More and more investors and real estate agents are using attorneys and negotiators to get their deals done.
It’s the perfect answer to the “I don’t want to deal with banks and short sales” issue. OR IS IT?
If you are a homeowner trying to get a short sale approved on your home, whether you’re a homeowner or an investor, you might want to think twice about the hands-off negotiations. There are far too many people that over promise and under deliver.
I learned from a friend of mine and mentor, many years ago, never to ask “Why” something had or hadn’t happened, but how to fix it moving forward.
Let me tell you a TRUE STORY and what the ultimate solution was (names of the actual buyers and sellers will be changed for privacy purposes). If you are in the Central Florida area, please contact us privately and we’ll be happy to let you know the name of the law firm, agent and Realtor involved in this situation if you need to hire either a firm or Realtor so that you don’t get burned too.
Several years ago, in the real estate investing boom, 3 investors purchased several houses in an “up and coming area”. We’ll call them Kim, Hillary, and Bob. Now we won’t get into the ways in which the Realtor that sold them the properties acted with negligence. We’ll just assume that they had done their homework and made a sound investment decision. In hindsight, the investment was a mistake and they were all upside-down in their properties.
They’d struggled to keep the payments up. They’d worked to try and keep it afloat with renters. Ultimately, they’d tried to list them and sell them with no luck. They were forced to take short sale offers (and yes, they had fallen behind on their mortgages). The three owners had thought they’d found a competent agent who had qualified attorneys working on her behalf to negotiate with the lenders.
One by one, the offers began coming in. They were enthusiastic that they would be able to put this mess behind them soon enough. They had a Realtor that seemed good, although she required some serious management and frequent follow up requests. The Realtor had confidence in the attorneys and it was just a matter of waiting for the next moves from the lenders. There was only one more property that needed a contract and everything would be moving in the right direction. This was Kim’s last remaining property.
Then… one day, a letter arrived in Kim’s mailbox stating the sale date had been set for the property that had did NOT have an offer.
Panic set in.
They began to look at alternatives and talked to several attorneys about the options, including bankruptcy.
They also called the lender and asked if there was still time to get an offer in.
The good news is, they still had a few days. Fortunately, they were able to get a contract in and stop the sale, but what happened next was nothing short of extraordinary. The following is a timeline of events that took place over the next 2 1/2 weeks.
Backstory:
We had been asking for updates on the files and (the Realtor) assured us everything was moving along AND that the law firm was still moving on property 1, which had an offer first, but fell out while they were waiting.
The lenders were calling and telling the owners that they did not have short sale files on 2 out of the 3 properties that had contracts. However, the Realtor assured as that everything was moving along and that the law firm was following up. The files were still in review.
When we showed our concern, the Realtor asked for authorizations to contact the lenders directly. These were provided immediately (early May).
In the midst of the concerns we were beginning to have on these properties, the owner gets a notice of foreclosure sale on the final property. We contacted the agent to assist us in generating a HUD since her law firm would be handling the case anyways. The firm wanted to send the package (I’m not sure if this was their idea or the agents. It really doesn’t matter as you’ll see here in a second).
The specific instructions as to what was needed by the lender to stop the sale were detailed in an email in addition to a fax number in a special processing department.
The law firm submitted the package on May 19th (incidentally, we had told them to hold off until the owner spoke with an attorney that afternoon. They did not follow the instructions).
I called the lender on May 19th to verify the package was received. They had no package and advised to call back the next day.
I then called the Realtor and asked to have a copy of the package forwarded to me so I could take care of submitting it as time was of the essence. After not getting anything, I contacted the legal assistant directly and emailed her directly SPECIFICALLY requesting the package to be emailed to ME.
The reply she sent was: “I’ve already submitted this package for you yesterday morning at like 10am; I’ve already emailed them to Chuck and Nancy so please let me know if I need to do something else. I know that the sale date is the 27th and that is why I stopped everything and sent this in for you.”
We called the Realtor back again and finally got the package after 5pm EDT.
The package was an absolute mess, unprofessional, and inaccurate. It contained the wrong supporting documents (financials for the wrong owners, no hardship letter, no listing agreement, and the list goes on and on.) It was also missing several of the items I SPECIFICALLY listed in the requirements for the lender. (We are working on blacking out the private information and will provide a copy when it has been done).
The HUD (which was the one thing we’d asked for in the first place had the wrong loan number and lender).
