Suggestion: Print this list and ask your prospective agent each question. By the end you will KNOW if they are qualified to handle your short sale. If they sputter iin response to any of these questions, you would be wise to keep looking.
1. What is your experience representing sellers in short sales? How many have you CLOSED and what is your success rate/percentage?
For comparison sake, our close rate for short sales with cooperating sellers is above 90%.
Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is the Be-All and End-All for a successful short sale.
Thousands of agents are now taking short sale certification programs and presenting themselves as short sale specialists. Many of these agents have never closed a short sale in their lives. In fact many of the people teaching certification classes have themselves never closed a short sale.
Knowing the mechanics of a short sale is not enough. Lots of agents now have this information from taking one of the many certification classes now prevalent. It will not get the job done. Ask the agent how many short sales they have closed representing sellers in the
last year.
(Representation of buyers in a short sale counts for nothing in terms of short sale experience since all the approval action goes on with the listing side.)
The listing agent needs to know how to escalate a deal to get an approval. Some loan servicers reflexively decline short sales and, basically "make up" values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer.
(Understandable perhaps, but if the loan servicer really wanted to get the most money from the short sale, they should provide a target number up front, not spend months jerking buyers and sellers around).
The agent needs to know how to get to management to get an approval with Servicers like this. In fact the listing agent needs to know how to do this just as reflexively as the servicer who is going to reflexively decline the deal.
Negotiating price prior to getting to the Management level is going to prolong the process, not shorten it. But the listing agent has to know how to get around the lower level negotiators.
2. Have you CLOSED short sales with multiple liens and different lienholders? (How many liens are there on the property? )
First or first and second or HELOC, HOA, Condo, Special Assessment, Tax? If the 1st and 2nd aren't with the same servicer, challenges in obtaining multiple approvals from different lender/servicers are compounded. Second lien holders and HELOC holders can be extremely difficult and are very adept at killing deals. Your agent had better have experience with these situations if you want the best chance for a good outcome.
3. Have you CLOSED a loan on behalf of a seller with this lender/servicer? How many?
BOA, for example can be extremely difficult to deal with. Most deals will require escalation within bank management; much more so than say with Wells Fargo. So unless you just get lucky it will take a much more experienced and savvy agent to get an approval from BOA than WF.
4. Have you CLOSED short sales with _______ as an investor (Fill in the blank with your loan type if known e.g. FHA, Fannie Mae, Conventional etc.).
If the investor is not apparent (as is often the case with non-government backed/insured loans) can you tell me how you would determine who my investor is and why that would be important information to know?
Does your agent even know how to determine who the investor or private mortgage insurer is if the servicer refuses to provide this information, as they often do.
The ability to obtain this information alone and knowing what to do with it , can make the difference between an approved short sale and foreclosure.
Fannie Mae, Freddie Mac, FHA or VA or Conventional or PMI
Conventional loans are the Wild West for servicers since they can approve or deny anything they want.
Fannie Mae loans frequently have Private Mortgae Insurance which means, nothing is happening without the PMI companies approval, so even if there is only one lien, there may be two approvals required.
FHA has a proscribed process which allows servicers little latitude for game playing.
VA loans also have a proscribed process which allows little game playing on the lender/servicers part
5. Are you going to have one contract signed and submitted or are you going to submit all offers to the third party for them to decide which offer they will accept?
I would personally advise my buyers to run away from any deal where the
agent says they are going to submit multiple offers to a
servicer. So if you are a seller, needless to say, you want don't want to
go near that listing agent. A listing agent that tells me he/she is going to
do this is clueless. Why would you send multiple offers to a loan servicer who
takes months to approve one deal? If the agent can’t figure out which is the
best deal in a multiple offer situation, they should get out of the
business completely.
6. Do you have a financial modeling program to determine whether the offer is going to yield more cash to the investor than a foreclosure? Would you show it to me?
This is how the investor (owner of your loan) ultimately decides whether or not to approve a deal. Absence of this kind of modeling program means your agent is pretty much throwing darts with a blindfold on and has no idea what the lender servicer might actually accept.
7. How do you recommend pricing our property based on what we owe and the market today?
I still see short sale listings where it is obvious the property is priced at a number which would pay off all of the liens. Ridiculous. In a short sale, you need to price your property to sell. You're doing the short sale because you can't sell it for enough to pay off the debt, so why price it at a number which you can't possibly sell it for? This is a rookie mistake and any agent that suggests you do this is not an agent you want to represent you in a short sale. Many, many houses have been foreclosed on by this kind of mistake.
The absolute highest price you should list your property for in a short sale (initially) would be at fair market value as if it weren't a short sale; and the only if you have plenty of time and aren't already in default. The house won't sell for that but if you have time
you can try it and it will allow you to tell your lender/servicer that you priced it at FMV with no offers. The reality in todays market (in our region, at least) is that short sales sell for 10 to 20% below comparable non short sale properties and the banks approve the sales.
8. Ask the agent how they intend to handle any reduction in commission. If the say something like "We will split the servicer approved commission 50/50 with the selling agent"; or "we just accept what they offer"--watch out!
Why should how the agents handle commissions be of concern to you in a short sale? Banks are notorious for trying to reduce commissions
to agents on short sales. If your agent isn't savy enough to know how to protect their own money what do you think they are going to
do for you when the third party denies the offer from your buyer and the real work of getting a short sale approval begins?
9. Are you going to handle this transaction with the lenders yourself or are you going to outsource that to someone else?
Many agents stopped even attempting to do short sales for a time after learning how challenging they are. Now, various title companies
and attorneys have jumped into the void and offer to handle the negotiations for the agents.
The agent, in effect, throws the whole thing over the fence to another entity, whom you’ve never met, and hopes that entity is successful in getting an approval of your short sale.
But your agent is basically out of it. Either it's approved or it isn't.
The agent's just hopes it gets approved and they get a check at the end. So from this agent's point of view, it's a good deal.
The hard work is handled by someone else; if their lucky, the agent gets paid eventually and if you're lucky your short sale is approved.
Note that your agent has no hand in the process beyond listing and getting the property under contract.
Is this agent really committed to getting the job done? Well sure they'd like to get paid, but what service are they really providing you, the seller? I would say very little. And you’re putting your house, future credit and possible additional liability in the hands of a representative you’ve never even met. In fact, it’s likely your agent has never met them either.
10. Would you say you are an "expert" at short sales?
If they can give credible answers to all of the above questions, you should be in good hands. They don't have to purport to be an "expert". What they should be able to do is demonstrate thorough knowledge of the process and a real track record of CLOSINGS! This list will bring that out.
Actually, I would be very, very wary of anyone who claims to be an expert with short sales. If they falter the least bit on any of
the previous questions and purport to be an expert--well, I hope you get the point.
As far as being an expert goes, keep in mind: there are thousands of lenders and investors and perhaps hundreds of loan servicers all with different policies and procedures which change frequently. No one knows them all or has access to all of their criteria and guidelines, (well maybe Uncle Sam does). And we see new twists every day from loan servicers, lender, processors and investors as well as frequent changes in Federal and State Laws and programs affecting short sales and foreclosure.
On the other hand, a good agent who actually specializes in short sales will be familiar with the processes of the largest lenders
and Government Investor Programs and know how to escalate to get short sale approval AND be able to explain how that works. As far as the agents who take a two day course and proclaim themselves experts--I don't know about you, but I wouldn't want to bet me house, future credit and possible continuing liability on them.
With this list of questions, you won't have to.
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© Michael Davis 2010
