Archive for November 2011
The Short Sale BPO Agent Evaluation Model and Perspective – Everything You Thought You Knew
November 9, 2011 | 
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It is good to understand the general perspective of the agent conducting a BPO. Did you know the BPO Agent usually only makes $40-50 for each BPO the lender orders? Consider that for a moment. The BPO Agent has to drive out to property, spend 30 minutes or more inspecting it, take 10-20 pictures, drive back to their office (which many work from home), spend ANOTHER two-three hours putting together all the data they collected and uploading the pictures and information to company the lender used to order the BPO. All of that work for $40-50 buckos. The reality is the BPO Agents do not make any money if they have to spend A LOT OF TIME with one BPO. They have to burn thru as many BPO’s as possible to at least make a few hundred bucks every two weeks. This doesn’t mean they do not do a good job conducting one. In my opinion they are simply not motivated enough to spend the required time to produce an accurate value on the property every time. Hence, here is where investors can make more profit.
Many banks typically are not looking at just one property when they consider a short sale transaction. They are considering the entire portfolio and YOUR property may be .25% of a 50-100 million dollar portfolio. Banks for the most part do not make time or spend enough money to really care if they lose MORE on ONE house than what it is worth. They spend as little as possible to have some type of paper trail to present to their superiors and Senior Lender/Credit Officers, so they can sign off for compliance with standard operating procedures for the short sale approval. The incredible part of their story is this. Even though banks spend as little as possible to obtain a value on a property and short sale it when a Loss Mitigator writes a letter of recommendation. They still SAVE MORE MONEY by accepting short sales and not let their properties go into foreclosure and complete the auction process. Can you believe that? With all the mistakes and lack of due diligence on THEIR part…they STILL SAVE MONEY! That is astounding to me, but hey… it still makes great opportunities to profit in short sales. …so carry on with the bad habits banks….carry on.
Here are the basic factors that are considered in a BPO for the lender.
o What is the condition of the property?
o What have similar properties in the area sold for on the MLS?
o What does the home need to be sold in 90 days or less?
Serve One Another Better,
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Short Sale Tips for Sellers
Selling your home as a short sale and finding a real estate professional who knows how to handle your home and the transaction properly can feel like walking through a minefield. Lots of agents want the listings, but you need to find someone with some very specific qualifications because of the intricacies involved in handling the short sale process. Selecting someone other than an experienced professional can lead to worse problems than you have now. Below is some information to help you select the right agent to list your home.
Training
Agents that list short sales for sale know that these transactions are more complicated than a traditional sale. Good agents will know that they need specialized training to handle and organize the additional details. Make sure your agent has at least one of the nationally recognized certifications. Of course, we all know that training isn’t everything, but this will at least narrow your field to a smaller list of agents who have taken the time and care to take the additional step of perfecting the trade knowledge.
Experience
Ask if the agent has ever closed a short sale listing. It’s a reasonable request and will let you begin to see if you are going to be working with someone who has done this before. An agent should be able to tell you that they have listings, have some under contract or have closed several in the past. You owe it to yourself to make sure you get someone with some experience to help you.
Each short sale transaction is different and each bank is constantly changing the process to get a home approved. The more experience, the better.
Marketing
We often hear agents say that short sales don’t need to be marketed in the same way that traditional listings do because they are priced lower so they are therefore easier to sell with less marketing efforts. It’s been our experience that this type of thinking is a mistake. For every dollar under your loan amount your home sells for, the bank who has your loan loses a dollar. The banks themselves want to see that a true good faith effort has been made to sell your home for the highest amount possible. To ensure that the home is selling for a fair price, your lender will either order an independent appraisal or what is referred to in the industry as a BPO which is when another independent del estate agent provides the bank with a price for the home. This takes real, traditional marketing and you should never settle for less!
This means that you need a sign, a professional flyer and excellent photos just like every other listing.
The Pitfalls of Choosing the Wrong Agent
Don’t set yourself up for an uncontrolled process that leads to a foreclosure because the agent didn’t handle the short sale properly. Make sure you have a competent agent. If things go wrong, you could end up with a foreclosure or a bankruptcy. You need to prevent these pitfalls by selecting an agent who is competent, experience and trained to handle your short sale.
Whatever the reason is that you need a short sale, make sure that you select the right agent or things will go from bad to worse.
Be Careful Advertising Yourself As a HAFA Or Short Sale Specialist
I thought I would help shed light on some myths that are being shared publicly by real estate Agents about HAFA, as they may be miss-leading.
It may be known that Agents have a window period to capture as many distressed homeowners as they can, place them under their wing before lenders start referring Affiliates or Servicing companies referred Agents. The style by which some Agents are lead generating may place them under scrutiny
Of the many variants I have seen circulating is a mailer or flyer that states “I am a Short Sale Specialist” or “I am a HAFA Specialist and I will get you $3,000 from your Bank to move” Another is “I am a Short Sale Specialist and have all cash Investor Clients that also negotiate with the Bank” (This one being the most litigious in my opinion).
The Department of Real Estate has placed Deputy Investigators on Duty to harbor the phones for tips and reports on these types of public representations as well as outright Mortgage Fraud.
The pressures are surmounting on many Agents as they try to navigate the Short Sales process, one that none of us can accurately define. We have a working definition on what a Short Sale is, and while HAFA promises help for non-exempt homeowners, many loans are still currently exempt due to factors such as where and how the loans were originated.
While Obama’s program brings promise to many defaulted homeowners, it’s procedural mechanics and guidelines still leave many open doors for miss-haps in closing these deals as lenders may not provide for certain liens and title matters prior to their Short Sale Pre-approvals.
It is suggested that in the many case files of Investor defaults, the non HAFA zone will continue to exist, making it every Agents responsibility to continue educating themselves on the Short Sale process which is projected to continue throughout the next two to three years.
When advertising yourself as a “Short Sale Specialist” or “Pre-Foreclosure Specialist” or “Consultant”, you are wise to study up on the “Standards of Practice” Articles and in the NAR or Local Associations “Code of Ethics”. The use of the term “Specialist” comes with it an added responsibility of covering all your bases including whatever it is that you may not know that you don’t know.
Lastly, most MLS rules prohibit the use of commission reductions due to the pass on cost of a third party Negotiator. While the MLS “Private or Agent remarks” section provides to warn or disclose to Selling Agents that they may share a Bank imposed commission reduction, it is an MLS Violation to directly reduce an commission offering to impose a Negotiator’s fee to the Selling Agent or Buyer.
I have the answer to this too… though you’ll have to look out for my next article.
Copyright © Bryan Ridgley