NAR approves short-sale disclosure options for MLSs
MLSs can mandate disclosure of potential short sales
By Glenn Roberts Jr., Monday, May 19, 2008.Bookmarking Sites
The National Association of Realtors' board of directors has approved policies that allow for more disclosure about the potential for short-sale transactions in which lenders consider whether to allow a purchase offer that is less than the amount the seller owes on the mortgage.
Colleen Badagliacco, former president of the California Association of Realtors who serves as the chairwoman for NAR's Multiple Listing Issues and Policies Committee, said today that the board decision requires that Realtor association-operated multiple listing services must give participants the ability to disclose to other participants the potential for a short sale.
Prior to the rule change, many MLSs did not have the ability to disclose the potential for short sales to other MLS participants, Badagliacco said, so that buyers and cooperating brokers who are presenting purchase offers may not realize until they submit the offers that the sale is subject to lender approval.
It can take weeks and even months in some cases to hear back from lenders on whether a short-sale offer is approved, too, which can be a frustrating process for buyers.
"We're trying to do everything that we can, from our point of view, to make the retail market function," Badagliacco said.
"You have to give brokers and agents that participate in the (MLS) service the ability to disclose it," as a result of the new policy.
The language approved by the NAR board of directors provides that a "potential short sale" transaction is one in which there is a likelihood for a transaction in which title transfers, the sale price is insufficient to pay the total of all liens and the cost of sale, and the seller does not bring sufficient liquid assets to closing to cure deficiencies.
NAR directors also approved language that MLSs can choose to adopt on whether to require listing agents to disclose the potential for a short sale to other MLS participants. And the voluntary MLS policy provides for disclosure by the listing broker about a potential reduction in the gross listing compensation if the transaction is approved as a short sale.
The policy changes do not require or suggest any public reporting of potential short sales by MLS participants to consumers and other nonmembers of the MLS.
Rising volumes of short-sale and foreclosure-related real estate transactions are hot topics with real estate professionals and multiple listing services. Some MLSs already have specific categories and reporting requirements for properties that may be subject to a short sale.
Real estate auction sales have also been a subject of discussion for NAR officials. Last week, during a meeting of NAR's MLS Issues and Policies Committee and Multiple Listing Service Forum, a panel of representatives for several MLSs presented varying approaches for handling auction properties in an MLS system.
Ben Anderson, chairman for NAR's Auction Presidential Advisory Group, said the national subprime mortgage disaster is in some ways reminiscent of the collapse of the savings and loan industry in the 1980s.
The volume of property auctions is rising again in response to rising foreclosures, he noted.
"The oversupply is overwhelming and the result of that is a challenging market," Anderson said. Auctions can help to quickly heal the supply-demand imbalance, he said, and Realtors and Realtor-affiliated MLSs can play a role in the transactions.
MLS Property Information Network Inc., a New England regional MLS, is opening up to non-Realtor auctioneers in order to allow its members more opportunity to participate in auction transactions, said MLSPIN's Michael Jewell, who spoke during the meeting.
Anderson said that Realtors should not feel threatened by auction transactions.
"The auction will never, never replace what we do as Realtors in a traditional sense. It is a method of selling real estate," he said.
Some audience members questioned whether prices for auction properties are accurate, as they may reflect a starting bid price that is artificially low because it may not meet a reserve price or satisfy the lender if the transaction involves a bank-owned foreclosure, for example.
And the MLS representatives who shared their methods for handling auction properties have different requirements for disclosing the price and compensation involved with these properties.
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Submitted by Jillayne Schlicke on May 19, 2008 - 1:49pm.
Disclosing short sales to the general public is the next step.
Submitted by Gregory Bain on May 19, 2008 - 3:06pm.
One would think with all the hoopla over "short sales", that they had just been invented. Hello - glad the association is awake now. Most of the agents I see who post "short sales" in the MLS have never even talked to a representative from the mortgage company. They just put in a number and write subject to "third party" approval. They don't even have comps to support the number. Just working on blind luck. No wonder the public thinks we just stick a sign in the lawn. Now the NAR is going to work out details on how the 10,000 different MLSs are going to report them? Great another barn door closed. Good Job!
Gregory Bain, ABR, SRES
Realtor Associate
NJHomes@Ask4Greg.com
Submitted by Michael Espiritu on May 19, 2008 - 4:05pm.
The California Association Of Realtors has already implemented forms for a Short Sale Addendum and a REO Listing Advisory. Short sales make up a huge segement of the listings in our 12-Association member MLS in the Southern California area.
Each association should have its own rules regarding short sale language, compensation, etc. Many agents who list short sales have never actually successfully done one as a listing agent or a selling agent. I would recommend at minimum attending a short sale seminar so agents at least know the process. There is a procedure that each bank uses that has to be completed prprior to any acceptance by a bank.
With all the hurdles a short sale entails, an unqualified or naive agent is another obstacle you must overcome.
Submitted by Ron Taylor on May 20, 2008 - 7:17am.
Yes, it can take months for a short sale offer to go full cycle with a lender. The amount of paper work, viz., short sale workout package, is quite time consuming for the realtor or an auctioneer like myself but there is no way around it.
Remember how much financial information the lender wanted to approve the initial loan? Well, the same information plus more, is needed to see if the homeowner can qualify for a short sale.
That is why we try and get the short sale approval before trying to market the property to the public and then auction the property as quickly as possible.
Whether you are an auctioneer or a realtor, your commission must be approved by the lender. That commission rate must be on the net sheet, i.e., preliminary HUD 1.
Do not try and negotiate your commission after getting the short sale approval or you may be in for a surprise.
