I get emails now and then from real estate agents around town. Usually the agents email and tell me they’ve read my blog for awhile, they like what they see, they like the audience and the comments, and hey! Wouldn’t it be cool if I agreed to post an article written by them about real estate in Santa Clarita?
It’s hard to keep track of all these guys. I’ve seen them all around town, on billboards, magazine inserts, and signs, of course, but, in my mind, they all kind of mash together into an indistinguishable fuzzy block of knowledge in some distant, rarely-accessed part of my brain. The agents know this, of course, so in the past they tried to distinguish themselves from one another. In the course of this nearly five-year old blog, I’ve been pitched by eco-friendly specialists, cop & firefighter specialists, big property specialists, ranch, farm animal & horse property specialists, condo & townhome specialists, school specialists and many more.
In what is only a sad commentary on the state of our local & national economy, now these same agents specialize in one thing: Short sales & and so-called “distressed properties.” But they’ve gotten a bit creative with it. They’re no longer just specialists, now-a-days they establish their offices as “Centers” for short sales. To you and I, a “Short Sale Center” is just another name for an agent’s 700 sq. ft. office at some vague forgettable strip mall, but calling it a “Center” confers authority and professionalism in buyers’ minds.
I wouldn’t be surprised if the next evolution of this is for some savvy agent to create a “The Institute for SCV Short Sales,” and publish marketing material under that impressive-sounding name. After all, an “Institute” sounds even better than a “Center.”
“Did you know short sales increased in Q4?”
“No, I didn’t. Who said?”
“Why, The Institute for SCV Short Sales, that’s who!”
Understand I’m not mocking the profession or the hard-working agents. In fact, I’m marveling at their flexibility and ability to reinvent themselves. A few years ago there was enough business for them to get fat -really fat- by catering to all these various demographic groups. Now business is so lean that the herd has thinned and the market has become strange and uncharted, so the remaining ambitious agents have no choice but to reinvent and distinguish themselves from one another once again, but this time they’re doing it under the short sale umbrella.
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If you think it’s been a rough ride for the real-estate market these last 2 years, you Ain’t seen nothing yet. The industry and non-industry that I trust (and have been proven accurate) tell me that the housing market is set to crash another 20-30% next year due to pricing corrections that should have happened in 08 and 09 but were starved off with the stupid stimulus (that I of course took advantage of).
Good thing I am prepared to own this house (even if I do eventually rent it out) for a long time.
Yep, yep, and yep.
The ‘ghost inventory’, as the media likes to call it, has been kept off the shelves by stupid government programs, bank mix ups, and maybe some purposeful holding of properties. Those suckers are going to hit the market one of these days and today’s RE prices will seem like a fairy tale.
Walker: you’d enjoy this.
Real Estate Agents = Used Car Salesmen
No short sale “center” for Garo Papazian. Instead he opened up a salon for men at the mall. http://www.the-signal.com/section/24/article/38121/ I guess he was taking a “haircut” in real estate and decided to go back to his “roots.”
That article is the best!!! I like especially how they reference that they have had firefighters and cops as customers to disabuse anyone that “real men” don’t want this service. And of course there is a reality show in the works!!!
I didnt think they could document “Manscaping” in a non-cable tv show lol
Short sales are certainly different from regular sale; after garnering an offer from a qualified/patient/highly interested buyer, the rest is largely in the hands of the escrow agent and bank(s). And on the primary mission of the listing agent in a short sale situation — most “short sale experts” simply drop the price to the floor to attract a pool of buyers.
This, in my mind, is not rocket science.
On the other hand, the escrow agent — the party that actually moves the short sale along — has a much more difficult job: to keep the seller, bank(s) and buyer all motivated to cross the finish line through months of wrangling. When s/he fails in that mission, it falls back to the listing agent to attract another buyer. Wash, rinse, repeat.
To that end, a skilled and experienced escrow agent is worth far more in the transaction than the listing agent but is paid far less.
Petz says that Nickeldime makes a good point about the necessity of having a good escrow officer- pfeferably one certified in psychotherapy since buyers / sellers/ agents let emotions start to control the process at the end-when the real numbers start to appear.
