Just because my deal got done, doesn't mean I'm going to stop this blog! I still have a few things I need to say.
First off: if you're thinking about a short sale, forget everything you ever knew about buying a house. It's not business as usual. These are new rules. And you'll be making up some of your own as you go along.
Maybe my experience is different than what other folks are seeing. I'm sure in places like California, Arizona, Florida and Nevada, epicenters of the subprime crisis, things may be a bit different than they are here in the Northeast. The volume of foreclosures and short sales is higher, so maybe buyers, realtors, lawyers and title companies have developed fairly standardized procedures.
In my case, there was no standard, because very few of the participants in the deal had ever done a short sale. Not my lawyer(s). Not my broker. Not the title company. My lawyer had never even heard of a short sale the first time I asked him to represent me (that was OK, he did a pretty good job despite).
What I learned, principle No. 1, is that it is up to the buyer to make it happen.
The seller doesn't have much to gain. They avoid foreclosure, and to some very limited extent minimize damage to their credit rating. In my case, the sellers were pretty nice people. They just didn't want to see a house they cared about in a neighborhood they care about get abandoned, boarded up and left to rot while the bank dithered. But still, they pretty much left it up to me -- and I don't blame them.
The realtor. The realtor has a lot to gain -- a commission. In my case, the short sale bank shaved the commission down from 5.5 percent to 4 percent. It's still a pretty good pay day. But it doesn't seem to be enough of an incentive to light much of a fire under a relators. Realtors are wired to do what they do: show houses, place adds, negotiate. Maybe there are some hard charging realtors in subprime ground zero who take the lead on short sales, but around here that was not in evidence. I suppose that the volume of real estate deals in the local market is high enough so that realtors don't have to invest too much time in short sale deals -- if they fall apart, the commissions are coming in from the conventional deals.
Next time: the lawyer.
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Nice blog, but give us REALTORs a bit more credit.
ReplyDeleteIt looks as though the process took about 9 months, I have 14 months into one where I am representing the buyer and we have continued to look at homes, exchange emails, etc. The process hasn't stopped.
As a employee, you realtor, has invested a considerable amount of time in your short sale only to receive a pay cut in the end. If you take all the time invested in the process, including looking at other properties and keeping the doors open for the length of time your transacion took, the 'pay day' may not actually measure up to $10/hour. Our commissions are not for the last 24 hours of the transaction. Additionally depending on your agent's split and fees to their broker they may see as little as 40% of the commission. Top agents see about 80% when all is said and done.
I now require my clients to make up any reduction in commission on a short sale or I don't work them. My attitude on this is that I would not have taken a postion in the hospitality industry, my background, without knowing what the salary is, so why should real estate be any different?
On a $400,000 transaction that 1.5 reduction is roughly 25%. Imagine if your boss walked in to your office and said you were going to receive a 25% reduction in salary and it was going to retro back 9 months. Would it be acceptable to you? Then if it effected your performance, it was because of a lack of commitment to the company on your part, not that you were getting screwed and had no option.
Brian Long