Yet on the other hand, as a home seller, if you lined up a hundred agents and asked if they do short sales, 99% of them would respond absolutely yes even though they don’t have a clue.  Why would they respond that way?  Simple, it’s because they have to since Short Sales are such a big part of the marketplace right now. 

Yet when you take it one step further and ask how many successful short sales they closed in the last 12 months most of them (being truthful) would have to respond between 0 and 3.  And if you take it it even further and asked what percentage of all the listings they have taken actually resulted in a successful short sale closing you would find that number to be only 10 to 15 percent. 

Let’s clarify.  In 12 months an agent takes 20 short sale listings and successfully closes only 15 percent, that is only 3 closed.  What about the other 17 listings.  Unfortunately the mentality is that those 17 listings are just casualties of war.  Most agents believe that they have to list more properties in order to sell and get paid on just a few.

We also hear all the time that home sellers say, "Well, the agent sounded like they knew what they were talking about."  And I’m sure they did.  Agents are being invited all the time to attend seminars and other functions where elements of the Short Sale process are discussed.  Attend enough of these seminars and anyone can sound like an expert.  It’s when action is required is where they usually fall apart.  Most agents often don’t know proper paperwork handling, who to talk to and they believe everything the bank tells them.

Your agent should be in constant communication with the bank to find out where you are in the process and be doing everything possible to get your home sold and be able to explain concisely why the offer being submitted is in the best interest for the bank.

A common technique used by many agents is to submit a bogus offer that is substantially lower than the value of the property in hopes that the lender will see this as positive activity and stall the foreclosure proceedings while a more reasonable offer is sought out. 

Many agents and home sellers are left with their mouth hanging wide open when they realize that the lender is about to… or has already in fact taken the property back even though there was an offer on the home regardless of how genuine it was.

If your agent listens to the banks "advice" and hold off on submitting your initial hardship paperwork until you actually get an offer, you’re going to drag out that escrow by an extra four weeks just to get your file processed.  Believe us when we say that four weeks is a conservative estimate with most banks.  We’ve seen transactions with some of the lenders or loan servicers that easily take six to eight weeks to actually set up and order the BPO from the time they initially received a file with an offer.

Your agent can shorten this time-frame considerably if you’re aware that you can send a file in without having an offer.  The key is your agent has to follow-up repeatedly and be working on getting an offer quickly.  Your agent is responsible for keeping up on the status of your file and making sure the bank is moving forward at a reasonable pace.

Whenever your agent gets a call from a lender asking "where’s the offer?" they should hopefully have one by then and they can respond that they’ll be faxing it right over.

Then for the bank it’s only about reviewing the numbers from that point forward.

The bank nor it’s employees even care that the house was listed at ‘full payoff’.  In most cases they don’t even care that it was on the market for 5 months.  The main thing you will notice is that they want to make sure your offer submitted is as close to full market value as possible to get it sold.

If you listed your home with an agent that says it has to start at the payoff amount as the list price then they’ve done you and the bank a huge disservice.  They’ve wasted valuable moments during a declining market causing the true value to drop even further making your negotiations that much more difficult even when you do get an offer.

It’s rare that an offer of $1000 to $5000, which is common to traditional second liens, will be accepted by the bank that holds the HELOC.

Unlike a traditional second position lien, a HELOC has revolving credit characteristics – like a credit card – and can legally seek to recover the deficiency of the principal balance even after a foreclosure sale.

As you may know, they can seek payment and obtain a judgment.  This collection process may go on for up to 20 years.

When considering your short sale offer, a HELOC will consider the value of your offer against the amount they think they can reasonably collect from you over the next 20 years.

If you owe $80,000 on your HELOC and you offer them $1,000, they’re going to turn you down if they do happen to understand the power of their position.  After all, they can practically guarantee that they will be able to get more than $1,000 by attaching a judgment to any properties you may purchase over the next 20 years!

We’ll be the first to admit that short sales nationwide have a low success ratio due to ignorance or apathy.  If you were able to login to the local MLS and pull a report, you’ll notice that of all the active listings, 20-30% are short sales and, of all those short sale listings, about 10-15% will eventually close.

Let’s not forget, that has nothing to do with short sales themselves or the banks willingness to accept short sales, but rather it is because the agents handling the short sales are going about it the wrong way and don’t know how to negotiate a short sale properly.

Today’s real estate market is in a downward cycle.  If we were back in 2003 and the market was still going up, then more lenders would probably think it would make sense to wait to foreclose, take the property back as an REO, and resell it.

Even in 2003, a bank never really wanted to foreclose.  In that time, however they could foreclose in most any part of the country knowing that they would recover most, if not all of the late payments, principal balance and costs to foreclose and sell the REO within 60 days since the market was strong and appreciating.

