Every short sale has its own unique challenges but to try and simply the complicated, here are the six steps to a short sale:
Initiate the Short Sale - Every lender is different as some lenders will want the homeowner to call and verbally initiate it whereas some lenders will not initiate the beginnings of a short sale until an offer has been submitted.
Collecting Homeowner’s Financials – Gathering a bunch of financial documentation isn’t always easy, especially if you are packing up the house or have already moved. What banks are looking for are two years of taxes, 60 days of bank statements, last couple pay stubs, all other financial statements (investments accounts, retirement accounts, etc). You will also need to provide a hardship letter stating why you are seeking a short sale. Hardships can include: job loss, chronic illness or injury, reduction in income, increase in interest rate, divorce, death.
Submitting the Offer – Most of my short sale listings are taken immediately after first contact so upon listing the property for sale, I immediately introduce the homeowner to my short sale coordinator to obtain the above stated financial documents ASAP. I try to set the goal to have all documentation in within the first 48 hours of listing the property. Sometimes an offer comes in before we have all our financials uploaded and sometimes an offer comes in after everything has been submitted and properly uploaded into the system.
Valuations Process – This is the very slow and quiet time, typically the time where uneducated buyers and buyer’s agents with unrealistic views of the process walk away. The valuations process can take 30-60 days with little or no contact from the bank. During this time the lender is ordering appraisals and/or BPOs (Broker Price Opinions) and evaluating the current state of market, local comps and getting a very specific idea of what the property is worth at the present time.
Offer Review and Approval – this is what I consider “Rock n’ Roll time”. After periods of long silence from the lender a flurry of activity ensues. Lenders ask for updated seller financials and updated Buyer’s preapproval letter. This is typically the second tier negotiator who is getting the file complete to present to the investor of the loan for final short sale approval.
Closing – Once final short sale approval is granted, there is typically a 30 day window to close the sale. This is the period where the buyer will inspect the property, lock interest rates, order appraisal and generally get the loan ball rolling. A good short sale agent (like myself) will begin all contingencies (appraisal, financing, inspection, etc) at time of final short sale approval. In essence, the last 30 days are what typically happens in a normal resale closing.
For more information on Short Selling your home in Georgia, please visit our Short Sale FAQs for Buying Short Sales and Selling Short Sales. There is also a lot of information in previous Short Sale Blogs. The Walker Derby Team specializes in short sales throughout the following areas in Georgia: Acworth, Atlanta, Austell, Canton, Douglasville, Hiram, Kennesaw, Lithia Springs, Mableton, Marietta, Powder Springs, Roswell, Sandy Springs, Villa Rica, Vinings and Woodstock.
Most of the last 2 years made your typical “resale” listing the ugly stepchild of real estate. (Note “resale” is defined as a reselling of a previously owned home by a seller/home owner). The hot commodity of real estate since the downturn of the market has been the distressed market which is comprised of foreclosure, bank owned REO, pre-foreclosure and short sales. While April showers may bring May flowers, April will also bring a huge (albeit temporary) sell off in resale inventory!
There are tons of first time and return home buyers who have straddled the home purchase fence for months. Now that the tax credit deadline looms, buyers are becoming frantic! Short Sales are time consuming and this late in the game cannot be guaranteed a June 30 closing date to meet tax credit deadlines. With the influx of foreclosure offers, some banks are now taking WEEKS to respond to offers leaving many buyers worried that they won’t have enough time to find a back up property in the event their foreclosure bid loses.
Enter the beautiful position of the average home resale.
Sellers are available, motivated and ready to make it happen! A good listing agent has advised their sellers that it is do-or-die time until April 30, 2010. Today (Saturday April 17) I received an offer for a resale listing of mine at 1:09 pm and had it binding with a counter offer by 4:25pm. Definitely a refreshing change from the typical bank’s snail like pace and the buyer met the tax credit deadline! That makes THREE of my listings that have gone under contract this weekend and it is only Saturday afternoon!
Metro Atlanta (including suburbs) typical peak spring market runs from late January through Memorial Day weekend. With the tax buyers credit deadline (which said tax credit is not expected to extend) at the end of April, we may actually see an early end to what has really been an amazing spring selling season! Only time will tell however at this moment through the end of the month, resale sellers have become the belles of the ball. Enjoy this brief moment to shine and SELL, SELL, SELL!
