Many of our area agents and brokers are encouraging their buyers to allow the agent to alienate the short sale property from the list of homes to show.

Our market place is about 25% short sales or other distressed properties.

Over and over again agents share stories of excessive time loss from lenders simply not communicating with the agent. More and more of our agents are simply not taking short sale listings, because the lender's are unreasonable in the time frames that they give just to be heard back from.

Most buyers when buying, have a 45-60 day time frame - so the average 90 period it's taking most of these sales make them unreasonable for the consumer to wait on a high percentage of no answers from lenders.

I agree short sales can be a profitable niche, but the problem I'm seeing is dealing with a listing agent who doesn't know what their doing.

Lenders do indeed appear to be discouraging the sale of properties that are under water. In this market, if the commission to the selling agent isn't at least 3%, then most agents will not show the property to their buyers.

A speaker at a short sale seminar I attended said that 80% of all offers on short sale listings do not result in a closed escrow. Combine that with an escrow of 90 days or more, and the lack of cooperation from lenders, and you can see why most agents will avoid representing buyers in short sales.

In this market, REO properties are much more attractive because they are generally priced lower, closing is more likely to occur and the selection is very good. More and more REO listings offer a commission between 3 and 3.5 percent, unlike short sales, which start off at 3%, state that they will be determined by the lender, and actually end up being closer to 2%.

Regular sale properties are also plentiful, and most are also offering at least 3% commission.

Stacey, In response to your comments: While not a fan of conspiracy theories, I just can't fathom the Banks humbly concedeing a loss to a Trillion Dollar industry and just walking away. My focus was on selling agent's commissions.

Therefore, please consider the following:

The Banks here typically pay 1%, (sometimes 2%) to the listing agent on an REO. The Buyer's agent is offered 3% and sometimes, an additional bonus. In this scenario, would real estate agents focus on buyer representation leaving the REO listings to brokerages who secure the REO accounts as in-house accounts? Will conventional sellers pay a reasonable commission to the listing agent when the banks are paying only 1%?

Why indeed would banks conspire? If my 'theory' has any merit, the listing agent's commission will be reduced. Would the reduction in buyer's agent commissions soon follow?

Funny you should ask... I just today received an email asking if I'd like a short sale listing; my immediate response was "Thanks but NO THANKS!" I agree that the banks want REO - why else would they make it so hard for us to bail them out of the over-extention mess that they got themselves into with their greed? The three short sales I got sucked into working are ... I pray to God ... the only ones I ever WILL be involved in, and I wish I'd never wasted the time on those. The lenders were ridiculous ... and a lot of words you wouldn't print. I have no desire to be a part of that cluster-****!

I agree with Jane..........Banks make it very hard with their load of paperwork. So far every REO I looked at is sub-par.

Lenders are shooting themselves in their collective feet!

First, why would any agent want to show a short-sale listing? Lenders will not guarantee payment to the brokers of the commissions offered in the listings, and it is likely that these transactions will be both lengthy and frustrating, at the very least. Non-distressed properties in the current market are priced competitively with short-sales and REO properties, the commissions on those listings are guaranteed, and the sales are likely to entail less work, less frustration and less time to close.

Lenders will not reduce their inventories of short-sale properties unless they guarantee commissions--perhaps even offer higher commissions in consideration of the extra time, effort and risk involved, and assign officers for each property, who are capable of responding rapidly, and have the authority to accept, reject or counter offers.

Second, foreign nationals are looking to buy up distressed properties. Our low pricing makes property in the US an attractive investment, and the weak dollar gives foreign nationals even more buying power. Instead of facilitating these purchases, however, banks have tightened underwriting guidelines, offering, for example, only 60% LTV financing, as opposed to the 75% that was offered until recently. This practise is self-defeating, and I fail to see the lenders' rationale.

Third, the current market represents a rare opportunity for the federal government, states and local authorities to purchase properties at prices that would enable them to increase the availability of Section 8 and other affordable housing. So what do our leaders do? They put the Iraquis' interests ahead of our own, indebting future generations of Americans well beyond the foreseeable future fighting an illegal, multi-trillion-dollar war, they bail out the very for-profit Wall Street businesses that have speculated in real estate and suffered losses resulting from illegal and unethical lending practises, and they make additional funding available to developers, so they can build even more housing to add to the existing surplus.

