RealTown's RealTalk

I really appreciate Lou Frey's question.  A question that really needs critical assessment in order to understand what's really going on.  And the question is.

"I ask a lot of agents what a short sale is and they haven't a clue and think I am talking about stocks".

As I understand it, and I could be wrong, but I doubt it.  A SHORT SALE is nothing more than Property that is not  Worth the MORTGAGE balance.  In essence what the listing agent is saying and the buyer's agent will soon discover is the Owner OWES more than the present loan(s) balance regardless of the list price!  The problem I have with this kind of negative reality is that the listing agent is projection to the buyer's agent that if the buyer does not offer at least something to satisfy the owner, regardless of the offer, the bank will become the final arbiter between their client or customer (the buyer) and the DEED.  

Yet we are all told the bank will be forced to do what they claim they don't want to do! FORECLOSE!!!!! OK that may sound admirable on the banks behalf, but I doubt the bank could careless about whether they have to foreclose or not.  The reality of it all is the bank's only option is to FORECLOSE if the property is not worth making payments and the seller accepts a short contract offer.  

So what's in it for the Owner?  NOTHING.  Are we gulable enought to think the Owner is going to walk away with a clean credit history if the property sells short?  If the owner is upside down there is NO EQUITY so what's in it for the owner to be cooperative? NOTHING!  Why should the owner feel any obligation or loyalty if after accepting a short offer, the bank becomes biligerent like most do?  How does the bank explain to their investors, why they accepted a short sale?  Isn't this why the bank has a lien on the property, to avoid a short sale?  The investors were sold on the investment based on the lien to the property.  The bank's investors are looking for a return on the investment, not a short sale.  The worst case senario for the investor is FORECLOSURE.  But it is the ONLY senario if the bank is looking out for the interest of their investor client, based on the lien to the property.  Remember before a short sale can qualify you have to have a cooperative owner willing to accept a short offer.  The bank can not accept offers, only deed holders can accept offers. 

So what happens to the bank's investors?  They get the same treatment the owners of the property are about to get!  THE SHAFT!  You see the banks have a real problem in a short sale situation, they don't own the DEED!  For a short sale to work the bank needs that seller's signature to sell short!  That's a real problem! 

This is why Countrywide failed, this is why IndyMAC failed, this is why LaSalle and why a whole lot more are failing.  This is why the Government Bail-out will include a bail-out of Fannie Mae and Freddie Mac!  Banks loaned that money for one reason and one reason only.  They wanted that DEED.  They could careless about the property owners, their investors and anybody else in the mix.  I know that can be difficult for some of you to rap your brain around,  But why did the banks allow so many risky loans? Why?  Because when these banks fold up guess who comes to the rescue?  BIGGER BANKS!  It's amazing, what was once a liability to Countrywide, LaSalle, IndyMAC becomes an ASSET to the BIGGER BANK that gobbles them up at the Government Regulated Bail-Out sale!.  You see as long as the BIGGER BANK buys up the DEFAULTING BANKS "Liabilities" for pennies on the dollar it's all gravy for the BIGGER BANKS.

  These defaults are purchased with CHEAP 2% Fed money, HUD comes to the rescue with all new and improved regulations, such as raising the limit on loans and offering a suggested triple the prime rate loans to the unsuspecting FHA borrower.  Developing all kinds of new first time moron redtape and hoops to jump through, as affordable life carries on as usual. 

Only a few minor details to iron out, sucha as, INFLATION, DEVALUATION, and higher prices for all the consumable necessities of life, such as food, oil, clothing, transportation,  need I carry on with the diatribe of results we are seeing?

I think it's time for the "final solution" allow the banks to FAIL.  If anybody can afford it the BANKS sure can.

I leave all you thinkers with this final thought:  If the real estate market is going to recover, why not just wait for the turn around?  Why is FORECLOSURE the only OPTION on the table?  A Short Sale is nothing more or less than a PRE-FORECLOSURE.  I think as the months drag on into years we are going to see a bigger revolt than we are prepaired to bargain with.  There are way to many DISPLACED FAMILIES!  Don't think the Media and Internet is not going to spin this like they do everything else.  I have a very close dear friend who is about to face foreclosure, he is in his mid 70s his wife is on her death bed, and the wisel is at the door.  The bank talked him into taking out a line of credit on their property, to cover some of these medical expenses.  The property was free and clear.  Now they are about to loose their home.  Why the bank allowed the line of credit is beyond me.  There was no employment, there was no history of credit, being they owned their home free and clear, been retired for several years.  They owed nobody anything and yet the bank offered to HELP!  I asked my friend why he did it, his reply, "what else could we do"?.  Now the bank wants it's pound of flesh.  So what was in it for the bank who cared so much?  THE DEED!