I was recently out with a buyer showing a brand new listing in Marietta, GA. As we pulled up, an agent with buyers were leaving. As we walked around the house and property, two more sets of agents with interested buyers came through. When we left another agent pulled in. Since I knew this was exactly what my buyer had been waiting for being priced well under fair market value, I told him that “time is of essence”. We had lost out on two other homes before now so he agreed that we should go to my office and prepare an offer. Even after losing two other bids I was floored when he told me “paying list price is just paying too much, Jennifer”.
One of the biggest misconceptions in real estate is that paying list price is simply overpaying or not getting a good deal. Nothing could be further from the truth, especially in the land of foreclosures and distressed properties. As detailed in the recent blog “The skinny on foreclosure low-balling”, it is not uncommon for both banks and distressed selling agents to price a property aggressively and watch a flurry of activity ensue. Often this flurry ends with the property selling well over list price.
As a short sale agent, when I take a new short sale listing I purposely price the home at the lowest price I feel the bank will accept. I don’t pull numbers out of the clear blue sky, I base them on actual distressed sales within the past few months as before any short sale is approved it must pass a BPO (Broker Price Opinion). When agents show my short sales and call for offer instructions, I communicate how price was derived and that we expect a full price offer. Every once in a while you get the buyer that refuses to put in an offer at list price and 99.99% of the time that buyer loses out on the home.
Buyers: Do not base your emotions on the list price, base them on the comps! If the home is listed at $200,000 and comparable homes in the neighborhood have sold between $215,000 – $245,000 then you are getting a good deal at list price. Don’t allow a misconception get in the way of the home of your dreams!
As the deadline approaches for the First Time Home Buyer Tax Credit, many are asking whether the credit will be extended yet again. The answer looks to be NO!
The legislation was drafted by Georgia Senator, Johnny Isakson, who ironically spent almost 30 years as a Realtor. The last extension put in place required all first time home buyers to be under contract by April 30, 2010 and close no later than June 30, 2010 to receive the $8000 tax credit ($6500 tax credit for repeat buyers meeting qualifications). Senator Isakson told the GAR, Georgia Association of Realtors, that he assured Congress that he would only ask for ONE extension and this is it. He will not go back on his word and ask for a second extension.
For all home buyers (first time and repeat buyers) on the fence thinking this amazing tax credit will be extended, it is time to get down and take advantage of this amazing deal! There is a mini buying frenzy out in the market place right now on homes priced below market value so do not wait until the last minute or you will find yourself out of luck.
The Walker Derby Team has Buyer’s Agents ready to assist you in the following markets: Acworth, Austell, Atlanta, Canton, Dallas, Douglasville, Hiram, Kennesaw, Lithia Springs, Mableton, Marietta, Powder Springs, Roswell, Smyrna, Villa Rica, Vinings and Woodstock. Contact us for more information!
Ah, Short Sales! There is so much public confusion when it comes to short sales and that should be expected since there is also a lot of confusion in the industry as to short sales. Sometimes I read on message boards where buyers are frustrated with time frames and their agents aren’t exactly clear on the procedure and what to expect. This blog is written not only to the public but also to other agents in the industry as a helpful guide of questions to ask before submitting an offer for a short sale property.
What kind of experience does the listing agent/team have with short sales? A Short Sale Certification doesn’t cut it! I have sat in numerous “short sale classes” and none have prepared me for what I see out in the field. Every bank, every bank negotiator, every hardship and every investor is different! Just because an agent sat through a 3 hour continuing education class does not mean they are now ready to handle a short sale. When you or your agent asks the listing agent this question you should hear a definitive response such as “we have closed $10 million in short sales”. (The combined total of the Walker Derby Team has closed close to $100 Million in short sales)
How many short sales have you closed in the last 18 months? Simple question and make sure you aren’t hearing how many they have listed or under contract, you want to know how many have successfully closed.
What is your percentage of successful short sale approvals? This question really piggy backs on question #1 and #2. There has to be extensive short sale experience and closings to answer this question. The Walker Derby Team has a 90% success rate in short sale approvals.
