I believe it was Confucius who said that he who hesitates gets flattened by an 18 wheeler laden with 10 tons of abject irony along life’s crooked highway. Or was it something about those who dally within the confines of a centrifuge being at great peril of becoming centrifugal? Regardless of the exact phrasing, the veracity of the axiom is never more resplendent in self evidence than in its pertinence to a Real Estate transaction. Get in, get out, and for God’s sakes man, do it on the quick step.
Case in point:
August 8th, 2009. The night was warm and dry. Once again defying all logic, Phoenix did not burn up upon reentry into this late summer evening, and its denizens scurried out of air conditioned alcoves to forage for supplies as the sun dipped below the White Tank Mountains in the far Western sky. Taking full advantage of the reprieve, I was amongst the throng vying to get sixty eight errands done in a three hour span. That’s when the call came.
A little background. A client of mine purchased a beautiful home in Queen Creek two years ago. One job transfer and complete meltdown of Western civilization later, the home is unfortunately worth about 50% of its prior value. So we attempted to hammer out a short sale. Rife with frustration, incompetence, duplication and other multi-syllabic words, short sales are the very antithesis of expediency. It takes forever and a day just to get a negotiator from the bank assigned to the transaction. Once the negotiator is assigned, it can literally take weeks just to choke the direct phone number to the cave where they hide him out of a disinterested call center employee.
It’s crazy. It’s maddening. It’s 2009.
The upshot is that 6 months and many stops and starts later, the deal we secured was approved by the bank and headed for closing. Loan docs were in and we were set to put a ribbon on the whole shebang in two days. It didn’t matter that the bank had screwed up the first approval by providing an unrealistic closing window. It didn’t matter that it took an additional three weeks and a new set of BPOs (broker price opinions) to get the closing timeframe extended to a reasonable period of time to line up the buyer’s financing. It didn’t matter that the buyer had nearly backed out several times during the interminable wait as concern mounted about the continued erosion in values. Or that we had to sweat through an appraisal in August for a sale that was negotiated in February. We were finally at the finish line.
And then the fateful call came. Had the pool service not been performed? Was there new damage to the property? No, we had somehow managed to ride out the entire escrow without incurring any additional issues with the home itself.
The buyer lost his job.
Called in over the weekend and informed that his services were no longer wanted, months of work went straight down the portal to Real Estate hell that opened up under our feet. More pointedly, months of waiting went down said portal. Had the lienholder acted with the expediency and urgency that actual Real Estate professionals understand is vital to the successful culmination of a transaction, the unfortunate eventuality would be somebody else’s problem. Instead, the hot potato remains firmly in the bank’s seared hands.
Time kills deals.
The glacial pace that most institutions operate with only serves to demonstrate why bankers should stick to banking. The moral that the average consumer can take from this tale of woe is that you never take a Real Estate sale for granted. Things can and will happen between contract acceptance and closing. To limit those things that can sink your battleship, you want to get to the closing table as soon as humanly possible. Death, job loss, a bad night in Vegas … any manner of variable can rear its red inked head to sabotage your sale.
When you have the opportunity to close, close. If that means you have to reschedule the movers and change the turn-off date on your utilities, so be it. A little inconvenience is cheap insurance against catastrophe.
Flattened by the big rig and dizzy from centrifugal force, we limp back onto the market. Nimble as we can be with a 500 pound gorilla in tow.
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If there is a bright side to this story, the prospective buyers is not now left with a home for which they probably cannot make the payments.
Of course, that doesn't help the present owner. Sad story and not unlike many in the dark world of short sales.
Banks do not know how to sell real estate.
Very true, Lenn. We empathize with the buyer and are somewhat relieved that he isn't stuck with the burden of a home that is no longer affordable. That said, the lion's share of my anguish is reserved for my client. All in all, I chalk it up to "stuff happens," but it does help illustrate the point that sellers (and their lienholders) should never take a closing for granted. Get to closing as soon as possible.
The new profile pic is terrific!
Paul - I think your simple statement, "Time kills deals" sums it up neatly. I think I shared with you about the endless short sale that we have been involved in, which may actually close this month, a mere NINE months after we started the process with the buyer. Additionally, the bank tried to cut our commission to zero. As it turns out, we will get a pittance for the work we did, but at least our client will be out from under this anchor of a house.
You know that happened to one of my sellers a couple of years ago. Buyer's got laid off the week before closing. It is a mixed blessing in that you don't want a buyer to go through buying a house they head into foreclosure immediately, but make that stinks for your client.
Fortunately for my client the market was different a couple of years ago and a new buyer was found within days..
