Selling Soulfully with Jennifer Allan

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A Short Sale Dilemma - Does the Listing Agent Have an Obligation to Encourage a Buyer to Write on Her Listing?

Here's the dilemma.

Sally Jo has a short sale listing. It's a marketable property, except for the fact that it has a first and a second mortgage and is around $50,000 upside down. Oh, and one of the lenders is Bank of America, who, rumor has it, is among the worst banks to work with on short sales.

Sally Jo has watched two perfectly good contracts come and go, with a third on the horizon. The first contract was double-ended on her part - that is - it was written by a buyer who came to her off her advertising of the property. This buyer fired her after three months of fruitlessly trying to get anything from Bank of America only to finally receive a denial (with no explanation). The buyer, understandably, felt that Sally Jo had strung her along, and looked elsewhere for real estate assistance.

The second buyer walked away after waiting six weeks for any semblance of a response from Bank of America. Their buyer agent lost them, too, out of frustration with the process.

Buyer #3 also came in off Sally Jo's advertising and is ready to make an offer on the listing. In the meantime, Bank of America has again closed the file and estimates a 15-20 business day turnaround to review a new offer, then another 15 - 20 business days to assign a negotiator. Assuming that they don't lose the file or need "updated financials" from the seller.

So, do you see Sally Jo's dilemma?

She has a ready, willing and able buyer, worth around $6,000 to her if he purchases something. Worth zero to her if he doesn't. Is she obligated to encourage him to write on her seller client's property, knowing almost for sure that the deal won't ever close?

FYI, this situation is happening in a dual-agency state, which I don't have much experience with, so I'm not sure how that factors in.

Would love your thoughts! I really don't know the answer.

ja

 

 

 

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Comment balloon 22 commentsJennifer Allan-Hagedorn • August 11 2009 10:08AM

Comments

Run and do not look back. B of A will never let you get the deal done.

Posted by Terry Miller, Miller Homes Group and Tyler Apartment Locator (Miller Homes Group) over 10 years ago

Scary... and oh, so frustrating for everyone involved.

Posted by Jennifer Allan-Hagedorn, Author of Sell with Soul (Sell with Soul) over 10 years ago

Jennifer if a deal has zero probablity of closing what is the point of any offers? Very frustrating.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 10 years ago

Jennifer,

I have just completed Broker Bryant and Wendy's Short Sale Classes and they now have a website www.ShortSaleSuperStars.com that you may want to check out.  They have a lot of information regarding B of A and other lenders that may help Sally Jo.

Sharon

Posted by Sharon Senger, Licensed Transaction Coordinator (tcDocs) over 10 years ago

This is a "fire the client" situation on the one hand - though it's the bank that is a problem no the client. On the other, here's a great opportunity to find new buyers to work with that you'd now lose without the listing. And it's a service business we're in - both aspect, the service and the business, have to be considered when deciding what to do!

I think the first thing to do is see if BofA would provide an indication of what they need in order to accept a sale - which is probably more than anyone would offer. And they almost certainly won't in any case. Secondly, explain Terry's second part of his comment above to any new buyer... outline the issues of buying with BofA in the mix, make absolutely certian they understand that any frusteration they are going to deal with in trying to buy the house will be fully shared by yourself.

If this discourages them from offering on that particular property then you can move forward and find them something they can buy. If it doesn't, then hopefully you will "in it together" when trying to get BofA to cooparate... though if you explain it right the first time, then most will simply move on with finding more saleable homes, which is perfectly fair under the circumstances.

As for the owner of the house, you didn't choose which bank they are dealing with, and you didn't manage their personal financial decisions... you can only deal with what you are faced with. Beyond that you just can't feel bad for eveyone because this is a business that often deals in misery. Debt, divorce, disease, death and diapers... those are the five "D"s we often live by!

Good luck!

Posted by Stephen Hodge (Chestnut Park Real Estate Limited, Brokerage) over 10 years ago

I think you have to be honest with the buyer.    At least if you have the offer in on the Short Sale you can have B of A "wworking" on it so the next buyer may actually get it.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) over 10 years ago

It sounds like the agent may not be managing expectations that well. If they explain it will be a slow painful process and that it is up to the bank, not just the seller... at that point the buyer should be more understanding if it takes a long time, or dies.  and it gives them the opportunity to look for a different home if they can not afford to wait.  our business is all about managing the expectations, we need to under promise and over deliver!

That being said, if you pet a dog and it bites you, shame on the dog. If you pet the dog a second  time and you get bit, shame on you!

