Should you hire a 3rd party short sale negotiator? Processor? Massachusetts New Hampshire

Should you Hire a 3rd party short sale Negotiator? Massachusetts

EXPERT – It’s often I see that term used to describe someone involved in short sales.  It’s pretty scary.  I’ve seen it as a designation for many agents after a weekend course.  I can tell you without a shadow of a doubt NO ONE is an EXPERT in short sales because short sales laws, requirements, paperwork, time, etc., change daily.  No one can possibly be an expert, because no one knows everything about short sales.

True Story – We were negotiating a short sale for a “newbie” agent.  This agent knew very little about short sales which is why he hired us.  We worked with him in aggressively listing a property and got three offers.  We took an offer from a buyer with 20% down, conventional, pre-approved mortgage.  One agent that presented an offer was VERY angry.  He tried to bully my agent and wrote an email saying that if his offer wasn’t accepted, that he would go straight to the lender.  Of course the agent we were working with was a bit panic stricken.  He forwarded me the email.  It was very interesting that this agent had a CDPE designation to his title – Certified Distressed Property EXPERT!  If he was an EXPERT he would have known there was no way he could send his offer directly to the lender without permission of my seller.  We crafted a very polite response and told him if he felt that strongly to “Go Ahead” – Thankfully he calmed down and was put in back up position.

Hiring a third party to negotiate short sales is not new.  It is actually becoming more and more common with the increasing liability agents face.  In New Hampshire the NHAR actually published a bulletin stating, “REALTORS must be careful when handling short sale transactions to NOT negotiate with the lender on the property owner’s behalf.” (http://www.nhar.org/member-services/legal-committee-resources/potential-ramifications-of-the-safe-act-for-realtors/ – scroll to bulletin p.2 last paragraph) – Don’t believe me? Call your E/O provider right now and ask if they’ll cover you in short sale negotiations. Next call your attorney and ask if you can be civilly and criminally liable for consumer lawsuits regarding short sales. Do you know how many homeowners I’ve run into that never understood their liability regarding deficiencies, taxes, and even the short sale process in general?

It makes sense that you see more and more listings popping up with a disclosure regarding a third party negotiating a short sale.  Agents are realizing the value in outsourcing, not just in the legal sense, but primarily the time saved involved in negotiating.

Third parties all approach the collection of fees differently.  Up until recently some negotiators charged clients up front for fees (usually to the seller), but no longer is that possible with recent MARS-FTC rulings, unless you are a lawyer.  Only lawyers can charge up front fees for negotiating and even lawyers have certain guidelines they must adhere to. There are third parties that charge the agents (buyer’s and seller’s agents) a portion of their commission, whether it’s 1-2% and sometimes that’s split between the two agents involved.  There are some third party negotiators that charge a portion of the sale amount that is paid by the lender or agents involved. It may be 1-5% of the purchase price.  Many lenders have tightened their belt and said “NO” they will not pay 3rd party negotiation fees. Then there are those negotiators like our company that charge a flat rate to the buyers, whether it’s $3500, $5000 or sometimes a percentage of the sale.  There are certainly all different ways to recover the time spent on negotiations and each 3rd party approaches it differently and utilizes the method most comfortable to them. There are also lawyers that charge up front fees in compliance with MARS-FTC rulings.

I have worked with several lawyer negotiators, and what I’ve found is if they solely concentrate on short sale negotiation, i.e., that’s the primary portion of their business, they are extremely effective negotiators, however I’ve also worked with lawyers that had “added” short sale negotiation to their long list of services they already provided to clients.  In my opinion, they didn’t necessarily make for great negotiators.

What should you watch out for when hiring a 3rd party negotiator?

Well, for starters, you want to know how they are paid.  Find out who is responsible for their time and make sure that payment is ON THE HUD.  Any negotiator not getting paid on the HUD may face serious liability.  Fees should be disclosed somewhere in the listing agreement or on the MLS if it’s charged to the buyers.

Call your AG’s office and make sure no complaints have been filed against the company you’re doing business with.

Review negotiation contracts and make sure they are MARS-FTC  compliant along with any other necessary disclosures.

Ask if they are licensed.  MOST STATES do not require a license to negotiate a short sale.  New Hampshire 3rd party negotiators must adhere to the 479:B law if they are not a licensed agent, attorney, etc.  Licensing is NOT an indication of success, but it is good to know.

Ask about their methods of communication.  Honestly I think the #1 thing that makes someone successful as a negotiator is easily the simplest and most forgotten, which is communication.  I don’t care if the lender hasn’t reviewed the file for three weeks or longer, a good third party negotiator is updating the agents, homeowners, title companies, etc., regularly. A good negotiator should have IMMEDIATE communication with a homeowner if a lender has requested information, given an approval, or needs assistance. A good negotiator will also match the HOMEOWER’S preferred method of communication.  I’ve had some homeowners who responded better to texting than emails, some who needed phone calls instead of emailing.  A good negotiator finds out up front how the homeowner prefers to be contacted.  Make sure you know exactly how they’ll be communicating with you.

Watch out for so called “experts” or “professional” or “specialist” short sale negotiators. Like the beginning of this blog, I’ve run into the EXPERTS who knew NOTHING about short sales.