RE:  Not showing short sales, short sale commissions, etc.

I'd like to elaborate on my last post vis a vis showing or not showing short sales.  As real estate professionals we are charged with looking out for the best interest of our clients and that responsibility comes in many forms.  When representing a buyer we typically (or should be showing) are showing properties based on several criteria, i.e., location, condition, price, etc.  In the literal sense not showing a short sale could be construed as a violation of our fiduciary obligation to the buyer and a potential violation of Article 1 of the COE not looking out for the best interest of the client.  However, in my opinion there are several variables in this regard.  In most markets there is plenty of inventory to show buyers properties not needing to show a short sale. 

Most of us are aware of many of the horror stories associated with short sales; the bank taking several months to answer, approving a short sale and at the last minute changing the conditions etc.  If in the course of working with a buyer, the agent advises the buyer of the potential problems associated with purchasing a short sale and the buyer says to the agent I have no interest in seeing these properties, in my opinion I as a hearing panelist would not find the agent in violation of article 1 of the COE. 

However, if buyer X said to agent Z I want to see this house, the agent advises the buyer the property is a short sale  and the buyer still wants to see it then in my opinion the agent would be in violation of article 1 if the agent refused to show the property.  Secondly, if the agent tells the buyer I refuse to show this property because the commission is X or may be reduced the agent maybe in violation of article 1 (again in my opinion).  Bear in mind the commission is ALWAYS subordinate to the interest of the client, ALWAYS, there are no exceptions.  Meaning the agent can not make an offer or refuse to make an offer subject to the commission.

With regards to published commissions in the MLS vis a vis commissions as long as it is published in the MLS the commission may be reduced by the lender there is no violation and it is not an arbitratible matter (again my opinion).  However, if the listing agent fails to disclose the listing as a short sale in my opinion the agent could be in violation of Article 1 (not looking out for the best interest of all parties), Article 2 ( misrepresentation and failing to disclose a material fact), and possibly Article 3 (failing to pay the cooperating commission, if the commission were to be reduced).  It would also be an arbitratible matter and the complainant most likely would prevail.

One last thing, it has been my experience that some agents when listing short sales are listing the properties well below market value in an attempt to attract multiple offers.  This is a major disservice to the seller, the bank, and the buyers.  Having completed over 700 BPOs in the last eighteen months a good 10-20% of them are for short sales and many of them are priced way too low.  There have been times when I have brought the value in higher than what the property has been listed for.  I have had the BPO company question me on this and tell me to bring the value in at the listed price.  I politely explain this is my opinion and this why you are paying me, for my opinion of value. I also explain to them it is my opinion the agent has listed the property too low and if the bank were to take it back they still would probably sell it for more than what the agent listed the property for.  In almost every case I have prevailed.  This is one more wrinkle in the short sale situation.

In the final analysis, the agent should be looking out for the best interest of the buyer and if it means not showing a short sale(s)  as an ethics panelist I'm just fine with that.

Refusing to show short sales flies in the face of an agent's fiduciary to
their buyer client.??????????????????????????????
 

JudiB says the above. I say it flies in the face of my own "making a
living" and fiduciary responsibility to my family. I never-ever show short
sales. Never will. Thank goodness in Central Arizona we have ARMLS who say
in effect: "The co-broke can have NO conditional statements", i.e. If the
lender agrees only to pay something less than 6%, then the two brokers will
divide it equally." Go ahead, but not with me. I'm not working for, and my
agents are not working for some "mystery commission". That's NUTS!
 

Just as any other independent contractor can choose a job for a certain
amount of money or walk from it, I walk from all "conditional" statements
regarding commissions, walk from MLS's that say "use this title company",
and the rest of the junk listing agents put in the MLS that their seller
never authorized them to do.
 

I show houses with a minimum co-broke of a certain percent. Below that I
will not show. I never show a house with a condition on the Title or Escrow
company.
 

With the number of houses on the market, if banks involved with short sales
only want to pay something lower than I am willing to take, so be it. They
lose. I don't.
 

