Active Rain February 26, 2009

Much Ado About Short Sales

Two featured posts on Active Rain this morning discuss short sales, and whether you love them or hate them, they are going to be a common occurrence in most markets for the foreseeable future. Full disclosure: I have specialized in short sales for a number of years, sold dozens, and have double digits in my listing pipeline. I feel compelled to add my 2 cents.  

Vanessa Simmons wrote that she does not advise her sellers to sign a contract before the lender approves the price. I disagree, but we practice in different states with different laws and protocols, and more importantly, she states that it works for her. Far be it for me to tell her to stop doing what works for her out in Ohio just because I do things differently here in New York.

Greg Nino, in his post entitled “Are You Still Showing Short Sale Buyers? Not Me!” epitomizes the frustration that many of us have with the short sale process. Greg appears to see things from the buyer side, and those of us who list short sales should appreciate his thoughts, at least some of them. It takes too long, buyers get frustrated, and stories of cut commissions are common. Too often, the listing agents are poor communicators, which is unacceptable. He’s right. Greg leaves the reservation in my opinion on a few of the things he says that push the boycotting/price fixing envelope, but I’ll chalk that up to justified frustration. I am certain that his clients come before any personal frustrations.

I am of the belief that the housing market would turn around far faster if sellers would just lower their prices to reflect the new reality. Prices have come down. Some won’t lower, but many can’t, and for them a short sale is the only way out. There are several things that we as licensees can do about facilitating short sales more efficiently and effectively.

  • If you are a listing agent and you are inexperienced in short sales, don’t take the listing. Refer it to someone who does them well. If you want to be one of those agents, work for a broker who does them and can mentor you. But we have too many short sales now listed with neophytes who are screwing things up for us, but worse, for their clients.
  • If you list a short sale, you have to communicate with the buyer agent regularly so they know the file isn’t rotting. We are familiar; the buyers are in this for the first time.  
  • If you are a taxpayer, write your representative and demand that any lender that receives TARP funds should have a transparent, streamlined short sale process of 30 days or less, period. It is deplorable that recipients of our taxes would be so arrogant, unresponsive and miserable.
  • If you are a buyer agent, you cannot just boycott short sales. If you have a client interested in a house, you owe it to them to ask the listing agent’s experience with negotiating short sales, who is dealing with the bank, who the lender is, if there is subordinate financing, and how far along the seller’s hardship package is. If the answers are less than satisfactory, you are justified in advising your buyer clients to pass this up…but knee-jerk avoiding them is not advocacy, it is looking for the easy way.
  • Repeat this 3 times: a properly negotiated short sale virtually never has a reduction in commission. I know this firsthand. If the first thing out of a listing agent’s mouth is that they don’t think they’ll get a full commission, they may not be up to the task.

Our responsibility is to our clients. Running from one type of transaction is unethical and contrary to looking our for the buyer. If something fails the sniff test, your conscience should be clear. Buying or selling, we cannot control the short sale winds. We can however, adjust our sails, and adapting to a market where short sales are common is in our clients’ best interest.