I received a call the other day from a consumer who was in the process of purchasing a short sale home. The homeowner has defaulted on her mortgage and the trustee sale auction has been postponed a few times now that this buyer’s firm offer has finally reached the lender’s loss mitigation decision-maker. Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator” who is charging an additional $9,000 fee on top of the real estate commissions paid to both the agent for the seller and the agent for the buyer. The Short Sale Negotiator is demanding that the homebuyer sign an agreement that the homebuyer will be responsible for paying the $9,000 fee. The homebuyer emailed me asking what I thought of this additional fee and could I offer some advice.
The first thing I did was to find out the name of the Short Sale Negotiator company, the owner of the company, and the person who is doing the short sale negotiating. I discovered that the negotiation company is owned by the same person who also owns the real estate firm where the listing agent works. I also ran the name of the short sale negotiator and discovered that this person IS a licensed real estate agent.
Readers please note that WA State’s regulators recently changed the real estate licensing laws and there’s a great FAQ section here that answers the question: Does a Short Sale Negotiator have to be a licensed real estate agent? The answer is yes, or a licensed loan originator or otherwise exempt from licensing such as an attorney. (Clicking through from the link, scroll down to “doing business” and see the second question.)
So we have a licensed real estate agent who is earning money as a short sale negotiator who works for a company owned by the same person who owns the listing agent’s real estate company.
There are a couple of things that come to mind here. First of all, isn’t there a bit of a conflict of interest for the real estate broker/owner of that company? Where are your duties? To the home seller, whose listing you’re charged with overseeing, or are your duties to the buyer, a client who signs the agreement to pay your other company $9K? What are the duties of disclosure to BOTH the seller and the buyer?
For example, if I’m the seller in this transaction, charging a buyer an extra $9,000 out of pocket might preclude a number of qualified buyers to make an offer….unless I hold back this information until after the buyer has emotionally fallen in love with the home and is already arranging the furniture in his/her mind. That seems manipulative. Why not tell all possible prospects up front what the short sale negotiator’s fee is: Make it mandatory to display this extra fee in the PUBLIC comment section of the multiple listing service.
You might be thinking: “Yes we could disclose this god-awful fee to the public this but that’s not in the best interest of the home seller.” Well, okay but what happens if you end up attracting a lot of buyers but they all walk when told of this high third party fee? Now the listing agent has wasted everyone’s time. It’s like if someone asks me out on a date and then later he tells me he’s married. Come on! Hey, some women might say yes and it’s nice to know up front how big of an a-hole a guy is. I say the listing agent would actually be attracting the right kind of buyer if they disclosed that their Short Sale Listing comes with baggage. It seems to work fine for the married guys who post personal ads on craigslist day after day.
More: If there is an affiliated business arrangement going on between the two companies that are owned by the same person/people, then a RESPA-required Affiliated Business Arrangement disclosure form should ALSO be required so that the home seller and home buyer are aware of the dual company ownership. Part of that AFBA disclosure form should state that the homebuyer understands that buying this home means he/she does NOT have to use this particular short sale negotiation firm and is free to select another short sale negotiation company to do the same or similar work. However, since a ‘short sale negotiator fee’ might not necessarily be classified as a “settlement service” then this rule might not apply. HUD are you listening? It’s highly possible that the next time a federal regulator makes it out to Washington State, the Seahawks will have won the Superbowl. Knowig this, we should look to the state regulators for assistance.
For a home buyer, a big red flag would be if the listing agent demands that you use this affiliated short sale negotiator. Demanding that a buyer use a real estate broker’s affiliated company is a licensing law violation as well as a violation of federal law when those companies are a title, escrow, appraisal company, and so forth. So why not a short sale negotiations company also?
Even more: Is the listing agent receiving part of that $9,000 fee? One way of structuring this is for the owner of both companies to promise the listing agent something like this: “if the lender cuts your commission, don’t worry, I’ll give you a portion of that $9,000 negotiator fee.” Unearned fees are not allowed under RESPA.
Even worse: Is the short sale negotiator splitting the $9,000 with the home seller? How fast can you say “Mortgage Fraud is now a Class B Felony in Washington State?”
The other logical problem that comes up for me when I see an additional fee of $9,000 is this: what work is being done for NINE THOUSAND DOLLARS? That’s an awful lot of money. I could install all new vinyl windows in my 1959 house with that kind of money. I could put this in my teenager’s college fund. I could accomplish a lot with $9,000 so why would I want to pay that kind of money to a short sale negotiator? Is this like extortion/payola in order to get that particular house for that price?
