This is somewhat of a rant since I’ve been dealing with a couple of short sale real estate listings in Denver lately working while working with first-time buyer clients. I’ve written about why sellers that owe more on their homes than its current market value should work with a real estate agent who’s experienced in short sales and I keep running into cases where home owners already in distress are setting themselves up for more problems .
Denver Short Sale Blues
So, I currently have some first-time home buyers looking for a bunch of features at a price that puts us into the realm of a short sale or foreclosure home . Our first offer ran into an interesting hitch that the Colorado Real Estate Commission has decided is the type of scenario they want to crack down on and they’re looking into it, though our offer was ultimately rejected. Basically, if you’re a seller and behind in your payments and want to sell before you reach foreclosure, contact an experienced short sale real estate agent to help and it’s a bonus if they have a short sale transaction coordinator/negotiator on their team. There are some unscrupulous companies out there that are offering to put your home or condo in a land trust to force the lender to negotiate a short sale offer. Many times these companies advertise they have investors ready to buy your home. Never deal with a company like this, especially if they promise the buyer will pay their fees to negotiate with the mortgage company, lenders, and other lien holders.
A reasonably priced short sale negotiation team will run $500-$700. They usually require a partial upfront fee and part of that is to ensure they have a motivated seller that’s serious about getting out of their current situation. The benefits of a professional team are:
- They are used to working with lenders. They know how to talk the language, who to speak with, and what information you need to have a short sale packet ready to submit when an offer comes in.
- They negotiate to have any deficiency waived as part of the approval. If a lender approves a sale at a loss, they’re legally entitled to require the seller to sign a promissory note for the short amount as a condition of sale. In our earlier article on ” How a Short Sale Expert Can Save You Thousands ,” I mentioned a seller who signed a note as part of a short sale so she still owed $60,000 and a collection agency is now aggressively pursuing them. You wan to avoid this!
- They will negotiate to have their fee paid for by the lender on the HUD since it makes the process go more smoothly for the lender as well. In the case it isn’t completely paid, the seller’s real estate agent normally picks up the remaining cost. As a real estate agent myself, it’s well worth the money to have a short sale professional making the phone calls and keeping up with process since they have a proven track record and I can focus on marketing !
The Current Denver Real Estate Short Sale Debacle
On our next deal, we wanted to make an offer on a home around Sloan’s Lake but the other real estate agent still hadn’t sent the disclosures after 3 days. This home is already in foreclosure in addition to short sale and will be sold to the bank in two more months. It’s been on the market for about four months with one minor price adjustment. The trick is to drop the price quickly , document your marketing and price history and most important, get an offer !
There’s supposedly already an offer into the lender for approval, but he hadn’t spoken with the lender in a month about the approval. Warning sign!! An experienced short sale real estate agent or negotiator will be talking to the lender at least twice a week to keep the process moving . For the lender’s perspective, if you don’t care and it’s not a priority for you, they won’t make it one for them.
Today the other real estate agent just told me he didn’t have any disclosures back from the seller (remember, this home has been on the market for four months!), that we needed to submit an offer and we’d get them before closing. Since this home was built in the 1950’s, a Lead Based Paint Disclosure is required at the time of contract or the Colorado real estate contract is invalid. Further, since the home is in a short sale, the Colorado Short Sale Addendum is required which does a lot to protect his client.
I asked him several times how I could help get the disclosures back from his out of town seller, including using one of my favorite products, Docusign , to get an electronic signature and do it all online. He couldn’t understand why my clients would expect to get the disclosures before making an offer, accused me of badgering him, and hung up on me.
Yes, I sat there in silence, stunned that this is the level of professionalism found in my industry. My clients will likely move on to another home, this deal will be mismanaged , and this seller may very well fall into foreclosure because his real estate agent didn’t know how to properly handle a short sale or organize the process.
Distressed home sellers, you probably have a lot of anxiety if you’re considering a short sale but there are experts to help you navigate the process and significantly increase your chances of success.
Contact us at ShortSale@MileHighUrbanLiving.com for more information or even send us any questions you may have about how this works.
{ 7 comments… read them below or add one }
Good information about short sales! It is true that our clients need to be educated on the short sale process from both the seller’s and buyer’s perspective. I am sorry to say that there are real estate agents who do not provide the professionalism and knowledge that the public deserves however, those of us who do work hard at educating and representing our clients to the best of our ability will definitely shine!
Excellent information here Derec! You hit the nail on the head here. A Seller needs to protect themselves and ensure that the Agent they agree to work with either has good experience with short sales and a full understanding of the process and/or works with an expert short sale transaction/negotiation company. Short sales are challenging and an Agent shouldn’t feel bad that they may not have the experience. They can lean on the expertise of those that do these all day, every day. They shouldn’t just try to wing it though and go it alone, it is a diservice to their clients and will not end well. Thank you for pointing out the dangers of working with those that put the home in land trusts and get involved in the transaction by purchasing the property themselves. Many of these companies are making money not just from their service, but by flipping the property for more than what they paid for it-usually the same day (they don’t do any repairs or fix it up and then re-sell). Also, as a warning to agents – be aware of short sale facilitation companies that want to take a percentage of the home price. Why should they charge differently for handling a short sale on a $150,000 property versus a $650,000 property? Find a company that charges a flat fee and who wants to help the Agent help the Seller. Thanks again for providing this great information. Short sales can be challenging but if a Seller works with someone who has the right knowledge and a great team, it can take a lot of the stress out of the situation. Great entry!
On your second deal, it sounds like one of those agents who doesn’t even have their sellers accept an offer, but gathers multiple offers and lets the bank decide. So your buyer gets to wait for months and not even know if they’re the top bid.
I do a lot of short sales (listings) and these types of agents are the reason MY listings don’t get shown, even though my sellers treat buyers with honesty and courtesy.
I end up calling agents before I even show a short sale. I want to know if their seller will accept an offer, or just hang us up. That way I can advise my buyer before we go see the property.
Rant away!
Great feedback and thanks! Susan, I totally understand what you mean about multiple offer submissions to the bank.
Even worse are when agents roll competing offers into the lenders for consideration so they’re receiving new ones while trying to process others for acceptance.
It’s a crazy time in the world of short sales. Part of out REALTOR Code of Ethics is not to accept a deal you’re not competent to handle and a short sale should really be included in that!
Derec,
You have covered a lot of ground and thank you for sharing. In your experience does the seller pay the $500 to $700 for the short sale help up front to the negotiation team? Then get it back from the lender of Realtor in the end? Do you have the negotiation team working for you as an agent? Thanks again.
Carra, great question. The short sale negotiation teams I work with charge a $250-$295 upfront fee to setup the transaction, get the paperwork to the seller, and put the hardship packet together, which MUST be done before an offer comes in.
I DO require this be paid upfront to make sure the short seller is committed to the process. This is AFTER educating them to explore all their options and I make them contact their lender and the HOPE hotline FIRST!
The rest of the negotiation fee is paid at closing and it’s included on the HUD for the lender to pay since it’s really a service that benefits all parties the transaction. If the lender won’t pay, I pick that up as the listing broker since they saved me time and money.
The seller can’t receive any money back at closing in a short sale but they’ve made a good investment by working with an experienced short sale agent that has a professional team that focuses on negotiating with lenders. I personally outsource this rather than having these people on my staff (but they’re still a part of my team). Hope that helps!
Great advice..thanks and good luck with Brad. Aloha