John Burke, ABR

I saw this excellent article about short sales - I had to share.

WHAT THE LENDERS WON'T TELL YOU ABOUT YOUR SHORT SALE!

FELIX SANTIAGO 07/28/2009

Not a day goes by that I don't hear the same question from an agent, "Why would the bank do that to my short sale?" It's really quite simple...BECAUSE THEY CAN!

I could write a book about everything the lenders won't tell you about the short sale process. However, it would be worthless the moment it is published. The business changes every day, every hour, every minute. The lenders, investors, collections agencies, government agencies and everyone involved in this mess are still trying to figure out what happened, let alone what is happening right now.

ANYONE THAT TELLS YOU THEY KNOW THE SECRETS OF DOING SHORT SALES, RUN FROM THEM AS FAST AS YOU CAN! AND HERE ARE THE REASONS WHY...

1) The lenders still are not sure that what they are doing is right FOR THEM. They are constantly changing their short sale and loss mitigation process to figure out what will make the most return on the loss. It will change at the whim of those assigned to review the pipeline disaster that is their loss mitigation. And, time and time again, the changes usually are not for the best. They only further complicate the process. The banks are in the business to lend money. The whole loss mitigation and short sale business is still a blur to them. Think about how absurd this business is...they will forgive $300,000 on the property without blinking, but will kill a short sale for the remaining $5,000.

2) The property is ONLY A WIDGET! The lender will never see or visit the home. The only one that cares about how the home looks is the homeowner. The lenders and their investors DO NOT CARE ABOUT THE FEELINGS OF THE BORROWERS/HOMEOWNERS. They have NO emotional attachment to the property. However, they want to assure that the borrower absolutely HAS an emotional attachment. Remember, those lovely photos in the appraisal are only seen by an underwriter that initially approved the loan. The actual lender does not care for photos and will never see them. THE PROPERTY IS SIMPLY A WIDGET.

3) Lenders and investors make secret deals for billions of dollars every day behind your back! Many agents remain shortsighted on the housing industry, altogether. They only want to see and believe that their real estate transaction is the only way the lender can move the property. In fact, this is not by any means the principal manner of unloading their inventory. REO's, performing and non-performing notes account for the majority of their swaps. However, those sales are never recorded in public records. Most of them are sold for pennies on the dollar.

4) The housing crisis is NOWHERE NEAR A BOTTOM! The biggest reason for this is the tremendous amount of inventory. And I'm not simply talking about the inventory in the lender's hands. I'm talking about inventory yet to be taken back. There are millions of homeowners living in their homes for free. I have clients going on 2 and 3 years without a mortgage payment. The lenders and their investors are simply overwhelmed by this crisis and they would rather see someone in the property taking care of it. Once they foreclose, they are responsible for all the bills on the house. Only 30% of the lender inventory is even available for sale. Nearly three times the current inventory is pending foreclosure. And unless everyone behind on their payments gets back to work and starts paying their mortgage, the crisis will not be going away any time soon.

5) Prepare Your Clients for the Long Haul! I ask all my new short sale clients, "are you in a hurry?" If they are, our firm is not a good fit for them. Please note that there is a difference between working quickly and efficiently and being in a hurry. The lenders are in no hurry to process your short sale file. Plus, if the homeowner is basically living for free in the home, what hurry is there to move out and start paying rent? The process provides them a good opportunity to stabilize themselves financially. And always remind them: A HOUSE DOES NOT A HOME MAKE! Home is your family and friends, not brick and mortar. Home will go wherever they go. The lender, on the other hand, will take every opportunity to attach an emotional response to that building, even if it is unsalable collateral. Don't let your clients fall in to that trap.

6) Every Lender Has Issues! As I mentioned in Part 1 of this post, never assume that the lenders have their short sale process down to a science. It's a work in progress for them. This is still their worst nightmare and they are just hoping it will go away when they wake up. They still think this housing mess will end tomorrow. Their loss mitigation staff is a temporary solution to the problem and there is a heavy turnover of employees along with a huge backlog of files. The same underwriter that approved your loan was offered a job as a so-called "negotiator." And, he/she is still working with the same mentality... "the bank is in control!" Unfortunately, you have to let them believe that. REMEMBER, YOU HAVE THE BUYERS FOR THEIR HUGE MESS!

7) Make a Buck Not a Friend! We've all heard the saying, "the squeaky wheel gets the oil." With the current state of the loss mitigation industry you need to be as squeaky as possible. You need to be noticed; otherwise, your short sale file will be delayed time and time again. One of the worst culprits right now is Countrywide/Bank of America (and that's a whole other post or two). They are a real mess and overwhelmed with files. Turn-time on newly received faxes is taking at least ten days, and that's assuming they find your fax. Send your fax two or three times if necessary! Yes, that may only add to the backlog of faxes, but if it means they will find YOUR fax and YOUR file nearly two weeks later you've accomplished your goal. If you are calling and don't like the answer or attitude of the short sale representative, hang up and call again! Trust me, the answer will change every time you phone.