Instead, the federal government--in conjunction with private lenders--should wake up and make funds available for the purchase of affordable housing. Funds could be raised by issuing government- or state-backed bonds. This would rapidly and efficiently reduce the staggering over-supply of housing and, at the same time, meet a critical need which is otherwise not being met.

There are many viable solutions to our housing and mortgage crises, but it seems to me that all those capable of facilitating the change we need--particularly the president and our Congress--are overlooking the most obvious, logical and pragmatic solutions!

I won't be showing any short-sale listings until lenders change the way they do business, and our housing and mortgage crises are not going to disappear until the government takes a common-sense approach!

Many of the listings in my area that are expiring are characterized as “short sales”. The listing prices of many of these listings seem to be directly based on what’s owed on the property rather than on the property’s fair market value. Combine this with the fact that the commission rate on short sales can’t be guaranteed and I can certainly understand why so many of them expire without selling. Short sales can be a less expensive and better alternative to foreclosure for lenders who fully understand the benefits that they gain from using this process. Buying and selling brokers should understand that they can say no to a reduction in the commissions due them; even if it means no closing. Short sales may not be for everyone but they’ll likely be around for a while given our current economy; they may be worth looking into.

Short sales are a HUGE OPPORTUNITYright now for agents, and most of them are missing the boat entirely. Agents need to key into what investors are learning -- how to successfully navigate the short sale transaction. it only makes sense in today's market, and any agents ignoring it are leaving HUGE profits on the table IMHO.

...jp

Short Sales are doomed as the lender DO NOT COMMUNICATE, AT ALL. If you dare ask them to respond as the Buyer's loan lock is expiring or that they must make a double move as the 90 days plus it takes to get an approval, let alone close wrecks havoc on families, their school plans and loans. The difficulty is compounded as ones buyer places their faith and trust in their Realtor who represents them - but when no information or communication is available, buyers have not only given up but gone on to seek another agent. How sad, we just want to provide professional service, yet the very thought of a Short Sale causes more grief than results. REO yes, Short Sale NO! 80% do not complete, why do it?!

Lenders are not helping at all by not responding. It's discouraging when you're really doing your best, have a qualified buyer and submit a complete package, your buyers rate is about to expire, your seller's home is on the verge of foreclosure and the lender either doesn't respond, doesn't know status, you can't reach your lender or anyone knowledgeable enough to know what's going on or even where your shortsale package is. lol

As someone who has worked more buyers then listings over the past 19 years of my real estate career, I have come to the conclusion that selling 10 homes to see 1 stick is just not profitable, especially when you have to wait 60 to 120 days for an answer. This is often times the case with short sales. Unless the system changes I will discourage buyers from seriously considering putting in an offer because at any time until the bank issues a formal acceptance of a buyers offer, a subsequent offer can trump the offer we have working. At least at a true auction you know within minutes if you are the lucky winner. The short sale process turns our buyers into shills for the banks benefit. No thank you. Until the system becomes a little more buyer and buyer broker friendly I think I'll encourage my buyers look at resale, new, corporate relocation & bank reo's. Surprised, in all the blogs I've read I don't see more agents demanding more equanimity for their clients!

The problem is that in my Los Angeles neighborhood, there are a lot of homes that ARE for sale. A short sale continues to be a Maybe.

