Short Sale Misery

I've heard a lot of talk amongst real estate agents lately, both online and in person, about short sales. And, the gist of the conversation is that they are horrendous and no real estate agent in their right mind would do them.

While I certainly understand the sentiment, I am disturbed by the remarks.

First of all, let's be clear that real estate agents are running a business. And, if the business does not make a profit it soon goes out of business. So, it's not reasonable to expect real estate agents to take on listings that will not pay them but will result in increased costs.

There are a number of reasons why it's risky to list a property where the owner owes the bank more than the property is worth. First of all, you sign a listing agreement with the owners. And, in that agreement, they agree to your fee. But the lender must agree to any contract and they have a history of voiding the listing agreement you signed with the owners and telling you what your fee will be. (By the way, it's always lower.) At that point you've already done a tremendous amount of work and it makes no sense to walk away, even if it turns out that what the bank pays you is a pittance. Something is better than nothing.

And, you'll work much harder for that reduced commission. Dealing with the bureaucracy at most lending institutions is a real pain. And, often you're dealing with both a first and a second mortgage.

The other big problem is that most short sales never happen. In most cases, especially in this kind of market, the property goes into foreclosure a couple of months later. Since lenders already have established relationships with real estate agents, you then lose the listing altogether.

All that being said, there are families who need help keeping their homes from going into foreclosure. We are uniquely positioned to perform that service. And, there are, of course, big hearted people who willingly take these risks and help these homeowners. I'd just like to see more of them.

It's interesting that attorneys don't refuse to take on bankruptcy cases our of fear of not getting paid. They get their fee up front or they don't take the case. Maybe that's what needs to happen here. Or maybe there's a retainer so the agent knows there will at least be some pay for their trouble.

I think the industry has an obligation to figure this out. I think it's in our self-interest to show we're willing to go out of our way to help. It certainly can't hurt the overall reputation of our profession!