Ugly!
Sometimes I wonder if the banks are really in as much trouble as they say or if they are just that inept at handling the process. I see the REALTORS as trying to help them and solve their mountain of problems and they just throw every hurdle in the middle of the road to slow and stop the process. It is maddening. I think I understand why the banks are in the mess they are in! Sorry to hear about all your hard work being for naught. Congrats on the feature though!
Those kind of stories are very common among the community, the current employment power of the country is not as strong as it used to be, I represented a buyer last year and right before closing the deal, we had loan docs and everything, he got laid off. Anyway 6 months later he bought his first house but we can't do anything. that is out of our hands.
Thanks for the posting.
Carlos Morales
Jason - As long as your buyer doesn't take a job offer in Cambodia between now and then ;)
Melina - I'll get it sold again, but to open ourselves up to all of the hurdles again in this market, and the possibility of a lower price for the bank (which will entail yet more genuflection), it's nothing short of Suckfest '09.
Jeani - I have a hunch that banks throw up so many hurdles and delays for more than a matter of simpy being understaffed. I truly believe it is willful. Whether or not they are receiving TARP money to offset the losses, I think they aim to make the process infuritating as a deterrent. Can't have news of a seemless process get out to the public or they might face an even greater avalanche of short sellers. They want it to be hard.
the same holds true for any deal not just short sales, every hour that goes by is an opportunity for something to go wrong.
Banks know something we don't or they would get these sales done. I read lately that only 23% of short sales are getting approved lately. There must be more money for the banks from somewhere else or they would complete these.....
Carlos - I disagree somewhat. In your case, if I'm correct in my assumption that it was a typical sale with a 30-60 closing, there probably was little that could be done. In my case, we had 6 months to wrap this thing up before the job loss torpedoed the sale. The bank should have had this closed 3 months ago.
Great post Paul. Can you put it on the market at the bank approved price?
Erin - Yep. Of course, the approval is only good for so long.
Paul, I feel your pain! I had the same experience, although not with a short sale. The dragging was feet was not the issue, timing, however, was, as my buyer was let go from her job the day before closing. Like you said, just about anything can go wrong in the time from contract to closing.
Kathy B
Paul, talk about a bad ripple effect between seller and buyer over time. Wow, 50% drop in value over two years. I am using YOU for people to call when I argue real estate IS NOT an investment.
You, my dear, have a way with words. A great read this a.m. I loved this: One job transfer and complete meltdown of Western civilization later, Sorry about the deal. And as the old saying goes, hmmm . . . yeah, I got nothin'
Paul being from Phoenix I totally feel your pain. Slow excruciating, painful for all transactions that may -or may not ever close. Worse yet, fall thru as yours did. I'm sure the buyer is relieved but your poor seller - oh my - and you too. I know the amount of time and work it takes.
Queen Creek - tell me more - I might a have a potential buyer if it's under 130K 3/2 with garage.
That hurts to come so far and have it fall apart. Makes you want to scream. Good luck with things.
Extraordinarily well written - I thoroughly enjoyed both point and presentation!
Loved your presentation ... intelligent with humor! I especially enjoyed the last line and would love to use it if I may?
Read my recent blog about frustration with REO foreclosure sale. May I join you as you limp back into the market?
Hi Paul, The many pitfalls you mention are not the sole province of shorts. Your premise is correct - get to the closing table ASAP !!!
Our issue is that the default for loan contingency is 17 days in CA, rather than at closing. Most sellers agents will allow little, if any, extension. Had that happened in CA, the buyer would most likely have been out of contract and lost their deposit to the seller.
Vicky
Yes that would definitely have been the case in CA and now I can see how this 17 day period is a necessary part of our contracts.
Hi Paul, Most agents try to avoid doing short sales, and for good reason. I saw this as an opportunity and obtained the "Certified Distressed Property Expert" designation. I know what I'm doing but my experience mirrors yours. The major lenders don't seem to know what they're doing and many of these potential sales just drift along until the buyer decides to go elsewhere. It's almost as if they want to 'build' their real estate inventory through foreclosures rather than complete the short sales and reduce their non-performing loan portfolio. I've worked with some of the larger banks and unfortunately they seem to be the most difficult and unresponsive of all. It's very disappointing and I still strongly advise my buyers to avoid them if possible.
Paul,
I'm sitting on a short sale now and your statement that "banks do not know how to sell real estate" is about the best I've heard yet. I have a very young first time buyer and I'm sure her parents - who live a coast away and don;t even really know what a short sale is - think I am totally negligent. No folks, wrong place to put the blame!