Posted by Robert Rauf (HomeBridge Financial Services (NJ)) over 10 years ago

My first question when it is a short sale is who is the lender. If the answer is B of A I ask no more questions I advise my buyer strongly not to get into this mess. I will not take a listing with them as a mortgage holder so I avoid the problem you ask about.

Posted by Charlie Ragonesi, Homes - Big Canoe, Jasper, North Georgia Pros (AllMountainRealty.com) over 10 years ago

Jennifer, I think as long as you stick to the honest facts with your Buyers, you will be within the ethical bounds of dual agency.  Tell them the history of the past offers, let them know they are in for a long and possibly fruitless wait and let them make their own decision.

Posted by Dianne Deming (RE/MAX Realty Group) over 10 years ago

Charlie - I suspect that, too. I haven't done a lot of short sales, and was wondering if there are some that are worse than others. So, you're saying that BofA IS harder to deal with?

Robert - I agree, but even with reasonable expectations, a short sale starts to feel impossible if it never seems to move forward. But how about my original question... is the listing agent obligated to encourage buyers to look at/write on her listing?

Gene - That's one approach - do you know if it works or not or if each new offer results in starting from scratch?

Stephen - very thoughtful comments - thank you!

Sharon - Thanks for the link!

Gary - exactly... but IS it the listing agents duty nonetheless?

Posted by Jennifer Allan-Hagedorn, Author of Sell with Soul (Sell with Soul) over 10 years ago

Jennifer, I guess the obigation is to bring all offers as far as I understand RE licensing.  But.... (always a But, or is that butt?)  much the same as a 6% listing vs a 5% listing... all else being equal you sell the one that makes things go Cha Ching... even though it says Not to in the fine print. I am sticking to my eloquent once bitten twice shy answer above!

Posted by Robert Rauf (HomeBridge Financial Services (NJ)) over 10 years ago

Had a buyer place an offer on a B of A short sale .  8 weeks later, the bank still hadn't responded.  No worries, in that time period, the buyer got restless and decided to buy another house.  The other house closed within a few days of the Bof A response deadline.

I feel bad for the seller, who will probably end up foreclosed upon. But my buyer is very happy with his other home, even though he initially fell in love with the short sale house and was willing to pay cash for it on the spot...


What I would do is educate, educate, educate the buyer in the process w/ Bank of America so that there are no surprises.  Tell them that it's almost a definite that it will take weeks to get a response. Also encourage them to be exploring other options....  If they know ahead of time that it will be a long process, there is little chance for them to think you are stringing them along...

Posted by Karen Rice, Northeast PA & Lake Wallenpaupack Home Sales (Davis R. Chant, REALTORS) over 10 years ago

My advice to buyers who like a home that is a short sale is to write the offer with the understanding that it may take 30-60 days or longer for the bank to respond. During that time I encourage the buyer to keep looking at other homes and writing additional offers until we have one that is fully accepted. At that point we can withdraw any other offers that are still outstanding.

Posted by John Novak, Henderson, Las Vegas and Summerlin Real Estate (Keller Williams Realty The Marketplace) over 10 years ago

I must have missed something. Sally Jo has an active buyer. Sally Jo is focused on the $6000 she might earn if she represents the buyer in a purchase. Should she encourage the buyer to write on the house?

I suppose so if her only concern is the commission check that might come from the sale. I suppose so if she does not have access to an MLS. I suppose so if she is so void of information about the client that her listing is the only one to write on. I suppose so if she just wants to sit and hope she will earn a living by writing wishful thinking offers.

my opinion, with the limited information, is quite simple. disclose the situation to the buyer. explain the short sale process. if she can write on her own property, make sure she has her customer sign the appropriate forms that indicate that she is not represented by Sally Jo (i am in maryland and you can not represent both sides of any transaction). use a short sale addendum in the offer that sets all time lines to begin with the third party approval. include a home inspection contigency.

then spend some quality time with the customer, listening to what they are seeking. find other properties. if they find another they like, make them your client and write an offer. if it is accepted, withdraw your offer on the short sale.

i was sure that the job was to find a home for a buyer. you have to accept that your own listing might not be the one they want or need.

$6000............a drop in the bucket if it costs you the understanding of your job.

Posted by John MacArthur, Licensed Maryland/DC Realtor, Metro DC Homes (Century 21 Redwood) over 10 years ago

First of all, if B of A can do ANYTHING in 15-20 days, I would be shocked.  I have been working on a short sale with them since January;  in APRIL, we were finally making progress and in July, yes, as in 6 months later, they contacted my client, said they had closed the file.  Why?  Because they mistakenly made a note in his file he had requested a loan modification, which was not true, and told him he could not do both, so they closed the short sale file.  We were flabbergasted and protested loudly.