The absolute necessity for good/hardworking listing agent on a short sale should not be dismissed since they are the ones in contact with the bank. MLS rules and DRE regulations have made it more difficult to use professional negotiators in the short sale process. For example a short sale listing cannot ask the buyers agent to “split” the negotiators fee. This puts the burden for time and expense directly on the listing agent (or seller if they even care).
A good buyers agent knows who the “good” listing agents are (or can determine this with a few pointed questions) on short sales are and this is of great benefit to a potential buyer. Successful short sales often means managing expectations about the process at the beginning about what realistic terms and conditions will likely appear at the end of the process. No you will not steal the property based upon the low list price.
A good strategy to pursue is to wait for a short sale to BOM “Back on Market” at the end of the process when the hard numbers from the bank (banks) are known and this can expedite the process for a quicker close.
For what it is worth-this is what Petz says on the last day of 2010.
Doesn’t the escrow officer maintain more contact with the bank than the listing agent? Aren’t they the party that submits the information to the bank? The listing agent seems to fade in importance post-offer and the escrow officer steps up to carry it across the line. My experience is listing agents are extremely passive post-offer.
The agent negotiates w/the bank, coordinates that negotiation w/the other parties (changes to the contract, funds, commissions) and keeps on top of the short sale dept to ensure that the sale is moving along on their end.
“The agent”
Which agent?
Listing.
Listing agent is along for the ride, holding very few cards with little/no control of the deal. They get their commission cut by bank/split with buyers agent, etc.
The escrow officer actually submits the deal to the bank and serves as the focal point of the transaction.
In short, listing agent hunts, escrow officer kills.
I guess our experiences have been different, then. And maybe things have changed, but I worked in a RE office during the late 90s short sale explosion and making sure the deal closed absolutely fell on the shoulders of the listing agent. The escrow officer handles the paperwork side of things, but the agent is the one who spends hours on the phone making sure there is a negotiator on file w/the bank and keeping on top of that negotiator (usually through multiple negotiators), working numbers (and giving up pieces of their commission, and negotiating w/the buyers agent to come down on their commission, and maybe even w/the buyers to kick in a little), coordinating expectations between multiple lien holders, making sure the seller has received signed and returned paperwork required on the bank end, and moving along paperwork on the buyer/seller end (extensions….lots and lots of extensions….and amendments when issues like commission are negotiated).
Short sales are a massive game of liar’s poker. Here’s why only about 10% actually make it to the finish line:
The seller teetering on the decision between short sale and foreclosure. They’ve been squatting in the home for many months, rent free, and are emotionally worn out.
The buyer bidding on multiple properties, keeps an emotional arms-length with each subject. They want a deal, are tired of waiting and are fickle.
The Realtors don’t get paid unless a deal closes. Know everyone’s on edge, are dealing with less than cooperative parties, grow tired of the transaction. Time is money and short sales are a drain. They have no control in the transaction, other than to keep folks motivated. Their commission is sliced up between parties and is the first sacrifice during the negotiation.
The banks
First lienholder The kingpin in the transaction and ultimate bagholder. May have default insurance on the property, which is a wildcard on the deal.
Second, Third lienholders The big loser. Walks with nothing in the event of a foreclosure but is trying to minimize loss by holding a short sale transaction hostage; demands cash from anybody and everybody during the negotiation.
All of this explains why escrow is the neutral party in the deal. The other parties don’t have a motivation to be ethical. The currency of the escrow officer is her/his honesty, efficiency and thoroughness.
The moral of the story: don’t bid on a short sale.
ND ~ you said “The escrow officer actually submits the deal to the bank and serves as the focal point of the transaction”
Maybe I’m misunderstanding your statement, or maybe it’s different with short sales, but it is the real estate agent that submits the deal to the bank. Escrow usually isn’t brought into the mix until an offer is accepted.
We recently bought a house. It was a foreclosure, which made things a lot simpler. The person who worked their a$$ off the most during the entire transaction was our lender. Our lender worked harder to make the deal close than both real estate agents and escrow combined.
KLB:
Foreclosure / REO is vastly different from a short sale. At least two fewer parties in the deal.