Michael
This is in response to Vicki above: here in Ca, if the buyer had lost his job, he wouldn't be able to get the loan and thereby still protected under his loan contingency to get back his deposit.
Sucky that went on that long and it's now down to starting over again.
I suppose it's good for the buyer because if he had lost his job and had the house,he might have lost it.
Paul, I can't tell you how much banks are jacking around down here. My Broker just pulled "active with contingency" sales...the amount is huge and the number of short sales in that amount...almost bigger. What a waste for SO many people!
Great post today with lots of good information.
Thanks,
Patricia Aulson/portsmouth nh
Thanks Paul for reminding us of how frail a deal can be and how time is of the essence when it comes to getting a paycheck.
I agree Lenn, banks do not know how to sell real estate. It's just a shame that they are in control of so much of it right now with the foreclosures and short sales.
Paul, I had it happen to me twice last year on one of my listings. Same buyer, lost job, house fell through.
She was hired back, and lo and behold laid off again.
I know how you feel, I feel terrible for your sellers.
Banks have no clue how their delays cause things to happen.
Brilliant writing, Paul...love the image of the 500 lb guerilla in tow...that only started with a little monkey on someone's back. I've had some bankers wait for days into weeks to get with their other departments on an offer...they don't return calls and must be in those caves...the buyers walk away. Very frustrating. I like how you've illustrated the complexity of all this, but really don't like the facts you've clearly outlined
"Rife with frustration, incompetence, duplication and other multi-syllabic words, short sales are the very antithesis of expediency"
added to a boatload of incompetence...This is what "Kills deals"
I know, at this point that it's no consolation but it will eventually pass. It took a few years for us to dig out in the early 90's...Keep up your good work!
What a shitty deal! After all that time and patience, you're just back at square zero.
I could have just left the post over in Word and used your two lines instead, Georgina. Sums it up pretty nicely for all parties involved.
Seems like lately the only thing banks do well is hurt consumers, and I think it stinks.
I read an article (I think on Bankrate) telling that they aren't trying to help people because the loan servicers get paid more when a house goes into foreclosure. Every month that passes means more dollars from the investors to them, and then they get fees for all the steps in foreclosure.
And of course we all know the dirty tricks they're playing with credit card holders.
It makes me cranky - considering that so many of them got our tax dollars to keep them solvent and operating, then not only laid off thousands of people, but gave the big wigs huge bonuses.
I think the banks and the loan servicers deserve the skunk award for stinky business practices.
Marte Cliff
www.copybymarte.com
Here here! How about 3 negotiators and each of them wanting the same info each time they take over the case and then you are informed of a foreclosure date 2days away by the new negotiators who wants the whole package again!!!
Reading your post was like a fun roller coaster ride. And softened the blow from the short sale I just had fail yesterday after six months of work, now my buyers say they'll wait til next year to buy a house.
Time definitely kills all deals. The longer the can of worms is open, the more the worms crawl out. Gross image, sorry :-(
What doesn't make sense is WHY they take that long to close a deal? They have tons of excuses, like they are overwhelmed by the many foreclosures and short sales, but the reality is they drag their feet. Though I hope they don't just to increase their real estate portfolio, you never truly know with banks.
It is unfortunate that everyone in the deal suffered because they couldn't get to drafting your form filled acceptance letter and then staying out of the way. I think sometimes they get in their own way just for the fun of it.
Hopefully you can get it sold for them sooner rather than much later than the late you have already had to wait!
After reading this, I want to hire Mola Ram to rip to Loss Mitigator's beating heart from his chest and set it on fire before the dying man's eyes. Ideally, the sight of his darkened blood dripping from the clenched Thuggee leader's fist would inspire him to whisper an apology or warning to others before he succumed to his TIMELY demise. A YouTube video of said event could then be distributed to all banks for review. Surely, it wouldn't take more than a couple of sacrifices to Kali to get the message across.
Don't forget the freaky little kid with the voodoo doll, Erik. I wouldn't mind turning him loose with the pins and needles while the quite literally heartless mitigator is slowly lowered into the pit of molten lava. Then again, I suppose that's a commute he makes daily.
Boy, Erik's got a mean streak. I'd forgot about Mola Ram, yes I think he is perfect for the job. Paul, your right about time killing deals. Too much time, poof up in smoke.
How horrible for everyone involved in this transaction. I think the term "negotiator" when applied to a bank's short-sale representative is an oxymoron.
Great post, Paul! I hope your sellers get another offer pronto.
Cheers,
Robin