Short sales are all the rage right now, but should you make them a part of your business? Joseph C. Alfe provides an overview of the short sale biz.
Well, it’s been awhile since my last post and it’s not because business is down. Au contraire, my friends, if you are in real estate and you are NOT doing short sales, you are certainly missing out. I have more short sales than I can shake a stick at!
Seriously though, to be successful in short sales, it is imperative that you:
- Know what you are doing (and I mean really know what you are doing, none of this “I’ll learn as I go along” malarkey)
- Have a support staff
- Have expert legal representation, both for you and your sellers
- Have an “adapt, improvise and overcome” attitude
Let me explain why these points are so important for you to be successful.
Know what you are doing
I can’t stress this enough. Short sales are serious business. People’s financial and housing futures are at stake! You owe responsibility to both the seller and the buyer to make this happen.
Take a minute to really, really ask yourself: am I qualified to do this? If there is any doubt whatsoever, then the answer is you are not. Short sales are not a real estate issue; they are a banking issue.
So, unless you have either banking/loss mitigation experience, or have already completed dozens of successful short sale closings, you really should hire a professional to do the negotiating for you. The reasons are manifold.
The main reason is time. Short sales are a full-time business, so if you spend your days opening, following up and closing files, when will you have time to list, market and sell properties?
Secondly, the issue is liability. More and more states are writing laws governing short sales; are you familiar with them? There are Federal rules such as the M.A.R.S. disclosures; are you compliant? The big institutional investors like Freddie and HUD are starting to closely scrutinize short sale applications; are yours correct and true? If something happens, and someone complains, and it is revealed that you were not legally compliant, you could lose your license – or your freedom.
Think about that. Mark my words: consumer lawsuits against agents will come. If you represent yourself as an “expert” in short sales with minimal or no actual experience or training (these so-called certifications are worthless), you open yourself up to liability, because if you don’t get the deal closed, and a seller loses their home through a foreclosure, it’s only a matter of time before they start to litigate against the agents that gave them bad advice or service. Also, check with your E&O insurance. Brokers and agents will not like what they hear about coverage regarding short sales.
Have Support Staff
If you are confident in your abilities, you will need to hire a support staff. Knowing how to put together a short sale package is just the beginning. Taking the complete application, gathering documents, opening the file, submitting it to the lender(s), following up, coordinating with attorneys, etc, etc, ETC!!! Unless you have help, or are only working on one or two files at a time, this will simply take all of your time to do properly.
Have Expert Legal Representation
This so important, and I see little evidence that the average agent even thinks about this. A good, experienced attorney can make sure that you are legally compliant with any state and federal laws pertaining to short sales. They are out there, and they can cause you serious problems if you are not compliant. Ignorance of the law is not a defense in court. I require all of my short sale sellers to have an attorney, and if they do not, I will assign them one from my list of experienced attorneys who work well with me and know what is needed for a successful short sale.
This is key for several reasons. One, I ask the attorney for accurate tax, assessment, title and closing numbers so I can generate a preliminary HUD to send with the short sale submission. The lender requires this, and it is the most important part of the short sale package. Screw up the numbers, and you will join the ranks of agents crying that they closed a deal and never got paid. Second, any correspondence, approval, deficiency request, etc. that you receive from the lender is a legal document.
You must have the attorney review and present this information to the seller. If you do it yourself, you run the risk of being accused of practicing law without a license. Many lender approvals contain language and terms that could be harmful to the seller, so let the attorney handle it.
Have an “Adapt, Improvise and Overcome” Attitude
Short sales are problem solving, wrapped in troubleshooting, smothered in details and deep fried in creative structuring. You must be ready, willing and able to counteract every hurdle, lender roadblock and seller shenanigan that may come your way. It is essential that you keep a positive attitude and not let those setbacks set you back. Find a way to overcome the issues.
I really do find that there are very, very few deals that I can’t get approved, because I don’t believe in no-win scenarios. I always insist that there must be a way to get this done – and there usually is.
You may be wondering where to turn for help with short sales, and there is certainly no shortage of webinars, books and courses to buy or attend. Your local Realtor boards are also jumping into the mix with training, and frankly, most of it is so basic as to give you just enough information to make yourself dangerous – to both your seller and to yourself. Other courses are mostly there to teach you how to market for short sale leads, and have very little usable practical information.
I have seen several courses that advocate techniques that are downright illegal in many states. Anyone can take a three-hour course and learn the basics of how to put together a short sale package, but the process is so much more than that. There are so many nuances, guidelines, programs and tricks to learn, and they all change on a weekly, sometimes hourly basis.
So, where do you turn? Start interviewing attorneys and third-party negotiators with simple but direct questions, such as:
- What is your turn time? Any answer that is less than 120 days average and they aren’t being honest.
- What is your approval ratio? Mine is close to 90 percent-plus, theirs should be too.
- How many have you closed in the last 90 days?
- Are you legally compliant in (your state)
- Do you tie up the property with a fake offer, and then try to re-market? (Stay away from these; very few are reputable, and they open you to liability)
If you need assistance with a short sale, or just need to ask a question, please contact me and I will do my best to help you. I am currently helping agents with short sales in multiple states, and I will always take the time to help a seller, buyer, agent or attorney when I can. You can contact me at [email protected].
Joseph C. Alfe worked as a mortgage lending executive with a leading mortgage lender before starting his short sale negotiation company, Short Sale Processors, in 2005. Since then, he has stayed at the forefront of this constantly changing industry as one of the only truly independent, third-party negotiation firms, and has consistently innovated and developed cutting edge negotiation techniques and best practices.
Joseph and his associates have closed nearly 1,000 short sales, and he continues to be active as a short sale coach, consultant, and speaker. SSP is based in Chicago, and negotiates short sales throughout the country. Joseph resides in the northwest suburbs of Chicago with his wife and 5 children.
For more short sale road rules and information about the author, visit his Facebook fan page and website.