Philip Rosenberg
Broker/Owner
 

Mr Rosenberg,
         
I am sure you meant to explain that you always show the listing information to your clients and remind them that according to your buyer agreement that if the selling portion of the commission is less than the x%  you and your client have already agreed upon, that Mr and Mrs Client you will need to make up any short fall. However if, as you have implied, that you make the decision to not even tell your client about a particular property because you might not make the money that you feel you deserve I hope that you change that business practice. There are many here who will be happy to cite the chapter and verse of the code of ethics- all I know is that it is very straight forward with no room for any confusion that a Realtor's financial interest is never more important than the transaction itself.

I am not sure what disturbs me more from your post- that you choose which properties you show your clients based on your personal desires or that you are a broker/owner. I do hope that if you have any agents working under you that you are not sharing your business model with them. I am very sorry if this sounds harsh, but I am getting tired of fighting the battle that Realtors are greedy and only in it for the money.  Behavior such as this only enforces the already low public opinion of Realtors.

Yes this is a business, and yes I do have an obligation to my family. However I also have an obligation to my clients to find them the best property for them no matter what co-broke is offered.  And sometimes I make y% and sometimes I make x%. But my clients are happy.  And that is what is really important. Happy clients mean happy referrals. So yes sometimes I just take y%.

Instead of making the decision to just not show short sales because the bank might reduce the commission- just address that up front with your clients. I need to know I will be paid x% and if a particular house that you want to purchase doesn't pay x, than you Mr and Mrs Client will need to make up the shortfall. You are correct, as independent contractor we do get to make many decisions for ourselves as to how we will conduct our business. You just need to work within the rules.

Kris Coutant
Associate Broker
Balfour Realty
Serving Upstate NY - Warren, Washington
        and Saratoga Counties

Ken Duke, writes in part...

The new Rule passed by the MLS Committee in DC is not Mandatory. There were
two options passed that lets the Local MLS decide how to handle the process. <<<SNIP>>>

Hi Ken, my MLS has adopted the Mandatory Rule as it was passed. They have adopted it with the Listing Broker being able to choose the option they want to use, which is the way I think NAR meant for the rule to be implemented. Therefore which option do you think the Listing Broker will choose? OPTION TWO of course which lets them adjust the co-broke fee if the Third Party does not pay the full brokerage commission.

Tom Scaglione, ABR,  e-PRO, Realtor

Just as any other independent contractor can choose a job for a certain
amount of money or walk from it, I walk from all "conditional" statements
regarding commissions, walk from MLS's that say "use this title company",
and the rest of the junk listing agents put in the MLS that their seller
never authorized them to do.

I show houses with a minimum co-broke of a certain percent. Below that I
will not show. I never show a house with a condition on the Title or Escrow
company.

With the number of houses on the market, if banks involved with short sales
only want to pay something lower than I am willing to take, so be it. They
lose. I don't.

Philip Rosenberg
Broker/Owner
1-Click Realty and Property Management
Phoenix, AZ

I did not think much of short sales/commissions…until recently. I was asked to participate in a short sale listing...but decided to learn about it before accepting…. I attended a class given by an "expert" who does nothing but… walked out of the class after having learned the realities of short sales…so glad I did.

I not only discovered that along with the tremendous effort and countless hours you must put into just maintaining a short sale transaction…comes the heavy odds of it not closing… The constant chasing of the lenders for a response (they have thousands of files to work on)…uncertainty of "everything"…commissions…acceptance of contract alone takes several weeks if not months…and even that is not a guarantee after "accepted"…good chance second lender may deny…

We all understand of course that nothing is ever guaranteed in the RE business…but I think I'd rather work on things that give me better odds as time is money…

I realize that the odds are better for someone more experienced and in tuned to the game…

Good luck to them and anyone else who receives a positive outcome….I think you deserve the full 6%!!!!

AmyI

 I never heard of an agent that wouldn't show a listing because of the title company that the seller selected.  I have a seller ( a developer that subdivides large ranches) who specifies one title company.  Even though it's not the same title company that I prefer to work with, I honor his wishes.  My seller chooses this title company because the attorney helped him with the new restrictions, easements, etc,  Is it typical to assume if the title company is entered in the MLS, that it was the agent that made the choice and not the seller?  When would it ever be appropriate to not show a listing because there was a specified title company?  I have to be missing something.

RE:  Just as any other independent contractor can choose a job for a certain amount of money or walk from it, I walk from all "conditional" statements
regarding commissions, walk from MLS's that say "use this title company",
and the rest of the junk listing agents put in the MLS that their seller
never authorized them to do.