In today’s market, lenders don’t want to hold on to anything.  Know this, it is the philosophy of any major lender that "first loss is best loss". 

The problem is this philosophy does not always make it down to the trenches where you and your agent deal with the low-level loss mitigators.

When your agent tells you that the mitigator said they are going to foreclose, even though you have a great offer, you should know that they are talking to an hourly employee, or someone who just doesn’t understand what is best for the bank.

In these cases it is often necessary to Escalate in order to talk to someone who understands the upper managements philosophy.

A Good Agent will work hard to put together a good deal and move the file forward and deserve their full commission.

Also a bank has no right to dictate the terms between you the seller and your agent.

Legally they can only accept or decline.

When a good agent arranges a short sale they are helping the bank.  Albeit the agent is only helping them lose LESS money.  The Agent is saving them from the additional risk, cost, and hassle associated with foreclosing on a property, selling it as an REO, and hoping it will sell at all –  let alone for fair market value.

By allowing the bank to dictate terms, it shows that the agent is not approaching the negotiations with confidence that you have a good offer which is in the banks best interest or yours.

Remember, it is the banks job to cut every corner imaginable and they will try. 

If the agent you hire is willing to negotiate away his commissions, his livelihood, the thing HE counts on to survive almost instantly then you have to wonder what he negotiated away from you without concern.

To connect with professional short sale agents who are able to negotiate on your behalf as well as theirs, contact us at OCForeclosureOptions.com and we’ll connect you with an agent in your area with the right amount of knowledge, the right amount of experience and the right tools to get your short sale closed the right way.

If your offer gets turned down, and you know it was a good offer, or at least a better option for the bank than foreclosure, then most likely it’s not the bank turning down the offer, but rather the paper pusher you were dealing with. 

Instead of having your agent submit a new offer, or worse yet accepting defeat, your agent needs to escalate your negotiations.  They need to talk to someone higher up the food chain.  They should talk to a supervisor or senior loss mitigator.  Talking to the AVP that is over that negotiator is a good option if all else fails.

Everybody wants at least something in order to take the time and close out their position, even if they have no chance in getting a penny if the home is taken to foreclosure by the first position lien. 

Think about it, why would they go through the trouble of filing out the paperwork and spending their time and resources agreeing to the short sale if they will get $0.00 even if it goes to sale too?

If you aren’t offering them any money at all, it clearly makes more sense for them to let the property go to auction, at which poin tthey may or may not see any money, but they also don’t have to expend any effort.

In the end you need to satisfy all liens, and if they’re taking a loss, your agent needs to make sure the amount you offer to each lien is acceptable to them.  You can’t force a second position lien that stands to lose $50,000 to take only $1,000.  Sure, they might agree to it, but you can’t make them. 

Be sure your agent is aware of and negotiates with EVERY junior lien, otherwise you will not be able to close the short sale.

Remember: one dollar is better than nothing. As you go through your liens, it’s important to offer something that is reasonable.

Most agents think that the banks care about loss severity a lot more than they actually do.  Now don’t get us wrong, the banks do care about loss severity a lot.  $40,000 recovery on a $100,000 loan is a loss severity of 60%, and that is taken very seriously.

The bank originally put up $100,000 for the mortgage and they aren’t going to walk away with only 45% of it without doing their homework.  The lower-level bank employees who set up your files and take your agents calls are not going to be able to approve a loss severity of that magnitude.

You are lucky that those lower level bank employees aren’t the ones with the final say.  Unfortunately, they are the roadblock that you have to get over or around in order to get to a senior loss mitigator or AVP who understands math and can make a decision on the file.

If your agent can convince a higher level mitigator at the bank that your offer has merit and reflects current market value, there are many cases where the bank will accept a significant loss severity… even one as high as 60% in first position.

The degree of loss severity a bank is willing to accept all depends on the situation, and again …this can’t be stressed enough…how your agent presents the file and hardship.

Consider a property that has a fair market value of $45,000, but whose owners owe $100,000.  No matter which way you look at it, the lender is going to be out a significant portion of their initial investment.

In this case, they might accept an offer of $40,000 to avoid the hassle and uncertainty of letting the house go into foreclosure and then having to resell it as an REO.

First position liens rarely see a loss severity as high as 50%, although it definitely does happen.  However, a loss severity of 99% is not uncommon in second position or other junior liens.

If you’re not sure how to package your file and hardship and accurately present the numbers to a senior loss mitigator, contact us at OCForeclosureOptions.com and we’ll connect you with an agent in your area with the right amount of knowledge, the right amount of experience and the right tools to get your short sale closed the right way.