Does anyone know a place that I can sign up and get some REO property listing from the banks. Does any one know how that works? I see lots of signs out in my area and most listing are REO but I wounder how they get this listing? Thanks. so much

I beleive that the agents who are putting in the Short Sale are really misleading the public in many cases. I have had buyers make offers on properties that were listed for a example for 299,900.00 Finding out that the sellers owed over $400,000.00 There is no way that the bank will approve a 100k lost, and let the sellers walk with no way to collect it.
I believe us Realtors must keep it with in reason, maybe no less than 10% of the balance of a short sale unless you have a letter that states from the lender they are willing to accept something less. These Realtors are Misleading the public, and making harder for the other people to sell there homes at a reasonable price and driving the market even further down for their own gain. Their gain is geting hundres of buyer calls for these great priced homes that no one can really buy. I had another buyer put in offer on one that was listed at 189k, we offered 175k, the sellers owed 280k, the counter came back at 250k, now try and say your not misleading the publc on this stuff. They think they can buy it under 200k which is False and MISLEADING!! I think we need something in the rules and ethics that the price on a short sale can not be less than 10% of the balance on the sellers mortgage unless the sellers have in writing from their lender a approved price which ever is the lesser.
I believe may of these listings are unethical! and Misleadng!!

Can anyone tell me the standing of ethics 3-2 that states that the commission to coop brokers has to be set BEFORE I bring them a contract? I don't see how a broker listing a short sale can change what they are offering after I give them the contract. Sometimes the broker does not even tell you it is a short sale.

Brian Burry , Debra Barrett, and Mark Antonowsky all hit the bull’s eye on this subject. I have been in my Real Estate career for just under 5-years now, and I have worked in the distressed home/investor-sales arena for the majority of my career. However, I just recently ventured for the first time into the “pre-foreclosure/short-sale arena; it was my first venture – and – it was my last venture into this sales arena.

Not only did the bank refuse to communicate with me, they stalled answering (in writing or verbally) on a 92% NET offer on my short-sale listing for over 180-days; the prospective buyer became frustrated and walked away from the deal. I was fortunate enough to obtain a second offer (81% NET) from a prospective buyer; the bank again stalled for over 200-days, then refused the offer as “…too low…”, and sold the property at Sheriff’s Foreclosure Auction. The bank rebuffed any conversation on a counter offer and refused to “…negotiate…” further.

My investment in this pre-foreclosure sale totaled nearly $300; I had a yard sign stolen, a lockbox damaged, I invested money on advertisements as well as time spent showing the home and getting various “inspectors” into the property on short-notice.

Oh, and just for the record, the bank received a 79% NET from the Sheriff’s Auction, of course, my paycheck for all of my work was $0.00!

Soon after the Sheriff’s Auction was completed, I learned from a bank representative that my first offer had been “…lost in the system…” . In addition, my second offer had been passed through three different Asset Manager’s hands – without being studied – and was denied immediately by the fourth Asset Manager without proper investigation. The bank representative could not explain why this happened, but she was “…sorry…” that I had difficulty.

Why should I invest my time, effort, and money working on a short-sale/pre-foreclosure listing that in all probability will net me a big goose-egg ($0.00) in commission? I am a trained professional, and I stand accountable to a professional Code of Ethics! Why should I continue to do business with someone who seems not have any sort of ethics code, or with someone who practices irresponsible and unprofessional business actions?

As of now, I do not recommend my buyer’s even consider looking at pre-foreclosure short-sales, I am counseling them to wait for the home to be sold at Sheriff’s Auction or to be marketed on the after-foreclosure-market.

Yes, dealing with the REO department of a bank on a foreclosure sale is a headache, but it is far less of a headache than dealing with the Loss Mitigation Department before the home becomes a foreclosure!

I have an ethical question, which may/may not be a legal one.

A few years ago a nearby home sold to a nice couple, with husband's sister as his agent. They quickly realized they couldn't afford the home. It was rented, then finally foreclosed. The sister of the husband acted as the agent for the bank on the foreclosure and ended up short selling it (by over $500k) to her parents. She was able to get them $125k below what the bank was even willing to take. Can Agents represent a bank and sell to their family? She is also now occupying the guest house. Seems unethical. Appreciate your thoughts.

Does anyone know of a short sales agent that really knows what they are doing? I need to refer several possible short sales to someone? All the legal potential problems scares me to death!contact me at www.homesbyshari.com
thanks

We are a group of agents based out of Austin, TX that does Short Sale Education and training. We spoke at the NAR convention this year and we are here to help you! Please contact me directly or visit our website to learn more about our resources.