Maybe not. What is this third party negotiations company doing for their $9,000? Wait, let me go find out. I’ll read their website. Gee, there’s nothing on the website telling a consumer what their company actually does for that fee but the pictures of their team tell me they’re all good looking guys under 30. Not that there’s anything wrong with doing business with good looking guys under 30 but it should make us wonder how much experience the negotiator has at short sale negotiating. In 2009 I believe we added ten million “short sale experts” in the real estate industry.
My advice to the consumer: Negotiate that fee down to somewhere around $1,000 to $2,000. If the home is that close to the auction date, tell your real estate agent that you’re going to buy the home at the auction if the lender won’t approve the short sale and if the negotiators won’t go for a reduced fee. Most of the third party short sale negotiators out there are paid much less than $9,000.
Here’s some help with the math: I asked the consumer to ask the short sale negotiator how many hours he’s spending on this file v. how many hours he’s working on those biceps. Consumer says the SSN said he’s spent 10 hours so far on this transation! !! !!! Wow! Well! Okay then, let’s divide $9,000 by 10 hours. That’s a going rate of $900 per hour. That’s probably close to the hourly rate charged by the Johnnie Cochran law firm for litigation cases and I’m fairly certain that this licensed real estate agent negotiator doesn’t have as much experience or education as the JC legal team. Counter back with $100/hour and settle around $200/hour max.
I am betting they’ll take the $2k.
Ask for the negotiator’s $2K to be put on the HUD I Settlement Statement as a seller’s closing cost. There’s a chance the lender will pay it. If not, the buyer needs to as himself: Is this house worth $2k out of pocket at closing? It’s also important for the buyer’s new lender to know about this additional fee. Insist that it’s paid out through escrow and shows on the buyer’s side of the HUD I Settlement Statement if the lender refuses to pay it as a seller’s cost.
Buyers: do not agree to pay any money after closing, on the side, without disclosing this additional amount to all parties including the lender.
Predatory Short Sale Negotiators: The world is watching you. I wonder if your dreams are haunted the way I was haunted after watching The Hurt Locker. Soon your predatory fees are going to explode in your face. Oh, and loan mod salesmen thinking that being a short sale negotiator is the next big way to “make six figures with no experience,” please go back to the used car lots. I’m sure there are some openings at the Toyota dealerships.
Update. Just received a call from a consumer/buyer in the greater Bellevue area and she says the same thing is happening to her: Seller’s real estate agent is the “negotiator” and is demanding $10,000 be paid outside of closing to the negotiator/agent.
This is an informative article to help buyers and sellers protect themselves from predatory short sale “experts.”
Jillayne,
This reminds me of your loan mod article as well…very sad that predatory actions can take place when people are most vulnerable.
I recently closed a purchase where there was a first/second mortgage to contend with on the short sale. The second mortgage demanded $4000 from the buyer to proceed once everything was approved… the second lien holder/mortgage (both banks/lien holders are tarp banks by the way) didn’t care where the $4k came from (it could have been the agent’s commission)…the buyer wound up paying for it and everything was disclosed on the HUD–as is SHOULD BE.
The thread of comments on your loan mod post was very telling, especially the guy who couldn’t spell in his comment, is an attorney, and charges $950 per hour. It’s a classic.
Now the person with the $9000 fee, is that the same person who has a letter from Christine Gregoire, our governor, commending them for the fine service they are providing to home owners?
Both posts are very informative and gives the consumer some insight into the tools they have available. After reading these I can see some of your frustration. People stopped talking to me over a year ago when I found that the best solution was to let the bank foreclose, and people should move on.
What is really surprising me is the number of Real Estate professionals who know this, and continue to sell Real Estate services. Some how if agents make enough sales everything will work itself out. That’s just not true.
Banks have the burden of over priced assets. As long as the consumer continues to churn through the loan process the banks can continue to shift the balance sheets. Consumer Credit must be at an all time high with no hope of collecting.
So as long as there are such a thing as a back log of short sales, or loan modifications, the banks will never have to address the price of the assets.
What I’m saying to the consumer is that there are times when you just have to let go, and rebuild. We are in one of those times.
When a short sale is done correctly, there is no need to foreclose. Actually, there is no reason anyone should be foreclosed on these days.
