Short Sales: When Good is the Enemy of Great

Realtor Magazine posted an article today on its website following a seminar earlier this week at the California Association of Realtors Expo in Anaheim.

Kathy Mehringer, director of risk management for the Southern California region of Coldwell Banker, gave three tips for agents to negotiate short sales. It was good information, but like so many things in life, good is the enemy of great.

The tips, detailed below, were on target but not a bull’s eye. These days, with so many distressed homeowners in need of help, with the banks changing their strategies and policies on a daily basis, with such high stakes in play, we agents need to have better aspirations than just “good.” We must be Great short sale negotiators. We must have Outstanding escalation techniques. And we must have Superior skills, endurance and patience.

Here is the link to the article. And here, in brief, are the tips offered:

“1. Don’t give up. When a lender turns down your short sale offer, do not view that as the final answer. Too many real estate professionals assume that a firm ‘no’ from a lender means they’ll never accept a short sale on that home. ‘You can’t see “no” as an answer — see it as an opportunity,’ Mehringer said. Follow up by asking the lender: ‘What will you accept? What can I do to make this offer better?’ Remember, the lender is supposed to get the highest price for the bank; ‘no’ is merely the beginning of negotiations.”

Great tip! Never quit. Too many agents take the first answer, when in fact, “No” really means “Not Now.” We have had to escalate as many as six times to get deficiency-waiver verbiage inserted into a short sale approval letter. What if we had stopped at five?

I would add this: Mindset and posture are critical in this dance. A short sale agent automatically takes a subservient role in the negotiation by asking: “Well, what will you take?” If you know the numbers, then you know whether this transaction makes more financial sense as a short sale vs. a foreclosure. The numbers are your foundation and you can be 10 feet tall and bulletproof with that information. So use it.

The question isn’t, “what will you take?” The issue is getting the right message to the right person inside the bank. Chances are, the person who told you your offer or term was rejected isn’t the person you need to be talking to anyway. Escalate it and stick to the facts.

“2. Earn their trust. Lenders don’t always trust real estate professionals when it comes to short sales negotiations. Mehringer has learned the reason for much of their distrust: They believe listing agents put a home on the market for a significantly lower price than what it is worth and then waste their time by submitting a ridiculously low offer and present it as the best possible offer for the home. ‘Lenders think you underprice short sales,’ Mehringer said. ‘We need to show them that we are trustworthy and properly demonstrate the value of the property.’ After all, your job when representing a seller — even in a short sale transaction — is to work to get the highest and best possible terms for your seller, she told attendees.’ “

I disagree. My fiduciary duty is to liquidate the property and mitigate the financial damages to my client to the best of my ability. When I do my job well, I will earn Respect from the short sale lender, and that will help move my file through the process.

Yes, low-ball offers are less effective, unless you are working the investor angles. Personally, I don’t, unless there are no other offers. But we are on the streets and know our market values better than someone in a basement in Dallas. One bad or lazy BPO agent can blow a deal and reap financial devastation on a seller. So, Tip #2b: Make sure you meet the BPO agent at the property and provide them with comps and a little history. (No, I didn’t say slip her a Benjamin.)

You want to establish trust? Start with yourself, and then move on to your client.

“3. Lose the low-level clerk mentality. Mehringer said that she often hears from real estate professionals that the lender isn’t cooperating. But how is your behavior toward them? Telling the lender such things as ‘if I don’t have an answer by 5 p.m. today, the buyer will walk’ is not going to work in closing a short sale faster but will serve as a turnoff, Mehringer said. ‘You will get more by being nice to people,’ Mehringer said. ‘And being nice doesn’t mean that you have to be a push over either. Always be professional and courteous in your contact with lenders. Also, realize that a short sale is optional for a lender. ‘It’s a business decision,’ Mehringer said. ‘A lender may elect to cooperate to save the expense and time of foreclosure … but it’s purely a business decision — it’s an algorithm.’

Right on!

Be professional and be nice. You can build relationships on one transaction that will pay dividends on several others. We’re talking about people in a machine working for peanuts. With chips on their shoulders over the perceived massive commissions we make. You’d be bitter, too.

So overall, these are pretty good rules of the road for a short sale agent. But something is missing.

Tip #4 (probably should be #1): Know The Numbers. If you have ever played poker then you may have experienced the rush of knowing what the other player has in his hand and knowing that he can’t possibly beat what you have. Short sales are easier because you can know that in EVERY TRANSACTION. You just need to have access to the right tools and keep your head in the game.

Every short sale IS put through an algorithm at the bank. What if you had the same program they use? What if you knew before there was even an offer what the bank’s bottom line would be? It could help you price a property. Heck, it could even help you determine whether you wanted to take on that listing!

These tools and strategies are out there. Many agents just don’t know about them, and that is a shame.

Because there are just too many people in need of our help Right Now. And the stakes really are too high to be just good. We have to be great at what we do.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

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