About Foreclosures and Short Sales

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For the last couple of years or so, the new terms "short-sale", "pre-foreclosure", "bank-owned" have become very familiar to any active realtor.

Yes, there are courses and classes to make us aware of the opportunities of this new sector in real estate. And I am always receiving emails offering leads on foreclosures and short sales and "BPO's".

I have been involved in a few short sales and I even lend occasionally advice to people. The fact is that there is not so much to explain about it. It's just a logical way that it can be used to handle bad or problem loans and cut its losses.

So far so good. However, every time I get involved in a short sale or "pre-foreclosure" deal, the bizarre takes on the rational, and weirdness supersedes common sense. Let me explain why I think so:

1) There are some conventions in the US. Usually we list a property as a seller designates as his "listing agent" and place it on the MLS. There are some requisites to do that. He must give us an exclusive right of sale; otherwise we would not put it on the system.

2) If we have a buyer looking for a property, we would like to search on the MLS system and establish a relationship with its "listing agent" by requesting it to our buyer, or requesting additional information.

3) Once an offer is made, answer is received within a short term, usually 2 or 3 days. It can be an acceptance, a counteroffer, or a rejection. A non-reply within the given term is considered a negative answer. Now let's compare this to what a bank is involved in a short sale, or foreclosure sale usually:

A) After talking to his bank, the seller of the troubled property agreement with a real estate agent to his list for sale in the MLS. The agent will place a special clause in the listing, stipulating its special status as a short sale and its contingency to a bank & # 39; s approval.

B) When an offer is received, the bank sometimes requires it by a loan approval or a proof of funding if it's a cash offer.

C) The buyer's agent often wants to find a clause in the listing, stating that no commission is guaranteed. It is known that banks do not like to pay co-operating brokers more than 2.5% compared to the usual 3%, but even this is not guaranteed. You must accept whatever the bank wants. No discussion.

Do you think this is the perfect way for the best and most motivated realtors? Work double for less money? Usually, in a buyers market, a smart seller often increases the commission, so buyers & # 39; agents are motivated to give him some priority. But Apparently, they have been able to dictate their conditions, so they can save a few pennies after sinking billions of dollars into dubious transactions. Naming a listing agent who lives 200 miles away from the property is not the smartest move either. But let's not discuss their marketing skills. They must know what they are doing.

D) When an offer is presented, the bank does not answer within any agreed period.

E) First difference: the listing agent does not remove the property from the MLS.

F) Second difference: the bank can take many months to reply. Meanwhile other offers are frequently received and presented to the bank by the listing agent. The process gradually resembles an auction and the higher bidder might finally get an answer. Or not.

G) Third difference. When a buyer's agent contacts a bank-owned or foreclosure sale, and even some short sales, we often observe that same agent or broker has his name on a lot of listings. This agent is sometimes located in a location that is distant from the property. I have seen brokers in Tampa handling listings in Miami. Do these guys have some special connection with the bank? What are the criteria of the banks when they choose their listing brokers?

Frankly, I do not get any calls from any bank offering. And I've got a few of these "loss-mitigation" departments! I have not seen many of the agents in my area involved in this kind of transactions, either.

H) Fourth difference: Frequently, many of these listing agents do not even bother to show the property. They design a "showing company" to take the buyer's agent call and arrange a showing, usually by means of a lock-box key. The "showing company" does not usually provide information about the property. So much for great sales techniques, indeed.

I) Fifth difference: these listing agents very often do not respond to phone calls or emails. Perhaps because of the sheer amount of lists they carry, or because they are just disgrated by the whole process. I was involved because I did not care too much. In all truth, it looked like nobody cared, except me and the buyer. Some business must result though, and I am not trying to mock or belittle those agents; it's just so unprofessional.

K) In the case of a short sale, the listed price doesnt mean too much. It can be very low to attract offers. The listing can sometimes falsely indicate that the price was "approved by the bank". Correct me if I am wrong but it often bears the mark of "bait and switch".

L) Now let us study the short-sale transaction from the seller's point of view: he has probably initiated the case the MLS.

He wants to get all kind of conflicting information. A different employee will answer to his call every time and everyone looks completely disconnected from what has been done so far. They hang up on the next day, which is never happens. In many cases, when the seller asks to know what the exact pay-off of his mortgage, he can get different amounts every time.

N) The seller often gets calls from the bank, threatening foreclosure. He sometimes tries to explain that there is a short sales procedure going on. But in the morning, the day before.

Does this look like a comedy? You bet.

Everybody chasing his own tail in a mad dance. That's what it looks like.

My personal opinion: Complete disaster. Ridiculous. Tragic. Catastrophic.

A waste of my time, and everyone's time.

They are the reason I lost a couple of possible sales and earned the money. I now try to discourage my clients by getting involved in this joke. Am I wrong? Maybe.

But if they are going to get out of this mess, they'd better get their act together.

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Source by Henry B. Nathan

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