Thursday, May 20th
At any rate, I prepared the COMPLETE new short sale package, sent it to the lender and had confirmation of receipt in less than 90 minutes and the process was being escalated to stop the sale.
Friday, May 21st
I called the Realtor on May 20th and explained the situation and was insistent that we receive a copy of all packages that were submitted, a detail of all correspondence with the lenders, and where all packages were sent. I was assured we would have this after her meeting with the attorney on Monday morning AND that the Realtor would personally verify the progress of every file.
Monday, May 24th
Following the meeting on May 24th, we were assured that everything was good and that the Realtor had gone through each of the packages at the law firm. She did not have copies the packages as we’d requested, however.
It turns out that the Realtor did not even ask the legal assistant for the documents, which she admitted later in the week. She only requested the information when I emailed her asking for a detail of correspondence and copies of the files.
She told me the meeting went very well and that the law firm would be updating every Wednesday and that she verified all the files. (She has been provided to us with the claim that she was great at short sales). She said everything was moving along smoothly and making good progress. She said she had the meeting with the actual attorney and he assured her that this was a one time mistake and that everything else is very organized and handled properly and professionally. This was not the norm and all our other files were being handled smoothly. (Later, we find out this was not the case!)
Wednesday, May 26th
The next email I got from the legal assistant was on May 26th: “I was told today that this file has been placed on hold to review the short sale documents until July 1st, 2010; the foreclosure sale date has been postponed and there is a Negotiator by the name of Kelly Boyd; she is currently reviewing the file and I am to call back again next week for another status update on this file.”
Once again, I replied and told her that I was taking care of that property and already had that information. I asked her personally for an update on the remaining properties. She ignored the email. I sent a copy to the Realtor and requested she get me all the docs by the end of business day on Friday.
Tuesday, June 1st
I sent another request on June 1st for this information. I also left a message for the attorney to call me back. Neither the attorney nor the legal assistant returned my message (Big Surprise!).
I then contacted the Realtor via email (since she doesn’t answer her phone), at which time she said she would call them back.
Later that day, I got an email from the legal assistant telling us to set up a username and password for the Equator system and that the law firm had done all they could at this point. When I called Bank of America with the owner, I was stunned to find out that they had sent the first document in on June 1st and it was nothing more than an authorization.
They had never faxed the contract in or uploaded documents.
This was nearly 45 days after receiving the package (or after we sent it to the Realtor at least). I went through the information with a representative on the phone for over 1 hour confirming that nothing had been sent in to the bank since 2008 prior to June 1. Even at that, the contents of the package had not been submitted. It was nothing more than an authorization for the law firm. No supporting docs, no financials, no contract, no HUD… The list goes on.
I was mortified. We had an end buyer that was waiting to close on the property using the $8000 tax credit and here the file was sitting on an incompetent and/or lazy legal assistant’s desk for the better part of TWO MONTHS.
Naturally, I began making calls on the next property and the next.
To my surprise, the representative told me that they notified the short sale negotiator on May 24th that the package was missing a hardship letter. We verified that it was in the documents the Realtor was sent and asked for the fax to complete the file.
However, something didn’t sound right so I began asking a few more questions and had her pull an account history.
This will BLOW YOU AWAY! We found out that the legal assistant had submitted the package she’d intended to send to the lender on the property I mentioned above. She never submitted the original package for the offer we got on that property or the new offer. nearly 2 months ago. They had the wrong package and offer. So the ridiculous attempt at the package that was supposed to be sent to property A on May 19th was actually sent to THIS property. FYI… the information was still incorrect.
The crazy part of this is that the first contract that came in on this property was over 2 months ago… Nothing had been submitted for two whole months.
I forwarded all of the facts to the Realtor and told her it was her responsibility to get these fixed IMMEDIATELY as I was traveling the next morning.I asked for a phone call to discuss at 9am and have not gotten one to date as of the time of this post.
In addition… when I called each of the lenders, I also found out the Realtor had never faxed in the authorizations for any of the properties to follow up on the status (which she indicated she would do a month ago when the lack of communication from the law firm was apparent).
She admitted having not faxed in the authorization to the 3 lenders I spoke with, but claimed she’d sent to the 4th!
Wednesday, June 2nd
The Realtor simply forwarded 4 faxes with no answer as to whether or not they were submitted, what the intent was, etc. She DID tell me the legal assistant was working on HUDs. Yes, the same legal assistant that I CLEARLY told the Realtor was to no longer be associated with our files. So much for listening!