Who is the service provider? This is probably one of the most important questions to ask after you find out the agent’s experience in handling a short sale. Some service providers are amazing with short sales. For instance, Wells Fargo is really an innovator in processing short sales in a timely fashion. We have a 100% success rate in Wells Fargo short sale approvals and all of them have happened in under 60 days from submitting binding contract (many under as little as 40 days). Small banks are also fantastic in handling short sales. In December of 2009 we obtained final short sale approval from a smaller bank in 17 days! Of course where there are good success stories, there are also some providers that struggle with the efficiency of short sales, mainly BOA. I have Bank of America short sales that have taken 5 months to approve (right now that is a healthy average) however I also have some BOA short sales that we have been working for 7 months with still no answer! I could go into a lot more detail on this so I will hold off and do a separate blog about this very subject.
How many liens are on the property? What this means is how many loans are on the property (1 or 2) and whether there are any liens on the property. One loan is much easier to get short sale approval with over two loans. Two loans with the same provider are easier to obtain approval rather than two loans with separate providers (ie. 1st loan is with Suntrust and 2nd is with EMC). The first loan will offer the second loan a “settlement offer” which the second loan may or may not accept. If they do not accept then your deal is dead. Liens such as HOA liens (for nonpayment of HOA dues or HOA violations) are rarely approved by the first loan so the seller may have to pay out of pocket for those. Same with liens with the local city for ordinance for lack of property maintenance or upkeep
How do you handle the contract? Binding or multiple offer? According to the National Association of Realtors, a short sale contract is a BINDING contract and contingent upon final bank approval. That contingency is no different than a financing or appraisal contingency. If the listing agent is submitting multiple offers to the bank and not selecting one to go binding then RUN AWAY! I cannot make that any more clear! There are a lot of great and successful agents out there making this rookie short sale mistake and I assure you, the buyer and seller will gain nothing but frustration from agents that work short sales in this manner. If the EXPERIENCED short sale listing agent feels it is an acceptable offer and the seller signs off on it then it is a BINDING contract, it is removed from active standing and it is submitted to the bank. Multiple offers do nothing but lengthen the timeframe and make the banks a bit more greedy.
If you ever have any questions about the short sale process, we are just a phone call away!
Does Big Brokerage Branding Matter to the Consumer?
Lately I have been reading a lot of blogs asking this very question. To those unfamiliar with the terminology of what I am asking I can simply re-ask as Does it matter to the consumer which company the agent works for: Re/Max, Century 21, Coldwell Banker, Keller Williams or a local mom & pop shop (ABC Realty)? Tons of blogs and video rantings offer different opinions. I will give you mine.
When I came into real estate, I spent my first few years at a local boutique brokerage. Was I successful? Absolutely! Do I think I had to work twice as hard for that level of success with a no name brand? You betcha!
I really enjoy the listing (seller) side of real estate. Therefore I can speak from experience that the first few years at the small time brokerage I spent half my listing presentation strictly on why I could sell their homes just as fast and efficient as those “big name agents”. While I remained the #1 agent in my office for those years, I did encounter two issues that tell me that Branding DOES matter to the consumer:
1. No matter how hard I tried, I could not break the $225,000 housing barrier (meaning sellers with homes valued over $225,000 did not trust my “no name brokerage” with the sale of their home). My first listing call after joining ReMax was for a $450,000 home.
2. While a 75-80% success rate in obtaining the listings I competed for is impressive, since joining ReMax my conversion rating is now over 95%
Let me ask you a simple question. When you go to the grocery store and cruise down the aisles, do you pick up Coke or RC Cola? Kraft Mac & Cheese or the store brand? As a society we tend to put more trust in the brands that we see advertised, hence the “as seen on TV” verbiage on packages as if the simple fact the product was on television gives it more credibility.
Now from this point on the following is my personal opinion and in no way defines all agents but what I feel is a good summary. I may ruffle a few feathers, but oh well – here goes! Not only do I think that consumers like recognizable branding, I also believe that the type of brokerage can define the high/low level of agent production. Do you know that in metro Atlanta, 90% of ALL real estate is sold by the top 10% of agents in town? What that also means is that 90% of licensed agents in Atlanta and suburbs combined only close 10% of all local sales. What most consumers do not know is that different brokerages offer different programs for their agents. Let’s take the no name small brokerage which I will refer to as ABC Realty compared to the powerhouse that I work for which is ReMax.
