Short sales, foreclosures and the wild west
photo credit: Steve Weaver
It?s been a busy week in San Diego Castles land, which means the crickets have been having the run of the place here. ?Busy? is still in full swing, with more buyers than listings at the lower price points, so it?s rerun time.
Following is an excerpt from an article I wrote for Inman News last week. You only get half of it ? it?s a syndication thing ? but it may give you an idea of why we have been absent for the past week. And, I?m hoping it will suffice as a permission slip for an excused absence.
My costs of doing business are significant, particularly when I am representing the seller in a transaction. Staging, photographs, brochures and all those printer cartridges, not to mention my time, can be a drain on the old bottom line. That is why I am toying with the idea of tweaking my business model.
I am considering adding some language to our multiple listing service write-ups: “We are experienced listing agents; over 99.76 percent of our listings successfully close.”
No, that’s just silly. No one uses semicolons in the MLS, and I spelled all of the words right. How about this: “Buyer to pay 1 percent transaction facilitation intermediary fee. Our ‘Just Listed’ postcards, the ones that talk about how experienced we are, cost a lot. And our growing pipeline of business is significant, so we had to hire some guys to help with the more mundane tasks, like answering the phones.”
Then I will add a little 17-page attachment explaining “how I work” and outlining the requirements for playing our game of house.
“Buyer to be prequalified with three reputable lenders, two of whom are my cousins. Offers to be written with a Bic rolling writer (black). Contracts to be delivered by mule train, avoiding the interstate, and never on Tuesdays. Copy of deposit check, family trust documents, and a brief essay on the history of the U.S. space program (double-spaced) to accompany all offers. No exceptions!”
“That’s crazy,” you are thinking. “You can’t get away with that!” Well, think again. All the cool kids are doing it. And I will get away with it because my listings will be so artificially underpriced that I will be beating would-be buyers off with my yard sign.
It’s been a month of entry-level buyers for us, which means it’s been a month spent in short-sale hell. And I am not even talking about the absolute delight of spending six months waiting for a faceless lender who observes all of the banking holidays to make eye contact with my client’s more-than-full-price offer, only to return an “acceptance letter” with enough conditions to send all but the heartiest attorneys back to basic training.
I am talking about the Rube Goldberg-like process of interpreting the rules and actually getting an offer submitted before we are mowed down by a thundering herd of investors and flippers — or before my clients decide to just skip this step altogether and move straight to the retirement home.
It’s a supply-and-demand thing. In the more affordable price ranges, we are seeing huge demand. As for the supply, it is mostly of the short-sale or lender-owned variety, with enough strings attached to keep Yo-Yo Ma in business through the next real estate cycle.
“Possibility of 1.5 percent fee prior to split for negotiator,” the attractively priced listing description read. “Buyer to pay $1,595 for third-party negotiator,” said another. Yet another specified that the buyer would be required to foot a 1 percent bill for the lender liaison. My partner went out on a limb and asked about this one.
“Who does it go to?” he challenged. The agent explained, “As a matter of full disclosure, our negotiator is in-house, but I don’t make any money off of her. She does nothing but talk to lenders all day, every day, to keep things moving.”
For a short-sale “expert,” it sounds like a cost of doing business to me. Admittedly, processing a short sale is time consuming. I know — we have managed plenty of them. But there is no magic involved, no special skill set required. It just takes time, patience and perseverance.
Much of my job requires those things, and that is where I am thinking I should be pursuing my own cost-recovery program. First, though, I need to make it look really hard. And, that is where the “policies and procedures” attachment comes in.
OK, I can?t give you the ending, because that would be republishing the article in its entirety, which I am not at liberty to do. But, the ending was a little rant on the some of the more onerous, even goofy requirements for submitting on short sale and bank-owned listings we are seeing ? requirements which all but disqualify the average, I-want-to-buy-a-house-to-live-in buyer.
And as I write this, Steve?s latest saga continues. It involves an attractively priced condominium, six or a dozen first-day offers (how many, we aren?t really sure), and one listing agent who after a week will not even acknowledge receipt of Steve?s client?s offer, much less tell him whether or not they are in the running. He was finally able to reach an assistant at the listing agent?s office, however, and get some clarity of their modus operandi.
It seems this particular agent enjoys a lot of REO (bank-owned) business; so much, in fact, that he simply does not have the time to call everyone who submits an offer. If an offer is accepted, Steve was told, you will get a call. Otherwise, you will get nothing. Don?t call us; we?ll call you.
Not only is this a slap in the face of common decency and good business practice (and, I suspect, our Code of Ethics), it represents an arrogance I can?t fathom. If you are too busy, get help. Or take less business. But doing a crappy job and dragging decent buyers through the wringer so you can deal in volume and keep costs down is not the answer.
Granted, I know a lot of great agents who are getting hammered with ten or twenty new properties in one day from their bank clients, and I am not insensitive to the level of difficulty involved with dealing in these numbers. But, it?s becoming a lawless wild west. I?ll be glad when we finally get through this mess.
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