HOW TO EVALUATE A LISTING AGENT IF YOU ARE REPRESENTING A BUYER
1. What is your experience representing sellers in short sales?
Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is the sine qua non 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. I would also ask them if they have closed any representing a seller with the particular loan servicer who is the third party approver(s).
(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 - BOA immediately comes to mind - reflexively decline short sales and, I believe, manufacture values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer and agents.
(Understandable perhaps, but if they 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. How many liens are there on the property?
First or first and second or HELOC, HOA, Condo, Special Assessment, Tax?
Second lien holders and HELOC holders can be extremely difficult and are very adept at killing deals and cutting commissions.
3. Who is/are the servicer(s)?
BOA, for example is extremely difficult to deal with. Much more so than 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. Who is the investor or insurer on the loan?
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 PMI 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.
5. Is the listing agent going to have one contract signed and submitted or do they say they are going to submit the offers to the servicer to decide which one they want?
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. That tells me the listing agent 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 this business completely.
6. Has the servicer previously approved a deal which the buyer walked away from or has the servicer disclosed an acceptable price?
This may shorten the process, but not necessarily. Some servicers will force the agent to start all over from square one again with a new buyer, including ordering a new appraisal.
7. Does the agent have any financial modeling program to determine whether the offer is going to yield more cash to the investor than foreclosing?
This is how the lenders ultimately decide whether or not to approve a deal. Absence of this is means you are pretty much throwing darts with a blindfold on.
8. Has the property been priced appropriately?
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. Don’t even think about showing your buyers this property.
9. Do the agent comments say something like “commission paid on net sales price” or “50% to selling agent of approved commission”?
Either this agent is clueless or they don’t know how to handle commission negotiations with the lender. This is a run away, don’t walk situation.
10. Does the agent purport to be an expert?
I would be very, very wary of anyone who purports to be an expert. The only experts I am aware of are the guys sworn in as such in court rooms. We have 10 to 15 short sales in various stages of approval all the time and I see new twists on servicer tactics and processes every day - and there are dozens of servicer representing hundreds if not thousands of different investors. And don't forget HAMP or HAFA.
11. Will an Attorney get you a better deal on a Short Sale?
Think about it. Until this year, most attorneys would have turned their noses up at dealing with loan servicers on short sales. Suddenly, they’re experts in short sales.
(The inspiration for this blog was a question asked me by another agent at a meeting of the top agents in the Anne Arundel County Association of Realtors in Annapolis)
© Michael Davis 2010
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