It is essential to any successful short sale that the sellers select an educated agent who knows what they are doing. I have closed several short sales where sellers lost their job, and even negotiated with the bank to report favorably on their credit. They did not have to see that nasty foreclosure on their record for 7 years and us taxpayers did not have to pay the additional expenses to see their homes sit for months and then come back on the market way below what a short sale could have sold for.
Cutting losses and “starting over” is not the answer. When people start to believe that we are in big trouble. A foreclosure does not allow a seller to let go and rebuild for 7 years! Besides, if they have a second mortgage you have a higher chance of negotiating a solution with them and getting them to go away forever as opposed to a foreclosure where seconds can come back after 6 years and demand repayment. If 6 years is not enough, they can file TWO 10 year extensions!
I can’t be so arrogant to believe that everyone can have a successful short sale and win ever time. But if we can tell those people to at least try a short sale or a loan modification we will be much better off than if everyone threw up their hands and waited to get foreclosed on!
Hi David,
I’m fine with agents making sales as long as we’re all playing by the same set of rules. Once agents encourage people to put part of the transaction under the table, well then others think it’s okay and now all of a sudden we’re back to where we were when the bubble was on the way up.
Predatory lending on the way up, predatory short sale negotiator fees on the way down.
This isn’t how a healthy housing market maintains itself.
and there aren’t enough regulators to go around.
Did you see some of the comments on the CalculatedRiskblog post? Some CR commenters are saying this type of activity is widespread in some price ranges in Orange County, CA. Either you pay the negotiator the fee they’re demanding, or you go buy something else.
Makes me wonder if the fees, which use to range in the $1,000 to $2,000 area are now being puffed up to include payola to other parties such as the loss mitigator working at the bank and the seller.
When consequences of being caught are very, very low, activity like this will rise.
Hi Jillyanne,
The Calculated Risk thread was painful. Even though the content of the posts is good information, the comments wander wildly to the absurd. You did make good points there, and I am surprised that the practice of charging fees is so wide spread. The last Real Estate office I worked in did have an up front fee of $500 for short sales because they rarely close.
The idea of the loss mitigator being paid a fee is interesting, but I doubt that. The seller being paid a fee to cooperate I know goes on. That would be the cost of doing business.
However the consumers, the buyers, and sellers, probably are the losers in this process. Banks aren’t stupid. In my opinion there is just enough money churning through the system to tied banks over for the next few years while they build reserves from consumer credit.
There won’t be another residential Real Estate bubble. You know a lot of these commenters reference to Japan, and that is a good example that residential Real Estate can decline for decades while the economy as a whole continues to grow.
Jillayne
It seens the other day there were more comments on here – you replied to mine with a link to a state page to go and file a complaint about a predatory listing agent/3rd party negotiator. We’ve been keeping an eye on this place and found that the broker cancelled the listing on Thursday. I thought this would clear the way for me to talk to the seller about the buyer I represented purchasing the house. In trying to track down a phone number (none on the now cancelled contract from our previous offer), I found that the Seller also hung their real estate license at the same company as the listing agents (there were 2). We knew one of the Seller parties had been in the business before, but I never thought I would find them hanging their license at the same company. OH, and we also found that the primary listing agent’s license expired last November. What a stinky kettle of fish.
Anyway, in researching auction activity on the county site, I found that there was a sale scheduled for 1/4/10. Don’t know what happened with that, since my client went into contract to buy the place on 1/18.
They still want the house and I am trying to figure out how they can get it. Meanwhile, I have a bone to pick with the state and need the link to the form to file my complaint.
I am open to other suggestions that might help my client get this house.
Wendy
Hi Wendy,
Your previous comment can be found over here:
http://ceforward.com/
Here is the link to the Department of Licensing. Scroll down to the bottom of this page and look for the PDF form called: Real Estate Programs Complaint
http://www.dol.wa.gov/business/realestate/contact.html
I recommend contacting the Trustee tomorrow and finding out if another auction is scheduled. Your buyer might decide to bid on the home at the auction or buy the home as an REO if the short sale doesn’t work out.
The conclusion that I have come to, and the comment above is kind of a prime example, is that Real Estate agents in general should avoid these transactions.
Real Estate, at the short sale, reo, foreclosure, end of the business, is a brutal, vicious, grind them to dust, go to court, contact the investors, see what the stock holders think, kind of transaction. It’s best done with insider information, and if you have to threaten the negotiator, you better be able to back it up.
