C Tann-Starr's Outside Blog

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Don't Let a Short Sale Agent Hold Your Offer in Back-Up Position -- Report Them

 

presentation of short sale offersEither some listing agents are unaware of their fiduciary responsibility to their sellers or they don't read the REALTOR® Code of Ethics, because many agents are violating both. It is absolutely a misnomer that a Sacramento short sale agent can refuse to send a buyer's offer to the seller(s).

I know this practice is more wide spread than my personal experience has shown because I get asked the same question from other agents who ask to write offers on my Sacramento short sale listings. They say every short sale agent handles it differently. They ask me if I am sending all offers to the bank or if I have sent the first offer and am holding the others in back-up. Because that's how many naive agents handle short sales.

They are wrong. Dead wrong. Nobody died and made those agents God of all short sales. Are they lazy? Is that the reason? Incompetent? Is the first offer their own buyer? I don't understand it and don't need to understand it.

A short sale listing agent must submit each and every offer to the seller unless the seller notifies that agent in writing to cease.

Here is an excerpt of the National Association of REALTOR® Code of Ethics:

Standard of Practice 1-6           
REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. (Adopted 1/93, Amended 1/95)
Standard of Practice 1-7
When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing.

While it is true that some lenders, Countrywide, for example, won't look at competing offers once it's begun a file on an offer, other banks will. Regardless, an agent must submit all offers.

The next agent I catch in writing telling me that she won't submit my buyer's short sale offer will find herself answering to the Sacramento Board of REALTORS®. I encourage other REALTORS® to report these offenders as well. If we don't come together as a group and put a stop to this nonsense, our profession will continue to suffer from such antics.

sacramento short sale agent

The Short Sale Savior, by Elizabeth Weintraub, coming in June 2009.

Photo: Big Stock Photo

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Comment balloon 9 commentsC Tann-Starr • March 27 2009 06:31PM

Comments

C - It is sad that there are agents who fail to follower the rules.

Posted by Jennifer Fivelsdal, Mid Hudson Valley real estate connection ( JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571) over 9 years ago

C- I love you, I have always loved you and I will continue to love you.  I have used this on countless, clueless agents.  Most of these agents really don't understand the business let alone how to represent short sale clients.  Thank you.  I hope that every agent reads this post.  It is in everyone's best interests if we all know the rules and play by them! 

Posted by Suzanne McLaughlin, Sabinske & Associates, Realtor (Sabinske & Associates, Inc. (Albertville, St. Michael)) over 9 years ago

Sorry C, I disagree with the entire premise of this post.  Contracts must be presented to THE SELLER.  Whether the seller and agent present additional offers to THE LIENHOLDER has absolutely nothing to do with the price of beans in Uganda.  Want to add delay and confusion to a short sale?  Present a bank with more than one option at a time.  I do not believe in inundating an already overburdened and undertrained mitigator with more than one viable purchase contract at a time.  My fiduciary responsibility is to my client, not the bank.  Therefore, if it is in my client's best interest to either present one offer at a time to the bank or just send then 10 to review for the next 8 months, it is my professional responsibility to pursue the approach that I deem most likely to ensure the goals of my clients are fulfilled.  Big misnomer out there that you are somehow shirking the responsilbility of presenting all offers by not submitting them to a non-party to the agreement.  A contract may be subject to lienholder approval, but that does not transfer our obligations and responsibilities to that party. 

Posted by Paul Slaybaugh, Scottsdale, AZ Real Estate (Realty Executives) over 9 years ago

I'd rather sell all my possessions than deal with short sales and foreclosures. And unfortunately the fiduciary responsibility to the client gets overlooked in many situations... If you don't come to my broker's opens, I won't show your listings. WHAT??? I could go on and on. Go Paul. ;-)

Posted by Susie Blackmon, Ocala, Horses, Western Wear, Horse Farms, Marketing over 9 years ago

Jennifer, I am researching what the rules are because it appears each MLS gets to decide what their members should and should not be doing. Each bank has its own corporate policy on the subject matter at hand, and every state has its own set of rules and statutes. Some things are universal (Federal level) while everything else is very local.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 9 years ago

Suzanne, thank you. I love you too, bay-bay! ;-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 9 years ago

Paul, I understand what you are stating, but with some short sales THE BANK BECOMES THE SELLER because the owner signs over their authority to negotiate to the bank and walks away from making the mortgage payments. I'm dealing with a listing like that right now. The bank has not foreclosed on the property, the owner has given the bank notice they have run out of money and (1) can no longer pay plus (2) will deliberately not be paying by a specific date in the future. The listing agent (a friend of mine) now deals directly with the bank on all matters concerning this property because of the third party agreement between the owner and the bank. Meanwhile, I, the buyers agent, have people interested who are willing to pay enough where the sale is not a short sale (e.g. binder bidding war on a under-market property - can you see drama unfolding here? I do... ).