In a short sale, offer acceptance by a seller is the first page of a very long novel – once the offer is accepted by a seller, escrow opens and the escrow officer oftentimes inputs the proposal into the lender’s system (BofA/Countrywide is the largest, and their system is called Equator). That was our experience as buyers on a few different deals quite recently.
The escrow agent was the only party with the straight scoop on the file. The rest of the folks left out critical bits of data that were revealed much later in the process.
And I agree with your moral of the story – any patience we had with short sales is gone. REO or standard sales are the way to go, and buying new is by far the easiest.
I don’t understand why escrow would open so early . . . the seller’s acceptance means nothing unless the bank(s) approve. They are the real owners of the property, especially in a short sale situation.
We had the same experience as KLB. The loan guy was the one who worked his butt off dealing with our bank, which kept coming up with last minute hoops for us to jump through. Everything else went fairly smoothly as it was a regular sale. We shared a real estate agent with the seller and never saw him again after the contract was signed.
So are you a real estate mogul, ND? Buying multiple properties for investment? Perhaps your escrow officer is getting a bigger than usual slice of the pie?
ReaderMama ~ I agree, it doesn’t make sense for escrow to be brought in until the offer is accepted by the bank. But I’ve never dealt with a short sale, so I don’t really know. Maybe opening escrow that early is typical. I did go to BofA’s FAQ page regarding the short sale process and Bank of America says that the seller or the seller’s agent is the one who submits the offer to the bank for final approval.
Tell l me about the hoops!!! I’m like, you mean you didn’t know you needed this information from us three weeks ago?! HELLO! Make a freaking list of what you need and we will get it to you. I lost ten pounds from the stress. Although, I am happy about the weight loss.
Interesting. On two separate deals we were involved in, escrow handled the Equator interface for the transaction. Perhaps it is so frustrating, the agents handed it off?
Escrow absolutely opens once the seller accepts the offer. Someone needs to hold the buyer’s deposit. And you’re right – the rest is largely up to the banks, though the buyer and/or seller can kill the deal.
Bank owned is far, far different from a short sale.
Escrow has to open in order for the short sale process to start. And it stays open for a long time. The bank doesn’t even consider a short sale until there’s an open escrow, a named buyer, a deposit, terms, etc. That’s the starting point of the negotiation. Once the buyer drops out, unless another steps right in, it starts all over again.
Not a mogul, RM, far from it in fact. We sold our home a few months ago and were aggressively going after our next place and learned a ton in the process. We’re now on ice for a while, waiting to see what the Spring brings.
Ugh, I don’t envy you, ND. We were fortunate enough to find a place that was vacant but not yet on the market and through persistence finally got a deal done. That was after months of putting offers on short sales and never even getting a response. My two favorite search sites were http://www.redfin.com and http://www.listingbook.com . Redfin is great because it gives you the last sale price of the property.
ND – Most if not all offers on short sales specify that escrow will not be opened nor will the deposit be made until the bank responds to the offer on the property. Only then do the usual contingencies kick in for appraisal-property inspection- seller disclosures etc.which usually bring up additional issues that can complicate-delay or derail the transaction.
Petz prefers bank owned properties (foreclosures) unless the client prfers a specific property or neighborhood with limited availability.
Petz,
Interesting. The properties we are familiar with were in the advanced stages – bank had approved but buyers dropped out. The deals required re-submission, and escrow/deposit were pre-conditions. I can provide MLS numbers if needed on the three, each different listing agents, banks, etc.
I’ve noticed the short sales in early stages – less than 180 days or so – are just a waste of time. Perhaps these are the sales that don’t need a deposit or escrow.
Quick story – we called on one that was listed for one week. Listing agent says “yeah, it’s really early – check back in a few months.”
Well Jeff, you have done it yet again. I, for one, am a avid reader of your posts. You have no idea how many calls we recd when we did an interview with an local attorney who says foreclosure is better than most short sales. Who do you think wants us to get rid of the post and interview? You guessed it, the car salesmen. Btw, isn’t niche marketing is valid as long as you are a accepted member of that niche? Like still putting bad people in jail and saving the meek? “hyper global short sale mega net resource”. A modification from an episode of the Simpsons, has a nice ring to it. Apples to apples, I always say!