Their response?  START OVER with the process.  Yes.  Start over.  And expect a minimum of 3-4 months.  Oh, and if the buyer bolts and we present a NEW offer?  Start over.  Minimum of 3-4 months for a response. 

If a prospective buyer came to me on a short sale listing, I would definitely refer them out - a short sale is stressful enough without having to deal with BOTH sides of the deal, particularly if B of A is involved.  I would be very concerned about how to properly counsel the buyer in this situation.

Posted by Susan Haughton, Susan & Mindy Team...Honesty. Integrity. Results. (Long and Foster REALTORS (703) 470-4545) over 10 years ago

Hi Jennifer to answer your question as B of A is also countrywide yes they are the worst to deal with. The big problem is twofold if you are working with a buyer. 1 time is the buyers enemy if they are getting a mortgage. The enemy is interest rates rising and maybe now losing the 8k credit.

2 when a buyer puts in an offer they know they may have to change the offer when the bank comes back ( go higher) but as time goes on buyers minds change and they treat that initial offer as a final offer. So you know what if we did not put up with this garbage and did not deal with them they might actually get it . In the end I have lost clients who ahave worked with B of A becuase in spite of my warnings they went ahead and when the ^&(^&^& hit the fan guess who got blamed?

As to your dual agent question Georgia is a dual agent state and all the bad things that can happen to you as a dual agent apply. The only difference is the way folks are treated may make them more apt to take it out on you. There is no extra liability that I can see

Having said all this working with local lenders and local banks can make this process go in a 2 to 3 weeks after the approval . So you really have to pick your spots

Posted by Charlie Ragonesi, Homes - Big Canoe, Jasper, North Georgia Pros (AllMountainRealty.com) over 10 years ago

I haven't had to mess with many short sales, and only on the buyer side.  All I know to do is set expectations from the beginning......basically that they are unpredictable and that you are at the mercy of the lender and we have no control.  If I were the listing agent, I would do all I could to persuade that buyer to get their own agent to represent them and if they refused, I guess I would represent them as a transaction broker.  After thinking all this through......this listing is one I would throw back!

Posted by Ann Allen Hoover, CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL (RE/MAX Advantage South) over 10 years ago

     I agree 100% with Ann!

     Before you start showing the short sale, you need to REALLY REALLY qualify the buyer! They need to know and comprehend that it definitely is a long and winding road. If they are not willing and prepared to wait, they will lose... and you will too! Might be a good idea to prepare some sore of explanatoion sheet, a disclosure of sorts, explaining the risks and the process. Better luck with the next one. :-)

Posted by Pat Argo, CRS (Keller Williams Realty of Brevard) over 10 years ago

Wow! In this situation, i have regularly seen the buyers get antsy after 10-14 days and go out and make an offer on another property. Since I am a lender, I don't know if they are cancelling the first offer or just leaving it out hanging in the wind. We did start on a B of A short sale in April. The client made offers on 5 properties which were all short sales. B of A came back in June and we closed it in July. Tough scenario for the agent. I would get away from the listing when it expires to eliminate any ethical dilemnsas.

Posted by Patrick Randles (Nova Home Loans) over 10 years ago

Jennifer, when the home being sold is a short sale, "willing and able" on the part of the buyer takes on an expanded meaning.  The delays and incompetence on the part of the lending bank to approve an offer must be understood -- that can be the buyer's trade-off for getting what should be a great deal financially.  In the end, if the buyer is truly willing and able to go the distance, and wants that home -- write it up.  John

Posted by Alexander- Slocum, Realty Team- Vancouver WA Real Estate (Premiere Property Group, LLC - Vancouver Washington) over 10 years ago

Jennifer, if the buyer really wants to take a shot at this then I would have to agree with Karen, educate, educate, educate. However, Salli Jo should be careful as a dual-agency on a short sale especially with B of A is going to more than likely going to cause her more problems.  The rumor in the short sale class I took, is the banks have been known to only give half of the asking commission when a deal is dual-sided. 

Posted by Tanya Jeske over 10 years ago

Bank of America is the worst to deal with.  I think CitiMortgage is a close second and then Chase Bank.

Posted by Evelyn Johnston, The People You Know, Like and Trust! (Friends & Neighbors Real Estate) over 10 years ago

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