In my opinion the banks are laughing about all the money they are making by agents convincing people they have the ability to be closers. Coffee is for closers.
So, I don’t see it. I could never tell some one today that they should buy a property in this market. I have never written an offer in a multiple offer situation. If the seller wants to sell, I encourage them to do that. They should take whatever they can get, and be very grateful.
It is the same for the banks. If a bank can find some one stupid enough to give them money they are dollars ahead. Unfortunately there are millions of stupid people in this market place.
The longer this charade goes on the longer it will be before there are deals to be done.
Hmmmmmmm. This shocks me. In the Short sales I have closed representing Buyers it plainly states in the MLS under Agent only remarks Buyer to pay 1% negotiation fee or it is factored into the price. So when an offer is countered or accepted at full price in a short sale situation this fee has already been included.
I have ran into 2x where my Buyer got stuck paying a few bills but that was taken care of by the listing agent due to their foul up with Escrow.
I cannot imagine this :Once the offer was accepted by the seller, the homebuyer was surprised to learn that there’s a third party involved, a “Short Sale Negotiator
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Hi Jillayne
Good news, there is another auction date set, giving us time to get organized – and also arrange for enough cash to secure the property, I found a great source, The Legacy Group. Eric McNamee was very helpful and then I called the trustee and managed to maneuver thru the phone system and get someone to talk to me on the first call. Pretty stoked that these folks still have a good chance at securing the home of their future!
Ray, we were told if we even wanted to be considered the Buyer had to write in a $9k (3%) “3rd party nego6tiator fee”. When I asked about it the Listing agent said the Seller required it when listing the property. Our first offer included that $9k in the sale price, it was countered back with a lower sale price and the $9k had to be on an addendum to go to “3rd party negotiator fee above and beyond sale price”.
During the inspection period we kept asking questions and finally found out that the “3rd party negotiator fee” was the lead listing agent, who had set up an LLC. My client, a CPA, said this was a clear conflict of interest and it did not “pass the smell test”. He also thought it was insane that the listing agent get double commission, and for what? There were no offered disclosures or agreement as a part of the deal (like I have seen with other deals, at least they get a contract agreement and know what the negotiator is going to do for the buyer). The buyer was even willing to pay that much money for the house – what he was not willing to do was pay that money to the listing agent. It’s an ethics thing.
Did I mention earlier I also found that the listing agent was practicing real estate without a license? It expired at the end of November. The broker went in and cancelled the listing last Thursday, I think he realized the exposure this agent had put him into.
It’s just the frosting on the cake to learn that the seller is also with the same real estate company. I didn’t expect that at all. I guess I should have.
It is common for short sale processing to take 50 to 100 hours above and beyond regular Realtor duties. The shortsighted lenders usually cram down the commission. The short sale processing is a function seperate from listing and selling. Walk in that Realtor’s shoes and pay his bills and his staff for a week before whining like crybabies. While that Realtor is spending 100 hours processing and negotiating the short sale so your client can get a good deal, the whining buyer’s agent has that extra time to do other mutliple transactions. Based on your $100 to $200 an hour, the short sale Realtor should charge a fee between $5,000 to $20,000.
Dear buyer agent crybaby whiners: How many hours did you put in to make a $9,000 commission on this transaction? 10 hours would be $900/hr. 20 hours would be $450/hr. If you get 3% of a $500,000 sale that’s $15,000. If you worked 20 hours on the transaction that’s $750/hr. Is that predatory? Do you disclose to your buyer that you make $750/hr and that they are ultimately paying that much more for the house so you can drive a BMW and drink latte’s?
The short Realtor and his processing company is providing the following benefits:
1. The seller is avoiding foreclosure.
2. The foreclosing lender is reducing it’s losses.
3. The foreclosing lender is getting rid of a toxic asset months or years earlier.
4. The taxpayer is paying less bailout money.
5. The neighborhood is avoiding having a vacant foreclosure sitting for a year.
6. The buyer is getting a good deal.
7. The buyer’s agent gets a commission.
Everyone benefits, even the ungrateful.
Hi Gary,
I apologize for taking so long to respond; I’ve been in a continuing legal ed seminar all day.
A couple of thoughts.