The Realtor went on to prove her incompetence by telling me she didn’t have updated bank statements from the borrower, which I’d forwarded the week before. She claimed that the last statement she had for her was April. I tried to explain to her via email (since she refused to return calls) that May statement hadn’t been received. She apparently couldn’t comprehend that!
She began scanning in all sorts of documents and sending them my way. She asked if she should send to the lender or to me. I replied with a request for her to call me so I could go over them. She didn’t. She just sent me a series of documents with no explanation other than she was waiting on the legal assistant to send her the HUDs. (Seriously… this agent isn’t getting the fact the law firm is incompetent).
Thursday, June 3rd
I had to engage her broker and team leader because we simply weren’t getting factual information.
First, though she entered information into the online system for one of the loans. It had errors. She also hadn’t taken the time to see that there was no contract or other documents in the system that are required for the file.
She never sent in the other contract and was waiting on HUDs STILL from the legal assistant.
What’s Next?
At this point, there are several choices. Both the law firm and the agent are negligent. We have a few choices:
- Fire the agent: The reason this doesn’t make sense is that she has the buyers/contact with the buyer’s agents. However, if we don’t get satisfactory responses, we will contact the buyer’s agent directly, cancel the contracts with the Realtor and run them ourselves, keeping the commissions.
- Hire our own title company/law firm: In the event we need to seek legal action, I would rather have all of the responsibility fall on the Realtor as she was the one the sellers hired. By bringing in other parties, she could try and shift the blame.
- DEMAND Follow up and levy consequences: Specific follow up communication is required moving forward and the Realtor is going to want to get rid of us. Every correspondence will include her broker and team leader and any expenses incurred to find competent help will be at their cost.
Note: Legal action is not out of the question nor is a formal complaint to the licensing body. However, it is best to wait until everything is resolved one way or another, either with a foreclosure or a closing. This way, we have a concrete outcome and can go after the best recourse for the clients.
Takeaways
The truth is… Short sales really aren’t all that complicate and if you’re going to work short sales and foreclosures, you might as well take on the follow up and negotiating role. The theory that because an attorney is involved, the lenders will listen is simply not true. They don’t give extra weight because of the letter head. The banks have wised up to this and realize that there are plenty of incompetent attorneys representing short sale sellers. (You might as well get paid if you’re going to have to do the work anyways)
So here’s what you need to do moving forward if you’re hiring other people to do the grunt work:
- Demand regular follow up, even if they get annoyed. It’s too bad… If the are proactive in the follow up, you won’t have to be the “bad guy”. Include in the follow up request:
– Date/Time of follow up (must be weekly)
– The representative at the bank the person spoke with
– Key points of conversation (even if there was nothing new discussed) - Spot check the accuracy of updates.
– In other words, get your own authorizations from the lenders and follow up on your sellers’ files every few weeks and hold the person representing your file at the real estate office or law firm accountable for the updates. - Get copies of all paperwork submitted.
– You want to have the specific file that was submitted so that you can not only review for accuracy, but have it handy if you need to speak to the lenders’ negotiator about any elements in the package. - Take COPIUS notes of every correspondence with:
– the Realtor
– the negotiator/law firm on your end
– the lender
Unfortunately, you can just assume that because you’ve hired someone that the job is going to be done and done well. You’ve GOT to stay on top of these if you want to get paid. I would personally spend every Thursday morning following up with all my lenders on all my accounts.
Why Thursday? There just tends to be less volume UNLESS it’s the last day of the month or the 15th-16th when payments need to be in before late fees hit.
The good news is that lenders are doing much better (some are certainly better than others) and are getting them closed faster and being more responsive, so you don’t feel as much like you’re banging your head against the wall every time you call.
Use the short sale package checklist I’ve provided on this site as well and include your table of contents. This way, when they’re missing a document, you can easily point them to the precise page of the package. It contains everything you need to submit a clean package that gets put into progress immediately.
NOTE: Some lenders may require additional documents or require documents on their forms. Ultimately, the contents are essentially the same.
I will keep you updated on the status of these files with updates to this post in the future and what, if anything, we decide to due in terms of reporting to the appropriate bodies, lawsuits, etc. It all depends on what happens in the end with these files.
Needless to say, neither the law firm nor the agent will get our business and once all is said and done, we will reveal the names and persons here to protect others.