Now the part that sucks. I want all of my offers presented. I am being told the seller will not be getting any money back from this sale so my buyers don't have to offer what they are offering (screws up her short sale). My buyers want a property that is under market value, but not so far under that too many short sales and foreclosures will ruin the neighborhood. Seems I educated them very well. If the area is a declining market they are aware of the fact that (a) a larger down payment is required (10% instead of 3.5%) and (b) a higher possibility exists where they may not be able to sell the home if they decide to move in a few years.

What do you do when people want a decent deal that will hold propety values? You insist that all offers be presented to the bank because when an agent holds out for the offer that fits their package rather than the best offer (which may ruin the short sale) you get drama.

My two buyers walked because the home was "too cheap." Surrounded by $350K to $450K homes, $299K was a deal. When it went to $279K as a short they wanted to know what was wrong with the house and whether the other homes were overpriced.

Buyer perception is buyer reality. A nicely priced home equals good neighborhood in their eyes. A poorly priced home equals living in the hood... People always want a deal on their terms. It was a strange lesson to learn. They do want to save money but at some point they become suspicious at a "fire sale" price. That's why I avoid the short and always go for the under-market approach as a listing agent.

I think that some agents are too damn quick to short a house when they should be first trying to sell it to get their sellers as much money as they can. This house did not have to be shorted. It's barely been on the market and most NY foreclosures take 12-15 months to process up here. I would have let it go into the 30-60-90 days pre-foreclosure notice route before i shorted the property. The agent shorted the home in a matter of weeks and did not give buyers brokers like me enough time to find a decent buyer.

I had a buyer for the original discounted price, but that fell apart because of the electrical work needed. I had two more buyers on the hook for the property who changed their minds because of their perception of what a short sale would entail and their idea of too many problem homes being indicative of a neighborhood in decline.

I should not have been told over the phone to go back and tell my buyers to lower their bids. I should have been allowed to submit their bids to the lender and have the project accepted or rejected.

Respectfully, I have to agree with Elizabeth. Not being able to present my prospect's offer cost me a sale... Shorting the house also means 10% down and no 6% sellers concession to roll the closing costs into the mortgage. It cut out several buyers who would have been able to get it for 3.5% down at the original price with the owner able to make sellers concession and/or volunteering to help with closing costs because the home needs a little work.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 9 years ago

Susie, some of the people I am dealing with up here are crazy. They put me through hell, but I still do my job anyway. I am going to start serving their a$$ to them on a platter if they don't quit it because once they get used to doing things to a handful of people, they start to do it to everyone without blinking. I am at a point in my life where I have every intention of kicking their crap to the curb.

Life is short and I am tired of people thinking they can disrespect me because I am a Realtor and "have to work for free." I do not work for free. I do not owe anyone a damn thing. Leaving me a message does not mean I am obligated to work for free. Want to retain me and the firm? Make an appointment. Prospects don't sign the BBA, I walk. Listing agent gets unprofessional, I walk. Call and leave me a stupid message because you think my business number being public gives you the right to waste my time because you do not agree with my blog? I don't call back or acknowledge receiving the call, make a note of the person and do not do business with them or that firm. 

I am very busy and I am just starting to realize that sometimes its best to not take on new clients until you have finished servicing the ones you already have. I'm trying to clear my referrals right now. I have a lot of 'em and never imagined my blog would explode my business. 20 people a month is my cap. I can not deal with more than 20 people per month. It took me over a year to finally figure that out. Now I am in my happy place and refer the work out. :-)

I think I have a bit of an attitude because the more I learn on AR the more I realize just how bad some brokers have dumped their sh*t on me. I really had no idea how bad I was taken advantage of until recently and I feel a bit stupid for making excuses for them. I see people in the business as co-operating brokers but there are some who only see competition and are looking to cut throats and steal commissions or f*ck up other peoples deals so they can steer you towards their listings rather than the one you really want. Just because I forgive a person doesn't mean I have to continue dealing with them. Sounds cold, I know, but people didn't think twice about cutting me off when it suited them. Now, I'll stick with the ones who want to work well with me and send the others somewhere else to play their dumb little games.