*ABC Realty spends nothing on advertising which means that the average home buyer or seller will not see their TV ads, drive past their billboards or not find their ABC Realty website anywhere near the first few top pages of Internet search engines. Most of their agents are low to medium producers, they sell a couple houses a year usually from friends or family. Most of these agents are part time and use real estate to supplement their income. The broker does not require expensive desk fees and instead just charges a minimal “transaction fee” for every home they close. Let’s take an average of $69 a month in desk fees and $350 for every deal they close. What this means is that if a couple months go by without selling a house the agent is out a couple bucks for desk fees and that is it. On the other end of the spectrum, if the agent is a top producer and close 10 deals in May at $350 per transaction, they just paid $3500 to work there one month. While there is nothing wrong with working real estate part time (I could only dream of that thing called “free time”) why would a top producer pay so much to work there? There are exceptions to this rule, specifically if a top producing agent leaves their big name to start their own smaller brokerage but once again, still lacks the above mentioned branding. The last tidbit to mention is that most smaller brokerages are not members of their local Board of Realtors. This means that they are not governed by a Code of Ethics and cannot use the term “Realtor”.
*To work at ReMax, it is what I consider “advanced Realtor-ship”. Not many newly licensed real estate agents sign up with ReMax, typically they start out somewhere else and graduate to ReMax once they have proven themselves successful in the game. ReMax charges a large monthly desk fee that is payable whether you close a deal or not. That desk fees helps pay for the TV ads between your favorite shows, the dozens of billboards you pass on your way to work, top search engine placement when you type in Google keywords such as “Marietta GA Real Estate”. What this means is that if a couple months go by without selling a house at ReMax, the agent is out several thousand dollars. In other words, you have to be a top producer to remain at ReMax. ReMax (as well as the other big name brokerages) are all members of their local Board of Realtors which means continued training, Realtor title and following the strict Code of Ethics. Violations can include reprimands, fines and being kicked out of their local board (which means they would have to leave their big brokerage and join a firm that isn’t a member of a Board).
Today I received another lowball offer on one of my listings. The agent wrote on the cover letter that this was a CASH buyer, as if that would soften the blow. This made me realize that perhaps I should write a blog on why CASH is not king and break open this myth! So this is an open letter to all Cash buyers:
Dear Joe Q. Cash Buyer,
Thank you so much for your interest in my listing. I see you have cash that you want to purchase a home with, Congratulations! Sure it is nice that there is not a financing contingency attached to your offer, but what makes you think it makes your offer any better than the other offers I receive? At the end of the day it is all about the NET that the sale brings to the seller. This means:
Sales price – costs (closing costs, commissions, etc) = NET
Cash does not have any effect the net, all it does is make the closing possibly happen a little sooner. Curious how you find that is worth HALF off the list price? Just because you don’t have to qualify for financing doesn’t mean it is a done deal! We still have to get through inspection and your appraisal (if you want one), the soonest we could close is in about a week compared to another offer than will close in 30 days. At the end of the day the seller (whether a homeowner or bank) only cares about their bottom line. Neither myself or my sellers could care less if you have a loan or pay in cash, blood or pennies, what we care about is the net to my seller!
Respectfully-
JWD / Realtor Extraordinaire
On a side note, the risk of the cash buyer is that it is easier for a cash buyer with $250,000 in the bank to walk away from a binding contract losing their earnest money rather than a financed buyer who saved up for months for their earnest money deposit.
One real estate myth that I hear all the time is that buyers seem to think if they go directly to the listing agent (cutting out the buyer’s agent) that they will get a better deal on the home since only one side of the commission will be cut out. This is not always correct!
When a seller signs a listing agreement with an agent to sell their home, they agree to a set commission in which a percentage (usually HALF) would be payable “in the event” of a co-operating agent. What this means is that if a buyer contacts the listing agreement directly and does not have broker representation then technically the listing agent has earned the entire commission.
If you are a buyer and want to run the risk of no representation for a perceived lower sales price, make sure you do your homework! Be upfront with your request, not all agents will reduce their commission. I know of several instances where buyers were disappointed thinking they have negotiated the best deal and risked a lot of pitfalls only to find out at closing that in fact they saved nothing at all. Having an agent to represent your best interests in the largest purchase in one’s lifetime is a FREE service. Sure in the dawn of the internet age you can search for your own properties online, but are you familiar with due diligence (inspection) periods? What about financing and appraisal contingencies? If the seller’s agent is writing the contract I can assure you that the obligation of the agent is to look after the best interests of their CLIENT which in this case would be the seller.
The Walker Derby team has dedicated buyer’s agents who specialize ONLY in Buyer Representation. Contact us for more information!
Every short sale has its own unique challenges but to try and simply the complicated, here are the six steps to a short sale:
