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The 3 Biggest Misconceptions That Real Estate Agents Have About Short Sale Listings
First of all, “yes” some short sales take long to sell and “yes” some short sale listings can be frustrating. But let me tell you this; not all are created equal! With a little patience and a little creativity you can overcome some of the shortcomings of listing pre-foreclosure/short sale properties and make a lot of money by helping homeowners get out from underneath the huge burden of debt and stress they are under.
Let’s deconstruct three of the biggest short sale myths:
- Reduced commissions
- They take too long
- Too hard to close
1. Reduced Commissions
Yes, it’s true when it comes to a short sale; the lender is in the driver’s seat. And since they hate to lose money they tend to reduce the amount of commissions by an average of 1%, meaning that if your area pays out 6%, they will only approve 5%, which will be split by both the agents involved in the transaction.
You know what I say to that? Who cares! Be creative! Did you know that there are 7 additional profit centers that can offset your 1% cut in commission? Let’s take a look at what they are:
- A “Loss Mitigation Fee” via the Lender
- A “Loss Mitigation Fee” via the Buyer
- A “Loss Mitigation Fee” via the Attorney or Title Company.
- A “Loss Mitigation Fee” via the Seller
- Referral fee from a listing agent (for doing the loss mitigation work on their short sale).
- Buy it as an investment (buy and hold or buy and flip).
- Any combination of all of the above!!
The “Loss Mitigation Fee” is a fee that we collect only when we successfully negotiate a short sale and have the foreclosing lender pay for all of the closing costs (the realtor commissions, attorney/title company fees, conveyance taxes, etc.).
2. It Takes Too Long
The average loss mitigator receives an average of 30 NEW files a day. Not a week, not a month but a DAY! That is part of the reason that short sales can take a while, but it isn’t the main reason. The primary reason is because the majority of real estate agents submit short sale packages that are less than adequate and professional! Meaning;
- They are incomplete in terms of paperwork (entire documents are missing)
- They are arranged poorly (Yes, that makes a difference!)
- They are sent to the wrong person or department (happens very often)
- They are incomplete in terms of information (i.e. the financial worksheet isn’t completely filled in)
Those and many more reasons cause short sales to get hung up. Once again, take what the defense gives you. If loss mitigators are overwhelmed, then the key is to put together a professional and presentable short sale package guaranteed to get your short sale offer reviewed and approved.
3. They Are Too Hard to Close
With the right system they are not hard! Let’s take a look at how to overcome the two biggest reasons why short sales blow up right before the closing.
- Not managing expectations
- This is a negotiating process. Make sure you clearly communicate the process every step of the way to the buyer and the seller. We use an online short sale management tool called ManageMyShortSale.com to automatically keep everyone connected to the short sale process, which is updated in real time.
- Many deals blow up because real estate agents fail to communicate to both the homeowner and the buyer the current status of the short sale and what to expect when they negotiate with the foreclosing lender(s).
- Lack of qualified buyers
The key is not to have only one buyer but to have a pool of qualified buyers that are pre-approved. The best buyers to keep an eye out for are those that are already pre-approved and that have funds in place to make an actual purchase.
The two easiest ways to do that are:
Start networking with every real estate agent that specializes in buyer’s representation. They are easy to find because it is in all of their advertisements.
Start working closely with every single mortgage broker or direct lender that you know, or that one of your fellow agents knows.
In conclusion, listing pre-foreclosure/short sale properties can take some time to close. However; in this market everyone needs to stick together and help one another out. By building the right network of real estate professionals, we can all ensure that our listings (short sales or not) do not sit out there without a buyer!
For more real estate industry news and loss mitigation blogs and videos visit www.RealEstateBusinessMentors.com or visit www.AskBobLachance.com for any short sale bank negotiating questions.
About the Author
Before joining North Shore Enterprises (NSE) in 2004, Bob Lachance was a 4-year-collegiate-scholarship athlete in ice hockey at Boston University where he won a National Championship in 1995. After leaving BU he enjoyed a successful 8 year career as a professional hockey player. Upon retirement from hockey, Bob completed several profitable real estate rehab projects for his own benefit. He then joined NSE as an associate responsible for property acquisitions and loss mitigation/lender negotiations. Bob brought the same determination and work ethic that lead to great success in his professional sports career and thus generated more acquisitions and short sale acceptance letters in a shorter time frame than any associate before or since. His outstanding performance led to a promotion to partner in 2005. Since that time, Bob has taken responsibility for all the day to day operations of NSE. As partner, he has overseen the acquisition of, the loss mitigation, and the disposition of over four hundred properties. Bob continues to be directly responsible for identifying good candidates for acquisition and for overseeing bank negotiations, and has been essential to the success and growth of NSE.
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