A short sale occurs when a homeowner has a hardship that makes it difficult to continue paying their mortgage, needs to sell, but owes on the mortgage than the house is worth. Short sales were our team’s business and we did it very well. Prior to 2007 I had no clue what a short sale was. Strangely, I never considered an alternative to selling a property for less than what was owed – coming from the DC Metro housing market where everything sold for much much more. The Charlotte area served up a much different housing market, one with thousands of underwater homeowners, many newly unemployed, and everyone with a story.
It was an agent in my office in Indian Trail that handed me that very first short sale. The owner was unemployed, the home was in disrepair, the bank was foreclosing, but we had a buyer wanting to purchase. It was a challenge to figure out where to start: the investor behind the loan, the servicing company, the foreclosure attorney? After finally landing at Wells Fargo, submitting what seemed like a loan package, the calls began. I called relentlessly time and time again – every day until we got a response…3 months later. After working through a Broker Price Opinion from an agent that did a drive-by BPO only and came back with a price more appropriate for the Taj Mahal, we finally closed. No, it didn’t end up being a short sale since the amount owed was so close that we reduced our commission and got the deal closed. After that experience, I vowed to never handle another short sale ever again.
A few months had passed and then another homeowner came calling, needing help, in a bad way and facing foreclosure. Once again, listed the house (the worst house I ever listed for sale – ever), found a buyer, tried to get the home closed but the lender’s opinion of the value vs the fair market didn’t jive so the home was foreclosed. Shortly thereafter, another homeowner called to attempt a short sale but it was after his home was already foreclosed so it was little late. It was at that point that I realized how hard the market was crashing and that with short sales, we could help a lot of people.
Anyone reading this and not in the real estate business may think I’m full of it when I say that it wasn’t about the money but truly it wasn’t. In the early days of the financial crisis, the average short sale took 9 months to close and that’s 9 long months with multiple buyers, multiple bad BPO’s but only one pay check for the time. Calculate it up and I probably could have made more as a Walmart greeter than handling short sales but it wasn’t the money. In each homeowner that we helped, I saw myself.
When I purchased my first home, I was fresh out of college, great paying job, and everyone telling me how much I could afford. Unfortunately, I struggled to afford it in the early days and then five months in, I was unemployed. I burned through savings, not knowing what to do and without a job prospect that would pay enough to support my family. That’s when I decided to get my real estate license, figuring I could earn money for a while until I found a full-time job (guess I’m a little slow on that job search). I remember that time vividly: the sleepless nights, the calls, how it was tearing me apart inside trying to figure out how I got it all so wrong. In each of the homeowners I met with, I saw myself and I just wanted to help them any way that I could. The Short Sale was our way of helping for those that wanted to sell their house.
I fought against the scammers – the short sale floppers – and took major heat for pointing out their fraud. Along with my trusted attorney colleague, I started the largest short sale mastermind and training of its kind in the Charlotte area to bring together actual loss mitigation personnel and real estate agents to learn how each could work together. I was able to build incredible relationships with real estate brokers in the Carolinas through sharing our experiences and learning a few best practices. The current North Carolina short sale addendum is modeled after our short sale guideline sheet that I developed and had in practice two years earlier.
My goal in all of this was to never take another short sale again as that was a sign the market was improving. Thankfully, the Charlotte area real estate market has improved and prices in some neighborhoods have started to rise. Many more homeowners have found a way to obtain a loan modification or refinance and no longer need my expertise. Those homeowners that have managed to hang on during the lean times are finally being rewarded with the much-needed balance that had left the housing market in the early 2000’s.
Unfortunately, it isn’t all positive. As the market has shifted and values have risen, it does make it much more difficult to get a short sale approval when the buying public (and their agents) perceive short sales as bargains to be purchased at a huge discount. That they are not. Think about it: at one time, the average time from first delinquency to foreclosure in the Charlotte area was 550 days. That means that for about a year and a half, that homeowner lived in that house without making a house payment; expecting a foreclosure. That delinquency probably didn’t happen overnight so long before that day, items that were in need of repair remained that way. So if the roof needed to be replaced, it didn’t and that then caused water to leak through the insulation and into the drywall. Now a $5,000 fix is now $15,000 – but the investor behind the mortgage doesn’t see it that way.
Their BPO mentions nothing about a leak and so their value vs the fair market value vs what the buyer’s expectations are can be miles apart. All that work, the buyer walks, and a homeowner is foreclosed on. That’s a rotten day.
Another issue is the standard contract to purchase a home in North Carolina is absolutely incompatible with short sales. In a normal residential sale, the Buyer pays the Seller a Due Diligence Fee for the right to walk away from a contract at any time up and through the due diligence date. That’s excellent in a traditional sale but in a short sale, the seller cannot take due diligence money since it needs to be credited back to the Buyer at closing. The lack of due diligence money means that Buyers are optioning multiple houses all over town and once and buys which ever one gives them the best deal. Lots of time, energy, and effort wasted on a transaction that never stood a chance.
However, the biggest shift away from handling short sales was a big fear of the unknown. I have watched agents, some very good and others that had no business being in the business, career-ending inquiries and lawsuits from former clients, buyers who had their deals rejected and even a bank having an agent jailed. Over the last 10 years, I have grown to love this profession and as it is the very thing that provides food and shelter for my family, I will always remain conservative and stay away from anything that could endanger my livelihood. Any real estate agent continuing down this path, regardless how pure their motives, are asking to be put out of business.
Over the last year, I have endeavored to take our business in a different direction and I’m excited for what the future has in store.