June 12th, 2012 at 7:02 pm
As you know, short sales continue to be a large part of our business. With that in mind, I received a call yesterday that highlighted an issue I hadn’t seen before. In that case, our seller received approval from the bank and immediately delivered the approval letter to the buyer. After making that delivery, the seller then reviewed the lender’s conditions and found that a few of them were unacceptable. As a result, the seller sought to cancel the Agreement, stating that he did not have to accept all of the bank’s conditions. Of course, the question for me was whether that cancellation was effective.
Upon hearing this scenario, my initial reaction was that the deal was cancelled. After all, as the SSA makes clear, the seller “is not obligated to change the terms of their Agreement to satisfy Short Sale Lenders’ consent or term sheet.” (SSA, paragraph 1E.) On the other hand, however, the buyer’s agent then pointed me to paragraph 1C of the SSA and my opinion quickly changed. Paragraph 1C(ii) of the SSA reads as follows: “Seller’s presentation to Buyer of Short Sale Lender’s Consent satisfying 1B removes the contingency in 1A.” (Emphasis added.) In other words, by delivering the bank’s approval letter to the buyer, the seller is removing the contingency in the SSA and therefore their right to cancel the deal based on the SSA. So, in the case above, since the consent had already been delivered to the buyer, the seller could no longer cancel.
What does all this mean for us? It means that, as the seller’s agent, we need to carefully review the lender’s approval letter before sending it to the buyer. The SSA gives the seller 3 days to deliver the consent to the buyer, and we need to use that period to make sure that all the conditions are acceptable to our seller. Only then can we safely deliver the letter to the buyer. So, when an approval is received, immediately set an appointment with your seller so the letter can be reviewed and delivered to the buyer. By getting the approval reviewed and delivered, we not only confirm that lender conditions are acceptable, we also eliminate the buyer’s right to cancel per paragraph 1A and D. So move quickly, but carefully. That way you protect both your seller and yourself.
As always, let us know if you have any questions
June 6th, 2012 at 7:02 pm
As you know, we spend a lot of time providing you with information and training about all aspects of your business. We do that for many reasons, but at its core is our belief that the more you know and the more professional you are, the more successful you will be. We recently had a short sale that was a perfect example of this belief.
As you know, and as we have shared in the past, Fannie Mae limits the lender’s ability to reduce commissions in short sales arising from loans they own. Specifically, since March 1, 2009, Fannie Mae’s guidelines have stated that “closing of preforeclosure sales may not be conditioned upon the reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price…” In other words, on a Fannie Mae loan, the lender may not cut the commission below 6% if that is what the listing agreement provides.
With that rule in mind, one of our agents recently represented both sides in a Fannie Mae short sale where the listing agreement had a 6% commission. On May 17, he got an e-mail from the bank’s negotiator which said the deal had been approved and attached the Approval Letter. In both the e-mail and letter, however, the commission was reduced to 4%, “per investor’s requirements.” Note that the investor’s requirements were referenced but nothing was said about Fannie Mae. In response, after thanking the negotiator for their assistance on the deal, our agent wrote as follows: “You state below that the commission is at 4%. Upon further review, the loan is owned by Fannie Mae. It is my understanding on Fannie Mae loans that commissions are not to be below the level of what the listing agent and borrower negotiated.” After attaching the listing agreement showing a 6% commission, our agent asked the negotiator to look into “this oversight and hopefully have it corrected.”
In response, the negotiator first responded that the “commission will remain as approved. As a dual agent, 4% is the max.” The next day, however, we received the following: “I went to my contact at Fannie and they approved the 6% commission. Attached is the updated approval.” In other words, by knowing the rules, and pointing them out to the bank, our agent earned an extra 2% on this deal. Remember, it would have been easy to accept the 4% and move on. After all, most of us believe that commissions are limited when we act as a dual agent on a short sale. However, by being on top of his game and business, our agent knew that the discount was not allowed and fought for his money.
There is one other thing I want to point out about how this issue was handled. Please look again at the quotes from our agent above. At all times, our agent was polite and professional. He always thanked the negotiator for her help. He politely pointed out the mistake and asked that the “oversight” be corrected. There was never any anger or emotion in his e-mails and he never insulted the negotiator. This is another example of something we always tell you: act professionally and you will be more successful than the “jerk.” People like to be treated professionally and will respond more positively when they are. So, know your business, keep yourself up to date on all new developments and use that knowledge when necessary. It will help you get more clients because you will be the best at what you do, and it will help earn you what you deserve, like in the case above.
As always, contact us with any questions you may have
June 1st, 2012 at 7:01 pm
As we all know, one of the signs that our markets are turning around is the return of multiple offers. No matter where I go, I hear the same thing: Because inventory is so low, if a property is priced correctly, it will go in multiples. While we are glad to see this activity, multiple offers do raise certain issues that we haven’t seen in a while. With that in mind, I thought it a good idea to remind you about these problems and, most importantly, what you should do to handle them correctly.
The issues we most often see in multiple offers arise from the appearance of two potential conflicts of interest, both resulting from the listing agent representing one prospective buyer. In that case, two things almost always happen: the other offerors think you are favoring your buyer with the seller, and the seller thinks that you are acting in your buyer’s interest rather than theirs. The reason for this suspicion is obvious: You will earn both sides of the commission if your buyer gets the property. As a result, if your client does end up as the ultimate buyer, no one will believe it was for legitimate reasons. So, while avoiding this situation and not representing both sides in a multiple is the easiest solution, there are other things you can do to properly represent your clients without violating your obligations to anyone else.
