Washington Property Solutions has been doing nothing but short sales since 2003.  Even before short sales were in vogue, WPS was negotiating with loss mitigation departments and building relationships with lenders across the country. 

 

As our business has evolved, we find that people utilize us a resource to discuss their short sale questions and issues.  Buyers, sellers and real estate agents alike call us every day to ask a question or to discuss their entire short sale scenario.  We welcome and encourage those calls.  Frankly, these are tough issues and unfamiliar territory for almost everyone involved.

 

Some of the most common questions that we receive are listed below and I have tried to answer them, but please feel free to call for further clarification or with your own questions.

 

1.       Is a short sale better than a foreclosure?  The answer to this question depends on each individual’s situation.  So before dispensing a definitive answer, please delve deeper into what their future financial goals are with regard to purchasing a house.  Also, you should always advise that they consult both a legal and tax professional .  If they want to purchase a house in the future, then definitely exploring a short sale is the right path to take.  Although, if they have only one mortgage you need to be careful, as one mortgage short sale situations raise a whole different set of considerations for a homeowner.  In the short sale approval letter, make sure it is a full satisfaction of the debt.  THIS IS A VERY TRICKY QUESTION WITH COMPLICATIONS ALL ALONG THE WAY.  PLEASE CALL US TO DISCUSS YOUR UNIQUE SITUATION.

 

2.     How often does a lender issue a lien release only as opposed to a full satisfaction?  This answer almost every time depends on the lender servicing the loan and the investor that owns the loan.  The lien holders have 2 basic choices: lien release or a full satisfaction.  A full satisfaction eliminates the ability for the lien holder to pursue any deficiency once the short sale transaction closes.  A lien release will allow the property to be sold without paying off the obligations of the promissory note. However, the note is not satisfied.  They can pursue the remaining debt on the property (sometimes called a deficiency), have a promissory note signed at closing or simply reserve the right to do something in the future.  The important thing to keep in mind is that in the state of Washington, if a property were to ultimately be auctioned off at a foreclosure sale, all but the foreclosing lien holder can still pursue losses resulting from the foreclosure.

 

3.     Are the commissions determined by the lien holder or the listing agreement?  The listing agreement has almost nothing to do with what the lender determines the commission will be.  Personally, I have seen the lender take commissions down to 4% (total), but I have heard stories of even less.

4.     How long does it take to close a short sale transaction?  We are in a national mortgage crisis.  Lenders are overwhelmed with short sale transactions.  On average, I would estimate that a transaction can take anywhere from 3-6 months for someone who does not have an established relationship with a lender.

 

There are many questions that we encounter every day.  Feel free to call with any questions and we will try to be of assistance.  Toll free 1-866-732-9725 can reach us at any time.

---