I suppose it is good the NAR is doing something about disclosing a short sale situation but it will not shorten the time frame to get approval.
For more information about auctioning real estate, go to my website at www.canSellnow.com.
Ron Taylor<><
President/Broker/Auctioneer
The Restorer, Inc.
D/B/A Taylor and Sons Real Estate & Auctioneering
252-257-4822 (Office)
252-257-1302 (Fax)
www.canSellnow.com
Submitted by Alexander Paykin, J.D. on May 29, 2008 - 8:52pm.
Wow, you'd think no one here works in the industry! It's a short sale people. If you have a property where the owner owes more than the market value, just submit the short sale processing and mitigation to a QUALIFIED professional. Then, the professional will tell you what to list the property for, what the lowest possible number to be approved will be, how long it will take, and any other issues on the horizon. The, follow the expert's advice, and behold: the property will sell quickly, at a fair price, and the bank will approve the short sale.
Why doesn't it work for most realtors?
1. They try to do it themselves, but are not willing to call the lien holder AT LEAST 3 times a day. Yes, it's a lot of time to spend on hold, but if you're looking to approve your deal, you have to annoy the bank's mitigator until they give in.
2. They try to do it themselves and are simply not experienced enough to submit the package right the first time. I've seen realtors submit document packages that wouldn't get approved to be shredded!
3. The documents don't have the right deadlines. Don't submit a short sale with a contract that says that if closing doesn't occur in 2 weeks, the deal is off. By the time the bank gets to review it, they look at the docs and say, 'well, there's no binding contract anymore...'
4. The realtors get greedy. Yes, the bank is paying your commission and the homeowner doesn't care what's on the listing agreement. But the bank does! They will not approve a short sale with you getting a 7% commission, while they're writing off a 40%+ loss... Let's keep it reasonable...
5. Realtors are not trained in loss mitigation practices. It's not enough to convince the bank that the offer is for fair market value. You need to convince them that the homeowner is in dire financial distress AND that the bank can't possibly make more on this deal than is being offered by your buyer...
6. Realtors don't know the laws. Banks are governed by many regulations including those passed by the SEC. A qualified mitigation company that employs lawyers to do the mitigating will make sure the bank doesn't get away with something it shouldn't, whereas most realtors don't know any better.
7. MLS tagging isn't going to change anything. There has always been a field in MLS known as the property DESCRIPTION. Describe that it's a short sale. Is it that hard?
8. Realtors do not have the resources to respond to the banks in a timely fashion. Many banks outsource the processing and mitigation of the short sale properties to other countries. That means: DIFFERENT TIME ZONES. Banks can call back to mitigate the property at 4 in the morning! On Memorial Day! I know because that is exactly what Countrywide did with 2 short sales I have pending with them. If our company didn't have a 24-hour mitigation line, God only knows when, if ever, they would call us again. If you're going to do the mitigation yourself, make sure the bank has your cell phone and you sleep with the ringer pressed against your ear. You may think I'm kidding, and if you are, the joke will be on you...
9. Realtors don't have the document database and logging system short sales require. The most important thing in short sales is access to information. When the bank calls you at 11 at night and wants to mitigate your file, you need to have all the info in front of you. If you don't have a computer system where everything is hosted online and you can access every document, every comment, every record of every conversation you ever had with anyone and every fax receipt at your fingertips, then when the bank calls, you won't seem like a qualified professional. Banks know who will let them get away with things, and if you're not ready when they call, good luck getting them to call again!
10. Proof it up. You need to be able to call the bank's bluff when they say 'well we never received that'. You need to demand a supervisor, and be able to direct the supervisor to a web-page where they can instantly see a copy of your fax receipt, or an audio recording with an employee from their bank who promised you something that didn't occur.
If you don't have such resources as would allow you to do all of this, guess what? You're not a loss mitigator. You're not a short-sale expert. You're a realtor! I'm not saying that's a bad thing, or attempting to poke at realtors, but the fact is, loss mitigation and real estate sales are two entirely different fields. At no point during your career of selling houses did you earn an MBA, a JD, or any other degree that would give you the expertise your client needs.
This is by no means an all-inclusive list of common problems, but it should give you a feel for what your realty might lack. There are many other pitfalls, but as with anything, there are an infinite number of ways to screw it up...
Loss mitigation is a separate and complex field. A qualified loss mitigation company should only employ people with years of loss mitigation experience, a degree in law, a certification in mediation and arbitration, and it should not charge a penny unless and until the property closes. And even then, it should not charge the homeowner, but instead work out a commission split between you and them, where everyone walks away happy. Are you giving up part of a commission? No. You're earning part of a commission, whereas without the loss mitigation services, you were getting nothing (except a headache).
If anyone here needs help or some free advice, contact me. If any of you need a good loss mitigation company that has all of the resources listed above and a whole bunch of others, contact me, or just visit my company's website.
Good luck and best wishes!
Alexander Paykin, J.D.
President & C.E.O.
Option Next, Inc.
888-311-NEXT(6398) x.801
apaykin@optionnext.com
www.optionnext.com
P.S. I have written many authoritative articles and guides to short sales. For a free copy of my articles for homeowners, realtors, mortgage brokers and other professional, just send me an e-mail and ask. The only thing that I ask is that you don't reproduce them without my permission, except as follows: You may print out one copy of my articles at a time, for the purpose of handing the information to an actual person you are working with. If you choose to print my articles and guides and give them to your client, the article must be complete. Redactions are not allowed, and the article must include all crediting sections (i.e. author name, author bio, date/place first published, etc.)