Dealing With Homeowners Who Are In Trouble

By
Services for Real Estate Pros with RJ Smith Realty Real Estate Solutions
I went to a presentation yesterday on Short Sales and Foreclosures presented by two attorneys.  While I did not get much help on working with buyers on short sales, which is what I was hoping for since I am primarily a buyer's agent, I got a better understanding of the complexities of these situations from the homeowners perspective.  What are they going through and what is in their best interests?  I know that there are soooo many of these situations all over the country today.  We as real estate professionals will be facing them more and more as we move out of the current real estate upheaval and on to a more sane realistic one.

When an agent is approached to sell a home by someone who appears to be in trouble, some agents will ignore warning buzzers and present a regular Marketing Plan to the homeowners. Some sellers will tell you upfront there is a problem and some will try to hide it from you out of embarrassment or even anger.  It is important for you to know there is a problem before you can provide the professional services you are to be paid for.  Dig a bit deeper with the sellers if you notice that they are anxious or unclear about their reasons to sell.  There is nothing worse than having a ready willing and able buyer for a property at a price that the bank won't accept and you can not deliver clear title.

In the past, I have heard agents trying to negotiate with mortgage holders who have not gotten through to the right person in time.  I was days away from a closing with buyers when the house was pulled out from under them because we could not find the right person to talk to.  I not only lost the sale but I lost the clients as they were so turned off they decided to stay renters rather than continue.

After hearing the complexities of everything that can affect a sale I believe the best we can do is to get advice from an attorney who can delve into the homeowners full financial picture and offer options.  In NY the bankruptcy laws may be used to allow your potential sellers to keep some of the equity in a house if there is any available.  Also there is a way to guarantee your payment at closing as a real estate agent if a bankruptcy is approved by the courts.  

Perhaps there is a way to work with the banks to restructure the loan to keep the people in their home.  Some of you may say "Hey wait a minute I don't get paid unless the house sells" but those happy people will return the favor by referring others and by using you at some point in the future.  When you do things like this you gain a reputation as a caring individual.  

A word of caution against getting too involved with the lives of these unfortunate individuals.  It can bring you down if you let it.  Try to refer them to someone who can help them with the whole issue that they are facing, such as an experienced bankruptcy attorney, and be there to help with the real estate part only.  It is always good to be a resource but if you try to be the source you may end up burning out, or worse, in trouble for practicing law or giving financial advice without a license to do so.  

Keep Smiling and Keep Selling (Just Make Sure Your Sellers Are Able To Deliver Clear Title)

I'm Paddy Pizappi - Work with Me and You'll be Happy!
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Ambassador
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

That's a problem with many sellers who are in trouble Mike.  Wish him luck and move on I guess.  Maybe you will have a buyer for the house if the foreclosure occurs.

Aug 20, 2008 07:26 AM #5
Rainer
131,969
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Hi Paddy, thanks for the information.  I have been involved with clients who are facing difficulties and it's not an easy thing to deal with.  I tried communicating with their bank only to be ignored.  The listing eventually went "belly up" and the homeowner was forced into foreclosure.  Some lenders will work with you... and others aren't so easy to deal with.

Aug 20, 2008 07:26 AM #6
Rainmaker
526,803
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Homes

Paddy, Excellent post.  Your last paragraph is very good advice for agents who have a heart for helping others. 

Aug 20, 2008 07:32 AM #7
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

I agree 100% Susan.  The house that I had buyers for the agent did not even know the homeowners were not paying the mortgage until we saw the sign for auction at the courthouse.  I will stick with what I know and refer.

Your example Jon, is why I think getting them to an attorney who can try to help them with the whole picture might work out better.  Unless we have loads of experience we can not help the clients ourselves. We need to find the right person to work with them. 

Aug 20, 2008 07:33 AM #8
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Thanks Shirley Sometimes we can get too wrapped up in the situation and no good can come of that for us.

Aug 20, 2008 07:34 AM #9
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Jim Crawford
RE/MAX Paramount Properties - Atlanta, GA
Jim Crawford Atlanta Realtor - Atlanta Real Estate

Unfortunately for some home owners we cannot assist them.  The best thing is to point them in the right direction....lawyers etc.

Aug 20, 2008 07:34 AM #10
Rainmaker
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Neal Bloom
Keller Williams Properties, Weston FL - Weston, FL
Realtor CRS-Weston FL Real Estate

Anytime I'm approached by a buyers agent and client to purchase or make an offer on a short sale to explain that if they aren't willing to wait a long time for an answer they might as well move on...it's a long straining process of the unknown. We might think the deal should happen but the loss mitigators have no idea what is really going on and make their own decisions. Even when you tell them all the details they still tend to get antsy when you reach about 30-60 days into it. in most cases it ain't going to happen that quick so beware.