8) The BPO Is EVERYTHING...For Now! It amazes me that lenders depend on a half-assed appraisal called the BPO (Broker Price Opinion) to make their biggest investment decision on your file. To put it bluntly, your BPO can be sabotaged by any green-eyed, angry broker with an attitude. Always be sure to meet with the evaluator at the property if at all possible. And, be sure he/she receives a copy of your contract. The lender certainly didn't provide them a copy. You already have a good idea for what the property should sell. Be sure you convey your thoughts and opinion to that person. Remember, the BPO is simply a range in value. The negotiator or bank representative will usually try to trap you with the highest value in the range. Let them know that you will NOT pay the top of the price range.

9) Tough Love...Credit Means NOTHING! I'm still amazed how many borrowers ask me how badly their credit will be impacted by a short sale. The answer...SIGNIFICANTLY! Your short sale client should not be worried about how his/her credit will be impacted by their current financial and housing situation. It should be the last thing on their minds. I'm astounded that there is always some expert trying to put foreclosure vs short sale into tidy perspective for someone that is finding themselves in the worst financial crisis of their lives. There is really no difference. A 450 score or a 500 score is still a lousy score. For the most part your client must be in a foreclosure status with the lender before they will even consider a short sale. And, whoever tells you different is flat out lying. Credit reporting agencies and the lenders that use them have been telling us for years that our credit rating is the most important thing in our lives. They've spent millions of dollars on campaigns to remind us of that. This has simply been a scare tactic and it has worked magnificently...until now. I've seen clients scrape and borrow money, or completely eat away at all their retirement savings just to keep up with a worthless investment property. All because they fear how it will affect their credit rating, even at the expense of really important matters like food, utilities, and medical necessities. Your credit will always bounce back. Plus, the lenders will need all those who are suffering from this crisis back into the fold in a few years when they are ready to really lend again and we are ready to borrow.

Here is a terrific article on answering this question

Three Mistakes to Watch Out for When Asked, "So What Do You Do?" Published on Monday, June 15, 2009, 10:18 AM Last Update: 2 month(s) ago by Maya Bailey Category: All Articles » Networking and Referrals

OK, so you're standing in line in the supermarket, or you're in an elevator, or you're at a party, or you're in a networking group. Sooner or later, someone is going to say to you, "So what do you do?"

This is what you want, free publicity so to speak. However, how you handle this question could determine whether this person becomes a prospective client, a prospective referral source or just walks away.

This article exposes the 3 mistakes you could be making and why they don't work. Then you'll discover the ideal answer and understand why it's important to use it.

Here are 3 common answers:

Mistake #1: You say to little.

You say something like, my name is Jane Doe and I'm with _______________________ Real Estate Company. And then you smile hoping the other person will ask you a question. Probably they won't. This is a mistake because you have made a short statement that doesn't engage the other person's attention. It doesn't invite questioning. The other person may politely say what they do to fill in the awkward silence or they may excuse themselves in some socially graceful way.

Mistake #2 You say too much and ask for the business

You say something like, "My name is Jane Doe. I work for ____________________________Real Estate Company and I specialize in country homes. I love the country and I love to show country property. It feels so good to get outdoors, breathe the fresh air and help someone find a home they love in the country. So who do you know who is seeking to buy or sell a country home?"

This is a mistake because you said too much about yourself, did not ask a question that would engage the other person's attention and it's way to early to ask for the business. You should be cultivating a relationship with that person. Remember, people do business with you when they know, like and trust you. With someone you just met, you're still in the "getting to know each other stage." The most you should ask for is their business card and give them yours. If you have a connection with that person and would like to contact them in the future, you might consider adding them to your Sphere of Influence and sending them an Item of Value once a month.

Mistake #3: You talk on and on about yourself and your career

I know this may sound hard to believe but you'd be amazed at the things people say when they are nervous and trying to make small talk. So someone says, "So what do you do?" and you answer, "My name is Jane Doe and I'm with ___________________________ Real Estate Company. I have been with them for 5 years. It's a great company. All the people there are so friendly and helpful. I am so glad I chose real estate. I love the flexible hours and the income potential. This really beats my corporate job and ...."

This is a mistake because it's "all about you". The only things you're promoting here are (1) The nice atmosphere of your office and (2) what a great career real estate is . If you keep going you might talk the other person into becoming a real estate agent but they won't be a prospective client or referral source.

So, what should you say?

In my 12+ years of specializing in coaching real estate agents in doubling their incomes I have found one amazing answer that does wonders and I'm about to let you in on that secret.

Here's the scoop. When the other person, asks , "So what do you do?" you need to ask them a question to engage them. The question is, "Well, you know when people are buying or selling a home how nervous and stressed out they can get?" Pause and let the other person respond with a "yes". Then you say, "Well I take care of all the details and paper work, I hold their hand through the process and make the whole thing a relaxing, enjoyable experience for my client. My name is Jane Doe, and I'm a real estate agent with _______________________company.

Now, what do you think you'd feel or think if you heard that? Most likely you'd want to do business with that person. Why? There are 3 reasons:

They didn't talk about themselves.