Perfect example: I have an all cash buyer for a commercial property who was flipped off by an agent in my own firm who NEVER got the finacials back to me no matter how many times I asked and after several calls and e-mails. The tenant was a problem and he didn't like the grief the listing was giving him. My buyer wanted the tenant to stay so i said no problem except he didn't believe me and didn't service me or my buyer. Now, this person e-mails me all the time, spamming my mailbox with the listings he wants to move, yet, I could not get info on the listing I wanted. Another person kept telling me a property was under contract and it was not.

My buggest complaint: The seller sets the compensation when he or she signs the listing agreement. Some brokers get brain damage the monent they sit down to input the listing into the computer. Keeping the buyer's agents commission because you can sucks. Advertising no payment to the selling agent while you know they sellers has provided for the buyer's broker sucks. Changing the commission split after your seller accepts my buyer's offer sucks.Yup, been there, suffered that.

I love to use BBAs. They make sure you get paid by the buyer if (a) the bank denies the split agreed upon and you have to re-negotiate the REO, (b) if the seller's agent flips you off, or (c) the seller decides they are not going to honor their contract with the listing agent and force an escrow fight in court. 

Just because the market whomps doesn't give people (or the banks) the right to force agents into a lower payday. I do not mind taking a cut when I decide it will help a deal go forward and both sides are taking the same cut to help both of the clients out. I do mind being robbed and will not forget the people who robbed me. This is why I believe in presenting all offers and getting the co-broke in writing. Not presenting all offers doesn't help the client make an informed decision and opens the door to forcing a client to accept less when they did not have to... 

Another trend I have been noticing now is that listing agents are refusing to get the binder signed by the seller and faxing it back. The sellers are insisting they want to go straight to contract is what I have been hearing. I think it's time we stopped that nonsense as well. If the binder is not signed then I am going to inform the seller we do not have an accepted offer because they did not accept in writing, then move on. That little game has cost me money as well. I'm not happy about it at all and found myself wondering why I put up with it while a newbie. Time to nip that bad little habit in the bud as well.

Everyone can do what ever they want but I will always present all offers (and let the other side explain what they did with them when the sh*t hits the fan).

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) over 9 years ago

C, the bank does not become the seller.  The bank must approve a ratified agreement, but they are not the seller, nor the client.  The obligation remains to the client.

In your case, it sounds like a different matter altogether.  Your offer, were it not to cause the seller to sell the property short, sounds as if it wasn't presented to the client (seller).  That is an obvious breach of the code of ethics and fiduciary obligation.  For the life of me, I can't fathom why a listing agent and a seller wouldn't accept an offer that allows the seller to walk away from the property intact, with no short sale on their credit report.  That is just bizarre.  Out here, people are so far under water if they bought within the last 4 years that it's a moot point for the most part.  I listed a home for $425,000 that clients of mine bought new in the fall of 2007 for nearly $700,000.  No offers in 30 days.  Reduced to $399,000.  No offers in 30 days.  Reduced to $350.  Finally an offer after 3 weeks at the seemingly ridiculous price.  Now that we have a ratified contract to forward to the bank, the last thing you want to do is gum up the works by submitting whatever offers roll in to the bank for further scrutiny and approval.  I've seen and heard of too many instances where the bank simply sits on its hands with mutiple options, waiting for something better to come along.  Meanwhile, the best buyer(s) gets sick of waiting and bails after 3 months with no end in sight.  This is my problem with Elizabeth's post.  She doesn't allow for the agent's discretion (with seller consent, of course) in determining the most viable avenue for fulfilling the duty to the client.  I present everything that comes in to the client who signed my listing agreement, but I refuse to inundate the lender with everything that comes down the pike.  Banks are banks for a reason.  They don't know how to do this stuff.  As such, my seller and I negotiate the best deal that we can and forward ONE offer to the bank at a time.  Any subsequent offers will be held in backup position until the bank makes a decision on the offer that the seller has selected to execute.  Until the seller loses the property, it is still within his/her discretion to do so.  Further, a short sale situation does not always mean the seller is behind on their payments, though that is most common.  Short sales have and do occur in which the bank agreed to sell at a loss despite an owner being current on the mortgage.  That's not the current trend, but it does happen.  I don't care for this one agent directing how all agents handle their business for their clients.

Of note:  Elizabeth edited her post to now read "seller" where it had previously read "bank" and deleted all comments that pointed out this error.

Posted by Paul Slaybaugh, Scottsdale, AZ Real Estate (Realty Executives) over 9 years ago

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