First, if a short sale negotiator is taking 100 hours to do their job, if I’m a client, I’m already thinking chances are quite high that I’d be able to find a competitor to do that same job in a more efficient manner.
Deflecting the conversation to one involving Realtor commissions is taking the spotlight off of the short sale negotiator so let’s keep on topic.
I’m totally for short sale negotiators earning a reasonable fee. However, I’m totally against jacking that fee up and splitting it with other parties such as the seller, and making the buyer pay the fee OFF of the HUD 1.
The short sale is a way for the banks to get paid. You would have to be brain dead to buy a short sale. You will be over paying for an asset that will continue to decline in price.
Banks are in business to make money. Banks hold all the cards, and only turn lose of a property they can prove they got more than enough money for.
Banks answer to Investors, and stock holders. The only way they can release a property is to prove they swindled some one beyond any reasonable doubt.
Never believe any one who tells you are getting a “deal” on a short sale in today’s market place.
These people are crooks.
Banks are sophisticated financial institutions worth billions of dollars. They are no longer in the business of giving away free money.
Buyer, be very aware.
Thanks for the responses.
Sadly, you remind me of a great line from the movie The Flight of the Phoenix (1965)
“Mr. Towns, you behave as if stupidity were a virtue. Why is that?”
Hi Gary,
I was only 2 yrs old when that movie came out so sadly, I’m not familiar with the context and not sure of the part played by Mr. Towns and the person he’s talking to.
I’m going to give you the benefit of the doubt in assuming the quote was self-deprecating.
On RCG we do have only two simple rules: No blatant self promotion and no ad hominem arguments. Please attack the argument and not the person.
Most short sales are not good deals, as David Losh outlined in his recent comment. Buyers have a notion that they’re going to get a “good deal’ on a short sale but many banks/lenders are looking for offers closer to market value. If the buyer’s offer is very low, then the bank may believe they are better off foreclosing because they may lose less money selling the home as an REO.
Again, IMO, it’s okay for a short sale negotiator to earn a fee provided the fee is reasonable, disclosed to all parties up front, if there’s an affiliated business of some sorts, provide all parties with an affiliated business arrangement disclosure form, and keep all fees on the HUD I. This is what this article is about. It’s not questioning the validity of what short sale negotiators do for a reasonable fee.
Jillayne:
You crack me up…, benefit of the doubt indeed.
The movie was recently remade 2004, the original was 1965. The original was pretty decent drama; a group of men stuck in a fallen plane in the Sahara, and their efforts and disagreements regarding getting it flying again from the pieces of the wrecked original. Themes of American risk taking, German engineering, English stiff upper lip, all post WWII.
To quote a review on imdb:
“A superlative story of men living on the ragged edge of survival, working together but not necessarily getting along or surrendering their own values.”
I thought I’d look up the quote in question on imdb.com The quote immediately following it was even more illuminating:
Heinrich Dorfmann: “Mr. Towns, you behave as if stupidity were a virtue. Why is that?”
Lew Moran: “You told Towns he was behaving as if stupidity was a virtue. If he’s making it into a virtue, YOU’RE MAKING IT INTO A BLOODY SCIENCE!:
Me: “Or a career, perhaps”.
In all, the movie is an apt metaphor for all of us involved in the epic financial crash of our lifetimes (let’s hope) and eventual resurrection. Jillayne, maybe you could assign the movie in your class as extra credit!
The other interesting idea from this discussion is whether a short sale is a “good deal” for the buyer. The only true benefit short sales provide is increased liquidity of unwanted properties (allowing folks who no longer want to own a property to sell without too much liability). The banks certainly don’t want to let the property go below market value, nor should they, and they go to considerable lengths to assure they get as much for the property as they can.
For the buyer, it is a “good deal” if it is indeed the right home or investment, and has a better set of features than any other property that they can find (and afford). One should not expect it to be greatly under market value, but I think buyer psychology comes into play, and they become convinced it is a bargain priced property.
And in general, $9,000 sounds like a lot of money for the buyer to be picking up the tab, when it is primarily the seller and the bank that benefit from the process. The buyer that encounters this situation should just move on.
“Mr. Towns, you behave as if stupidity were a virtue. Why is that?
Ray, are you refering to the Issaquah Highlands?
Ah Roger, you know I’m a movie buff. I will have to rent it now.
Aristotle would tell us that actions like stupidity or to kill would not be able to be classified as virtuous because those actions lack the quality of goodness inherent in virtuous behavior.
