Why agents are better short sale negotiators than attorneys

I have nothing against attorneys.  In fact, we always advise our clients to speak with an attorney about how a short sale will affect them. However, there are concrete reasons why agents experienced with short sales typically are more successful at negotiating a short sale than attorneys.

1) A short sale transaction will succeed or fail based on how experienced and effective the real estate agent is, not the attorney.

The structure of the purchase and sale agreement is critical to a successful short sale transaction. The number one reason that short sales fail is a lack of understanding on the part of the negotiator about how the short sale process works. Maybe they are unfamiliar with the intricacies of all the forms that need to accompany the purchase and sale agreement. Or they don't understand how lenders manage short sales. Or they insist on including language in the agreement that banks are not willing or able to approve. For example, a P & S agreement we saw recently that was written by an attorney included a 25 day closing deadline. Since the average short sale takes 60 to 90 days to close, the inclusion of this impossible deadline guaranteed the sale would not go through, creating frustration and lost time for buyer and seller alike. 

Deep understanding of the real estate process, knowing what lenders want, qualifying buyers, setting the right price, providing constant communication with all parties-  these are the keys to short sale success. And these are  skills unique to a real estate agent who specializes in short sales, not an attorney.                 

2) If you use an attorney to negotiate a short sale, will you or your client get stuck with the bill?

All short sale negotiators are paid for their work.  If the negotiator is a real estate agent, negotiating the short sale is part of the professional service that they provide and are compensated for through their commission.  There is no additional fee to anyone.   

Attorneys typically charge a fee of 1-2% of the purchase price to negotiate a short sale. Sometimes the lender is willing to pay their fee, but more and more often they're not. Since short sales sellers typically don’t have the money, that leaves the listing agent, buyer or buyer's agent to pick up the tab.   The listing agent certainly doesn't want to get stuck paying the fee. And it's tough enough to sell a short sale property-  why make it harder by adding the possibility of additional fees to the buyer and/or their agent?  

We were recently involved in a situation where a law firm negotiating a short sale neglected to have the listing agent or seller sign a services contract, leaving it unclear who was responsible for paying their 1% fee. Once the short sale was approved, the firm asked the listing agent to pay the fee of $3,100 and threatened to not allow closing until they were paid.

If you depend on a third-party negotiator that charges an additional fee for their service you are to a large degree at the mercy of their process and their timing. The best way to avoid being taken hostage by a third-party negotiator is for YOU to be in control of the sale.

The bottom line:  

• We believe that short sales are first and foremost real estate transactions, and they should be handled by real estate agents who are highly experienced in short sales.   

• Negotiating the short sale should be a part of the professional services that the real estate agent offers at no additional fee to anyone.  

If you're looking for legal advice, see an attorney.  If you're looking to sell a home, see a real estate agent.  

Tips For Pricing A Short Sale

We often get questions about the best way to price a short sale. In reality, many of the same principles that go into pricing a non-distressed property  apply equally to setting the list price of a short sale. Price depends on the location of the property, its condition, the availability of strong comparable properties, and the amount of competitive inventory.

When pricing a short sale,  the key is to strike a balance between what a buyer will pay and what a bank will approve. It's not unusual to see agents apply an across the board discount to a short sale property (for example, a 10% price reduction). This is a mistake. In so-called "hot" neighborhoods, short sales often can be priced at market value.  When the bank's appraiser does a value determination of a short sale property, they generally will try to seek out comparable short sales in the neighborhood. If there are none, the appraiser will use non-distressed properties as comps. If an agent lops $30,000 off the value of a home just because it’s a short sale, it's unlikely that such low offers would be approved by the bank.  

An added note: If you want to dispute a short sale valuation, and your client's loan is with Bank of America, BofA has launched a streamlined process for considering an alternate value.      

BofA launches faster way to dispute short sale valuations

Listing agents that disagree with bank valuations of short sale properties now have a new option. Bank of America has streamlined their process for settling valuation disputes during a short sale, making it faster and easier for agents to get the bank to consider an alternate value.  

The value of a property is established by independent third-party vendors shortly after a short sale is initiated. If a listing agent wants to contest that value, this is the new process:

How to dispute a Bank of America short sale valuation

1. Tell your BofA short sale specialist that you would like a reconsideration of the value.

2. The BofA short sale specialist sends you an investor-specific, easy-to-complete form that specifies all requirements for a successful value dispute.

3. You fill out the form and attach specified evidence.

4. You can expect a value dispute review within 10-12 business days once all required information has been received.

Evidence you need to provide to Bank of America to dispute a value

When contesting a home value, Bank of America requires compelling evidence to support your claim. Here are the guidelines outlined by BofA: 

• Do not reference property pricing amounts in the narrative on the form. This violates appraiser independence policy and is against industry standards. Any reference to pricing will disqualify the dispute. 
• Provide comparables that are recent, proximate (nearby) and similar to the property in question.
• “Recent” means sold within 90 days of the actual value document date.
• “Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate.
• You will be able to provide additional notes to highlight characteristics of the comps.

When the dispute centers on property condition or hazards:

• Provide an itemized estimate from a licensed contractor on the contractor’s letterhead.
• Provide photos to illustrate the repair, condition issue or hazard you want to highlight.

The above is a summary of the new changes. Your Bank of America short sale specialist can provide additional guidance about the process.