They showed that they have a thorough understanding of the issues and problems people face when buying or selling a home.

They provided specific solutions to the client's problems.

When you give this kind of answer there are a lot of benefits. Can you guess what they are? The other person will be genuinely interested because you've engaged them. The other person will begin to trust you because you put the client's needs before your own. Finally, you answered in a unique way and that sets you apart from the crowd. So the next time the person has a real estate question, they are going to call you because you have demonstrated that you care.

With those kind of benefits wouldn't you want to use this answer, memorize every word and have it roll off your tongue the next time someone says, "So what do you do?" You bet you would. Just watch your income increase.

Experience Quotes

Experience is not what happens to a man. It is what a man does with what happens to him.

- Aldous Huxley

The life of the law has not been logic, it has been experience.

- Oliver Wendell Holmes

Do you know the difference between education and experience? Education is when you read the fine print; experience is what you get when you don't.

- Pete Seeger

Experience is one thing you can't get for nothing.

- Oscar Wilde

If we could sell our experiences for what they cost us, we'd all be millionaires.

- Abigail Van Buren

Nothing is a waste of time if you use the experience wisely.

- Auguste Rodin

The only source of knowledge is experience.

- Albert Einstein

The years teach much which the days never know.

- Ralph Waldo Emerson

Experience is a good teacher, but she sends in terrific bills.

- Minna Antrim

Is there anyone so wise as to learn by the experience of others?

- Voltaire

I frequently hear the question "How did the US get itself into the housing crisis?"

The best answer I've heard was produced in a special program about the housing crisis produced in a special collaboration with NPR News. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Globalt Pool of Money.

In a nutshell - up unto the year of 2000 - all the assets in the world - all the planes, trains and cars purchased, all the money saved and spent, all the rice, wheat and products produced in the world, pension funds, etc - had a value of about 36 trillion dollars. It had taken all of history to build to that number.

And along with all that money came an army of very nervous men and women charged with investing that money responsibly. So, for most of modern history, they bought really, really safe, really boring investments: things called treasuries and municipal bonds. Boring things. But then, something changed, something happened to that global pool of money.

From 2000 until 2006 that number nearly doubled to 72 trillion dollars. So, it took several hundred years for the world to get to 36 trillion. Then, in six years, to get another 36 trillion.

How's the world get twice as much money to invest? Lots of things happened, but the main headline is all sorts of poor countries became kind of rich making TVs and selling us oil: China, India, Abu Dhabi, Saudi Arabia. Made a lot of money and banked it. China, for example, has over a trillion dollars in its central bank, and there are office buildings in Beijing filled with math geniuses-real math geniuses-looking for a place to invest it. And the world was not ready for all this money. There's twice as much money looking for investments, but there are not twice as many good investments. They all wanted the same thing: a nice low risk investment that paid some return.

At that same point - Alan Greenspan made a decision to make that army's favorite investments a lot less attractive by keeping the Fed Funds rate at the absurdly low level of one percent. It tells every investor in the world: you are not going to make any money at all on US treasury bonds for a very long time. Go somewhere else. We can't help you.

And so the global pool of money looked around for some low-risk, high-return investment. And among the many things they put their money into, there was one thing they fell in love with - the US housing market.

There are problems. Individual mortgages are too big a hassle for the global pool of money. So picture the whole chain. You have the homeowner, he gets a mortgage from a broker. The broker sells the mortgage to a small bank, the small bank sells the mortgage to a guy at a big investment firm on Wall Street. Then that guy takes a few thousand mortgages he's bought this way, he puts them in one big pile. Now he's got thousands of mortgage checks coming to him every month. It's a huge monthly stream of money, which is expected to come in for the next thirty years, the life of a mortgage. And he then sells shares of that monthly income to investors. Those shares are called mortgage backed securities.

So - so many mortgages were made that there came a point in 2003 where just about everybody who wanted a mortgage and was qualified to get one .... had gotten one. But the pool of money had just gotten started. They wanted more mortgage backed securities. So Wall Street had to find more people to take out mortgages. Which meant lending to people who never would've qualified before. And so the guidelines were getting a little looser. Something called a stated income, verified asset loan came out, stated income, stated asset . . .

And we quickly got to the point that 23 dead people in Ohio were approved for mortgages.

It was all good as long as real estate continued to appreciate. But somewhere in the summer of 2005 the real estate market stalled and started to fall.

And the foreclosure data that was used for speculating risk was flawed.

As we now know, they were actually using the wrong data. They looked at the recent history of mortgages and saw that foreclosure rate is generally below 2 percent. So they figured, absolute worst-case scenario, the foreclosure rate may go to 8 or 10 or 12 percent. But the problem with is there were all these new kinds of mortgages, given out to people who never would have gotten them before. So the historical data was irrelevant. Some mortgage pools, today, are expected to go beyond 50 percent foreclosure rates.

Here is the entire program - about an hour.

http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1242

From Trend MLS - Closed Sales Volume 1/1/2009 through 6/30/2009 comparing one companies sales volume to another.