Interesting that some of the short sales out in Issaquah are going for over a $500K discount. I’m curious to see if a flipper is going to try and make a profit, or if the people who purchased are going to owner occupy.
Not knowing the details, I can only speculate that the first mortgage balance was somewhere near that $500K and there were junior liens behind the first that got shorted. Makes me wonder which bank was in junior lien position and if they’re going to pursue that homeowner later for the shortfall.
Ray, it’s Issaquah. for a half of million dollars there should be acreage with at least 4 bath rooms. OK, if the fixtures are pure gold, it could be three bath rooms. It’s Issaquah. I don’t need to see the property, it’s not worth my time.
You would have to be brain dead to give some one a half million dollars for a property in Issaquah.
Five years ago I was talking with a guy at WaMu. I would call him a buddy, but we only talked about business. I, for one, was extremely excited about the idea of having thousands of short sales and foreclosures to play with. It’s what I do. Distressed properties are a gold mine.
2006, and 2007, killed the dream. It was literally watching a train wreck. People refinanced, purchased, and got saddled with billions of dollars of debt they will never be able to pay back. You pointed out, before any one else, that people will walk away in droves.
There is, right now, a collective holding of breath to see if the economy will withstand the end of the tax credit, and federal purchase of mortgages. The stock market continues, Warren Buffet continues, and the recession seems to have stopped it’s contraction.
Why would any one purchase a property today knowing that it is a huge gamble, with the deck stacked against them?
Let’s go further with the global problems in Dubai, Greece, Spain, and Portugal. If you think the United States housing market could cripple a global economy, what would happen if the United States lost it’s AAA credit rating?
All things considered, it’s my opinion that banks are gladly selling properties today at premium prices. If you want value you should look at those properties that are a fair market value and make your best price. REOs may even be a good purchase if negotiated well. It’s much easier to get a deal once a property has been through the mill.
I disagree David. We still have an economy here in the PNW that will sustain some form of economic workforce. Back home in Reno NV these same Issaquah homes would sell for 400-500k as well and there are ZERO jobs there! They are even closing Harrahs now on the strip.
When the cost to build greatly outweighs the purchase price its time to look. There are many deals out there but only a few Gems. My buyers offers were the first in but unfortunately they were met by 7 other offers.
Its great to be bearish (like me) but you must keep your eyes open for true GEMS. They appear now and then and you must be ready.
Sorry, it’s Issaquah. There are no jobs.
They have been planning on closing Harrah’s for years. It’s the same with the Sands. You say no jobs? I say there are no jobs in Henderson. Now if you want to talk $500K for a house off the strip, OK, that’s fair. I think you should be able to get a pretty nice place with a pool for about $125K close in.
I said should.
Construction cost means nothing. One year plywood is $9 per sheet, next year it’s $15. One year they are using timbers, next year they are using strand board for the same price. It means nothing. Anything you buy today is going down in value.
We over built and put building codes and land use into place to build millions more of these crumby housing units whenever we want. We can throw up todays housing units in a week, and we’ve seen it done.
I think you should be able to get a pretty nice place with a pool for about $125K close in.
Wrong…David you cannot.
What David says above about Las Vegas is absolutely true. I’ve seen it myself on the way through to Death Valley. And that’s why the construction industry of which I’ve long been a part is in the death spiral doldrums or worse. Nothing will improve much until these foreclosure “bargains” are worked off. JG
When people are still paying $180K out in Henderson, it’s hard to imagine getting a place with a pool even as far out as the Target. That is exactly the point. The Real Estate market is over priced.
When Henderson gets to $85K, and it’s normal for a condo in Miami to be $35K then you will have a market place.
The larger problem is that this is global. The problems in Greece are the amounts of money in housing unit development with no one to buy them. The same in Spain. There is no buyer pool for these destination locations.
In Peru you could buy a house in Baranca for $95K in 2006 and now you pay that for a condo in Trujillo. Shangai? Forget about it.
So, if you really want to give banks the gift of more cash, by taking on more debt, you will only continue the slow, steady decline in Real Estate pricing.
The only bright spot in today’s market place is that if you control a property you have the ability to pay it off. If you can not afford to pay the property off quickly then it’s best to walk away.
Ray, you’re the one who has made this point repeatedly.
David:
“All things considered, it’s my opinion that banks are gladly selling properties today at premium prices.”
