It’s not always the banks fault they make bad decisions
East Valley Team memberDean Ouellette talks how when a short sale is denied when it should be approved it is not always the banks fault.
I have said it before, if you are an East Valley short sale agent and hear the word no from the bank what you should really be hearing is “know” as in they do not know enough information to make an informed decision.
I represented a buyer recently who was very interested in an East Valley short sale on the market for $146,000. The listing agent received a full price offer and submitted it to the bank. Three months later the house is foreclosed on and the bank throws it back onto the market at $136,000. My buyer could not be happier!
Not only was the house foreclosed on and put back on the market, they even did some work on the inside and spruced it up so it was in even better shape than when it was a short sale. Now tell me how the bank made out better here? Answer: They didn’t.
So how did this happen? Are the banks that dumb? First we need to dispel the myth that banks are dumb and don’t know how to make a good decision. Sure every now and then there will be a bad one, but most of the time the decision makers are AVP or SVP level executives who are very smart people and only care about the bottom line. Will I make more from this short sale than a foreclosure.
That is where this deal went wrong. If you are an agent who does a lot of short sales you better make sure the offer you submit to the bank is a good solid offer that is better than the foreclosure option. The only time this should not be the case is if there is PMI involved and then it may not matter what your offer is depending on some other factors.
But if your deal is obviously a good deal, like this one was, then it is your job as a listing agent to fight and not take no for an answer. Sure the $10/hr employee you talk to on the phone and their $14/hr supervisor may not know any better and may only be going off a bad BPO, but that should be an easy obstacle. It is now your job and your responsibility to the seller to build a rock solid case on value and then find someone in that bank who can look at the situation reasonably.
That decision maker is there, find them. Do not stop until you do. This is how you earn your money and build value to to your client. Sure there will never be a situation where you get 100% approved. There will at times be situations where even smart people make bad decisions. But you better be on that phone and online researching every day with sites like JigSaw to find the person who can see reason.
Who says you can't teach a rocket scientist new tricks. Since Kristin left her former profession for her new one she has built one of the fastest growing businesses in the East Valley. Kristin is known for her Youtube videos, make sure you check them out. 
After a long career in political consulting Dean transitioned to real estate and has not looked back. Dean is one of the sick ones who enjoys fighting with banks to get short sales approved and to help homeowners avoid foreclosure. Dean also loves making videos on the subject.
Great vlog Dean..so what kind of info is the bank “missing” then? Are you suggesting the listing agent provide them with stats and comps of the area? With details/pictures of the actual property? With the number of visits/showings logged on their MLS key in a certain time frame? With a personal biography of the buyers and why they would be a good choice? (these are the questions a naive agent wanna be like me has)
Jessie, sorry took so long to get back to you. So a few different things to answer your question.
Part of the problem seems to be bad BPO’s. I personally think hiring agents to do a BPO is a horrible way for the bank to determine value. I have seem BPO’s for houses worth $660k come in at more than $800k.
Now the good news for agents who are willing to work is they can effect a BPO. As soon as I have an offer submitted I change MLS to say contact agent for entry. Then when they call for the BPO I meet them at the property.
When I meet them there I show up with a thumb drive that has comparable properties, a cma, complete showing history and I make sure I tell them we had to drop this 2 times (or whatever the case) just to get an offer. I try to make their job as easy as possible and try to make sure they know this offer is good. And I make sure it is good too. I also give them repair estimates if the house needs repair.
Sometimes the number still comes out bad and then yes absolutely I will make the same case directly to the bank later on.
I don’t get into the buyer I make it totally about the numbers. In the end that is all the bank cares about is the numbers. If you know you are at or pretty darn close to market value then there has to be evidence of that and you need to find someone in the bank who will take the time and realize that. They will usually do a second or even a third BPO and all they are looking for is a number that proves to the investor they should take this deal.
Dean,
“Pontificating” is a good description….There are times (quite frequently) where Banks profit from homes going to foreclosure more than is they allow a Short Sale. This is the main reason for “denials” on deals that appear to make sense. As you may or may not be aware, banks bundled mortgages and sold them to investors all over the globe. These “notes” had default insurance policies attached (not Mortgage Insurance as we know it) to entice the investors to purchase the notes and decrease investment risk. Some of the policies pay up to 25% of the original note/loan balance. So…if the borrower defaults (goes to foreclosure) and the investor who owns the note is able to make a claim on this policy and then also pocket the proceeds from the REO sale, the investor profits more by foreclosing versus allowing a Short Sale, even factoring in a declining housing market and risk of vandalism. Blaming the Listing Agents, in order to imply that your “Team” fights/works/knows more/is more skilled at Short Sales is a bit misleading and omits pertinent information which you appear to not be aware of. I do whole heartedly agree with going up the Management ladder to get Short Sales approved and fighting for a yes, we all have a responsibility to do so. It is important to mention there are other factors in play that prevent Listing Agents from getting an approval. Not all Agents should be Listing Short Sales, we all know that, but your implication is unfair. Maybe understanding and discussing ALL the facts and factors that prevent Short Sale Approvals would better serve the public and the Agents who follow your Videos. There are a tremendous number of skilled Agent who get Short Sales approved and not all denials are the Agents fault. Thanks.
Dean: Sometimes I am a little too cautious and do not speak with the right amount of candor. Let me say that this post absolutely speaks for me! Great piece. Happy New Year to you. 4 Rugrats… Wow!
Melissa thanks. Look forward to talking to you in 2011