Any negotiator that tells you they have “inside contacts” should be avoided.  We all may have an inside

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contact.  I have LOADS of personal email addresses and numbers from negotiators at Bank of America, Wells Fargo, GMAC, Citi, AHMSI, ASC, Select Portfolio, etc., however if you think I can get my files to the top of my business associate’s lists, then you are sadly mistaken.  I’m not saying you can’t call someone and possibly get some help, but be forewarned, your short sale is not going to the top of a negotiator’s pile because I know them.

 

 

Be wary of anyone that promises they can get the sale done in a certain amount of time, or can get a short sale approval without a deficiency clause.   NO one, not even a lawyer can promise that.

So who should hire a 3rd party negotiation company?  Well, for starters, anyone who isn’t comfortable or doesn’t feel they have the knowledge to negotiate a successful outcome.  Many agents we work with are new and not experienced with each lender.  They lack the necessary knowledge for whatever reason.  Agents who are too busy to handle the mounds of paperwork, time on the phone with lenders, creating HUDS, faxing of paperwork, coordination of negotiators, coordination of closing agents, title companies, etc., are also another type of agent that may want to consider hiring a third party negotiator.  Many of the agents we work with want to concentrate on volume listings and not on dealing with lenders.  We have agents who come to us and admittedly confess they aren’t good at dealing with bank negotiators.  Many times a negotiator from the lender gets aggressive, mean, confrontational, and agents REACT.  They’ve come to us and said they realize their reactions made the situation worse, so they were ready to let someone else deal with the frustration.  Another type of agent that we’ve gotten phone calls from are those who are sick of short sales.  They may be very experienced, but are tired of dealing with the lenders and anxiety of the situation.  BELIEVE me many homeowner’s who are short selling their homes are anxiety ridden.

Besides agents, we are hired directly by homeowners.  Many homeowners have questions about the process, what to expect, what the outcomes are and homeowners aren’t sure where to turn.  Interestingly if you look back 10 years ago, agents didn’t really negotiate short sales.  Short sales weren’t prevalent in real estate and if they were necessary, usually lawyers and mortgage originators handled them.  The poor agents got the fun job of negotiating short sales by default.  When the housing market really started to crash, agents had to learn to navigate the short sale jungle without much assistance. Thankfully for homeowners in this market, many agents took the time to learn.  With the huge increase in defaulted mortgages, the market had a need for even more negotiators to handle distressed property.  Today, many third party negotiators ONLY do negotiations.  They don’t split their time listing, or selling property.  They negotiate full time and because of that tend to have a lot of experience.

Who shouldn’t hire a 3rd party negotiator?  That’s easy, anyone who is a control freak.  If you have a hard time letting someone else handle a file, then you won’t be comfortable outsourcing your files. I don’t necessarily mean that in a negative way, but there are some people that cannot handle someone else working on their files.  If that’s your personality type, outsourcing short sales will not be something you’re comfortable with.  Anyone that can’t handle change or is “old school” as I like to refer to it, isn’t going to be someone who will be able to outsource negotiations.  Outsourcing short sales isn’t necessarily new, however it does require a level of disclosures in your contracts, on the MLS, and if you’re not open to change you’re going to have a hard time overcoming a more progressive approach to negotiating short sales.  If you think you know everything about short sales, you aren’t going to be a good candidate for outsourcing your short sales. No one knows everything as I stated in the beginning of this blog.  Short sales change daily, weekly, monthly, and no one possibly knows every little detail about every little detail requirement.

What about investors? Should you let an investor negotiate your short sale? Well, it depends.  First you should know that most third party negotiators are negotiating on your behalf, but an investor negotiates on their own behalf.  Is this necessarily a bad thing?  It depends.  Most investors want to see the property close as much as the homeowner, but the biggest question I would have for an investor that negotiates your short sale is WHAT WILL THEY DO IF THEY CANNOT COME TO AN AGREEMENT WITH THE LENDER?  You want to know what the back up plan is if the investor can’t come to a price acceptable to them and the lender.  If they don’t have a back up plan, you want to make sure you do.  Make sure all necessary disclosures to the lender are in place if they plan to do a rapid resale for profit.  Do all the same diligence as you would above including, checking with your AG’s office, MARS-FTC compliance, and avoiding investors telling you they have “inside contacts” or are EXPERTS or SPECIALISTS.  It doesn’t necessarily mean they aren’t good, but you want to make sure you have a comfort level with them and that everything is above board.  Investors are doing an excellent job in assisting with the inventory in the housing recovery, however, one bad apple can make headlines soar.  Most investors that work full time on short sales, aren’t going to be the bad apple.  They know what is needed for successful sales including paperwork, disclosures, communication, and would never jeopardize their bread and butter.  I know some amazing short sale investors who have assisted many, many homeowners avoid foreclosure.  Don’t be scared to utilize an investor, but definitely do your homework before you get started.

In conclusion, outsourcing short sale negotiation is an excellent way to increase your volume if you’re an agent, and interested in avoiding the lengthy lender process.  It may not be the best option if you’re an agent that has problems having someone else control the homeowner file.  If you’re a homeowner in search of information, many third party negotiators are readily available and most focus only on negotiating, not listing, showing, or marketing property.  Their only focus is helping homeowners navigate the short sale process with ease.  Good luck with your decision

Maryann Little
VP Negotiations and Acquisition
http://shortsalemitigation.net
http://massachusettslossmitigation.com

Massachusetts Short Sale Negotiator
NH Short Sale Negotiator

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