Just depends if your definition of a premium price is today’s appraised value.
It seems it has been a bit of a struggle to get banks to sell them at today’s appraised value, at least around here. Especially if the seller (essentially, the bank in a short sale) is tacking on a $9,000 premium to be paid by the buyer.
Appraised value is meaningless to core value. An appraisal is only sales data. We are in this mess because idiots bought properties at higher, and higher, prices that were way above core value.
The only true value of property is economic. Rents are an economic indicator to the core value of property. Inflation can be an indication of core values. Construction costs can be, but became over inflated due to a perceived demand.
I’m saying people should wait for a long time before buying a property. The economic forces are overwhelmingly indicating that Real Estate is a dead market place probably like Japan, but I would expect a more definitive pricing correction.
Housing units are done as an economic indicator, because we over built, and have, at this time, an unlimited ability to throw up more housing units.
I can’t help but want to continue to comment on this conversation. It started with a short sale negotiator scam and ended with arguments about what a good deal is.
Clearly, everyone needs a roof over their heads and you are going to either have to pay rent or a mortgage. I personally think if you can own a property that you can afford and its close to what you would be paying for rent, thats a pretty darn good deal. Who cares what the value or appraisal comes in at if you can afford your own home and not have to pay someone else’s mortgage.
Back to the short sale negotiator comment. I have the greatest short sale negotiator that I PAY FOR! Yes, I as the listing agent pay for the short sale negotiator. She is $395 per closed transaction and she is the best. It took me awhile to find her but she is a licensed agent that use to work for several banks and knows the “lender language.” I don’t even bother trying to get a new buyer to pay for her because my opinion is that the negotiator is working for the seller, not the buyer. The sales contract is contingent upon the seller receiving approval with satisfactory terms from their bank. I could do the negotiating myself, but why sit on the phone for hours and get transferred to different departments only to hear they don’t have record of your file.
The most important element of the short sale is the listing agent. I always compile all of the sellers information and “pre-qualify” them for the short sale. If they are just sad their neighbors house sold for $25,000 less than what they owe I won’t even bother. They have to have a documentable hardship. I also will not meet with them until they have given me tax returns, bank statements, a hardship letter and all of the information I request. It weeds out a lot of the people who are not committed. I try and get them to stay in the house, keep it clean, mow the yard, pay utilities and HOA dues. If I do this, it saves me time and there are no suprises once a buyer comes in.
Jennifer says it all for me: “Clearly, everyone needs a roof over their heads and you are going to either have to pay rent or a mortgage. I personally think if you can own a property that you can afford and its close to what you would be paying for rent, thats a pretty darn good deal. Who cares what the value or appraisal comes in at if you can afford your own home and not have to pay someone else’s mortgage”.
Once in a while we should get back to the basic idea of what a house should mean to most people as Jennifer puts it so aptly above.
How long does it take your negotiator to get an approval? Can you give me her info?
Carla – even if you have the best negotiator there was, there is no way to estimate how long until an approval because of all the variables. The main thing is if the servicer has delegated or non-delagated authority. This means if they have delegated authority, they can make the decision themselves whether or not to allow a short sale. If they have non-delegated authority, they literally have to try and track down the investor on the note and ask for their approval. Sounds silly but can you image tracking down an investor when a note has been sold off several times or the investor is dead or in another country? That is one of the main reasons why short sales are taking so long. Another thing is if the listing agent/negotiator received all of the paperwork necessary to process.
The negotiator I currently use is Joanie Agee and her email is tjoanie@hotmail.com. She is great at follow up and as a previous loan officer and agent for 10 years, she knows and understands both sides.
As to: “Oh, and loan mod salesmen thinking that being a short sale negotiator is the next big way to “make six figures with no experience,
Hello Jillayne!
Thank you for this article! I was doing some research because I have recently came accross the same situation – Not 9000.00 but 1% of the purhchase price – The deal I have a problem with is that the negotiator is an agent in the same office and has only closed on 2 short sales total. What qualifies her? They must be doing some kind of hacky packy because there are not disclosures on the MLS – Why are they saying that my buyer must also pay 2% transfer Tax? When I know the banks pay that too. If my client is going to pay extra to get the house. I want to know this person is qualified and we will get weekly followup etc etc. I just don’t like this AT ALL! Gosh – At least have 5 to 10 closings under your belt before you ask for a negotiation fee!!