Aug 20, 2008 07:35 AM #11
Rainer
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Becky Cook
EXIT Realty Services- New Paltz, NY - Highland, NY
Ulster County, NY- New Paltz, Highland, Marlboro, NY Real Estate

Paddy- very interesting.  I wish I had been at the presentation.  We really need to educate ourselves- because foreclosures and short sales are everywhere.  I have a short sale right now.  Whenever anyone asks me a question- the seller, the buyer's agent- I tell them to consult with their attorney.  We've been waiting for months for answers from the bank- I don't think it will be much longer- they're actually starting to call us instead of us calling them all the time.

Aug 20, 2008 07:37 AM #12
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Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Paddy - This is usually a stressful situation that could physically drain you.  It is important to rely on resources able to navigate the mine field.

Aug 20, 2008 07:38 AM #13
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

You are right Jim. Pointing the way is a great service to others.

That is what we all find so frustrating about Short Sales Neal.  You just know thw bank is going to lose $ but they don't want to make a decision.  It is soooo frustrating for buyers and buyers agents.

Aug 20, 2008 07:39 AM #14
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Good luck with the sale Becky It sounds like you are on the upswing on it.

It can have that draining effect Jennifer.  You have to have some of your defenses up.

Aug 20, 2008 07:41 AM #15
Rainer
16,196
Tim Brown
SunTrust Mortgage NMLS #843991 - Richmond, VA

You nailed your final point..often when forclosure looms there are other challenges a client is facing...medical issues, bankruptcy, job loss, death in family, divorce.  Steer clear of those issues and focus on your expertise.  Lead them to other pros who specialize in those areas.

Aug 20, 2008 07:58 AM #16
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Well said Tim.  We can't be all things but we can do our job well if we avoid the urge to help in areas we know nothing about.

Aug 20, 2008 08:00 AM #17
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Paddy, I like how you emphasized with this topic being a resource to funnel the right people to help the financially distressed in homes. Often, we the REALTORS, are not the ones that inevitably solve all their problems.

Aug 20, 2008 08:27 AM #18
Rainmaker
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Cristal Drake
Prudential California Realty - Fullerton, CA
Realtor - Fullerton Real Estate

This is a great post Paddy. I have been on both ends of what we call a "Short Sale" or "Short Pay".  I am here to tell ya that there is nothing short about it!  It is a sad situation for the seller and an agonizingly painful one for the buyer.  I really try to stay clear but since I feel like I am a decent agent that knows how to get things done, I will consider short sale listings on a case by case basis.

Aug 20, 2008 08:29 AM #19
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Good point Gary.  I think sometimes Realtors can get in over their heads in these situations.  I don't want to have anyone coming after me with any violation that could cost my license. 

Aug 20, 2008 08:32 AM #20
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Hi Cristal, I think most can do a decent job if they ask for advice and make sure the sellers and buyers know the score.  I feel frustrated by the buyers side of things and would rather avoid too but I will do what I need to do for my clients.

Aug 20, 2008 08:36 AM #21
Rainmaker
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Greg Nino
RE/MAX Compass, formerly RE/MAX WHP - Houston, TX
Houston, Texas

Paddy,

Interesting Blog. No two short sales are alike & none of them are any fun or financially as rewarding as a regular transaction.

I like to think I'm helping folks when I do this. My gift and demonstration to the consumer that Reatlors are worth their weight in gold! We are worth what we make! Sometimes a this type of effort is rewarded in the form of a referral.

I got royally screwed just recently. FULL PRICE CASH offer and the effin bank TURNED IT DOWN! They said the STILL wanted to foreclose even though foreclosure was 20 something days away! The offer was maybe 10% below comparable sales!

unreal.

Aug 21, 2008 01:54 PM #22
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Michael Thornton
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspector - Nashville, TN area - 615.661.0297

Although I do not get into the short sale side of it, I found this interesting reading Paddy, Thanks...

Aug 22, 2008 05:32 AM #23
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Paddy (Patricia) Pizappi
RJ Smith Realty Real Estate Solutions - Pine Bush, NY
Real Estate Associate Broker Hudson Valley NY

Sorry you had a bad situation Greg.  It can be very frustrating to loose out especially when you know it was a good deal for the bank too and they just don't get it.  

Thanks Michael.  Have a great Friday 

Aug 22, 2008 05:35 AM #24
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