First, always get your manager involved in multiple offers. Their involvement acts as a buffer to your potential conflict of interest and oftentimes makes the other parties feel like they are getting a fair chance. More importantly, however, is to have your manager represent the seller in the offer process when you also have a buyer. That way, no one can claim that you improperly steered the seller to your buyer. After all, when following that process, you will not even be in the room when decisions about counters or which offer to accept are made. Rather, at that point in time, your manager protects the seller’s interests and you protect your buyer’s. As a result, everyone feels like the process was fair to their client. Of course, after an offer is accepted, regardless of which buyer is chosen, you can then step back in and represent the seller. By that point, the potential conflict has gone away and you can perform your duties as listing agent and represent your client.
Please understand that this policy came into being after a lot of experience. Without following it, you are very likely to get a complaint. If you do follow the process outlined above, however, our experience is that your deal goes much more smoothly and you can avoid these problems.
As always, contact us with any questions you may have.
May 25th, 2012 at 7:00 pm
I went to a Seminar this week put on by Inman, and the first presentation given was entitled “The Way The World Communicates Just Changed – Have You?” That title is true in many ways, but none moreso than with regard to e-mail. Where we used to meet a client in person to deliver or discuss a document, today, we send it by e-mail. Where we used to call the client to schedule an appointment or showing, today we do it by e-mail. While we can have a long debate about the benefits of this technology, and the corresponding loss of personal contact, the truth is that because e-mail is now such a central part of our world and business, we need to make sure that we use it appropriately and with the proper amount of care.
For example, we have had a number of complaints from clients who received an e-mail with the wrong document attached or whose personal information or document was sent to an unrelated party. In each of these instances, the agent’s explanation was invariably that they were out when the e-mail came, either could not or did not have time to open the attachment, and wanted to get it out quickly. So the e-mail is forwarded on faith, and the attachment is sent out blindly and without being checked. I think this is done in part because we use also e-mail in our personal life and that use is invariably very casual. While I have no problems with that use, e-mail for business is very different. It is the same as sending a letter, on your letterhead, by registered mail. It never goes away, and you need to treat it that way. Just like you need to proofread a letter, and make sure that the enclosures are correct, you need to proof an e-mail and review the attachments. In other words, you need to slow down and take the proper care before sending any e-mail.
Similarly, because e-mail can be informal and sent from our phone, we tend to send it quickly. That, of course, can result in a number of problems. First, we can hit the wrong button (reply instead of forward) and send our message to the wrong person. For example, in one transaction an asset manager sent an e-mail, meant for our listing agent, to the selling agent. Unfortunately, the e-mail said many derogatory things about the selling agent and obviously made the deal more difficult to close. Also, you can respond to an e-mail quickly and emotionally, and send an e-mail which, upon later review, does not say what you want to say or how you want to say it. There are many examples where a quick e-mail comes across as very angry. When sent to a client, it can often result in the cancellation of a deal or the loss of a relationship. As a result, don’t hit reply in the heat of anger or emotion. Walk away from the e-mail, think about your response, and come back to write it letter. Those are things you always did with letters and will improve your communication by e-mail.
In short, while e-mail is a great, easy way to communicate and run our business, it is really no different than any other written communication. As a result, we need to treat it with the same care. Slow down and think about what you are doing before hitting the “send” button. By doing so, you will avoid the e-mail problems we all have heard about and will avoid having your e-mail as Exhibit A to some lawyers lawsuit. And, of course, that is one thing we all want to avoid.
As always, let us know if you have any questions
May 11th, 2012 at 6:59 pm
As you all know, one thing you often need to do in your job is help your clients deal with and get around conflict. It is very common for some dispute to arise between the buyer and seller, or a client and agent, and keeping the deal together becomes dependant on whether that conflict can be resolved. With that in mind, I wanted to share an experience I had twice this week where solving a problem revolved around a very interesting “issue.” Specifically, we have a listing where the seller claims some personal property was stolen during an open house. Now, as you know, we don’t believe that we are responsible to safeguard a seller’s personal property. The Listing Agreement specifically provides that we are not responsible for any such loss and states that that seller will take reasonable precautions to safeguard her valuables. That being said, when property is stolen, the seller is upset. So, yesterday I received a call from the seller’s lawyer demanding that we somehow compensate them for their loss. In the course of that conversation, the attorney said to me that there was one specific thing that we could do that would help in making the problem go away. When I asked what that was he said that we “could tell the seller that we were sorry that she lost this property and was going through this issue.” He wasn’t asking me to acknowledge that we had done anything wrong or had breached a duty. Rather, he wanted us to tell the seller that we understood why she was upset and felt bad that her things were taken. He said that in two weeks of discussing this issue with our agents, no one had expressed these feelings to the seller and that bothered her. So I, of course, told him how we sympathized with her and felt bad that she had lost some property she felt strongly about. I didn’t say it was our fault. I only said that regardless of how or why it happened, we felt bad that it did and wished she wasn’t having to go through this problem. With that, the dispute easily settled. That was the second time this week that this exact issue resulted in resolution of a dispute. Earlier we settled a major lawsuit after telling the plaintiff that we were sorry she had problems after moving in to her new home, even though we never said it was our fault.
I share this story because I think it can be helpful to you as you negotiate your deals and try to resolve disputes. Please understand I am not telling you to admit fault. In fact, you should NOT do that. But you can express sympathy and understanding. Sometimes that is all the client wants to hear. With that understanding they are often willing to move on and close your deal. So don’t ignore your client’s emotions. While this is business to you, it is “home” to them. So by understanding and acknowledging their feelings, you are more likely to solve a problem, close a deal and have a happy client. And that, of course, is good for all of us.
As always, please contact us with any questions
