Homeowners: Do whats in your best interest; always use an agent for a short sale

On my blog I shared a story about a homeowner facing foreclosure that I met with recently. She has suffered some tremendous losses in the past 4 years, and her experience reminded me of the damage that investors can do to peoples lives when they are inexperienced, unscrupulous or both.

This woman's home went into default 4 years after the passing of her husband. This isnt the time or place to discuss it, but her story does highlight the need to have your affairs in order, even at a young age so that your family can recover if you happen to suffer an unexpected loss such as an early death.

The purpose of this article is to address whether a homeowner should use a real estate agent when they need to do a short sale to avoid a foreclosure. If you fall behind on your payments this is a question you will need to know the answer to due to the enormous number of people who have jumped into the foreclosure investing arena. It will come up, I guarantee it.

My goal here is to help homeowners who are in default on their mortgages understand the risks of not using an agent for a short sale and arm them with the knowledge they need to discuss the commonly used (and very misguided) pitch some "foreclosure guru's" and their students use, in which they will tell homeowners that its not only not necessary, but detrimental to use a real estate agent to negotiate a short sale.

For those with A.D.D. like me the bottom line is, investors will knock on your door and ask you to allow them to negotiate a short sale. They will tell you that its not necessary to list the home with an agent and that they can negotiate with the bank directly. They couldn't be more wrong. There is zero benefit to you as a homeowner to take their advice. In-fact its more than just a zero sum game, its detrimental to you to follow their advice. This article will explain why its a bad choice and what you need to do to protect yourself.

Also due to the tone of this article, It should also be noted that I am not an agent. I'm an investor telling other investors that we do homeowners an incredible disservice when we tell them to do their short sale without an agent.

The only reason investors ever use this tactic is in an attempt to increase their profits by eliminating a commission from the final price. Not only are they wrong about this concept, but you as a homeowner take on unnecessary risk by playing along.

Now you might not care about someone wanting to cut out commissions...or even feel that this is acceptable as long as you get the outcome you are seeking such as avoiding a foreclosure on your credit or trying to work out an arrangement to stay in the home.

That's all fine and well, however, it should be noted that the overall concept is flawed. I'm not going to spend a lot of time on the reasons why its flawed as this is really not the purpose of my article. I do plan on addressing it in a separate article for those more interested in this from an investors perspective, or just want the technical explanation. Suffice to say investors who think this way are wrong and as a homeowner you increase your 'risk of ruin' by foregoing agent representation on a short sale.

When an investor advocates a short sale conducted with no agent what benefit are you as a homeowner receiving from such a proposal? The answer is none, but you do take on increased risk and liability.

Broken promises

I mentioned that I met a nice woman this week who had lost her home last year. We'll call her Martha. Martha was contacted by some investors with a very common approach. They told her "Work with us and you can keep your home".

Now that statement is paraphrased obviously but Martha, like the majority of people who face foreclosure, did not want to lose her home. This desire to avoid loss opens the door for investors who promise to help them salvage their home and equity.

People facing the loss of their home often will make poor decisions because many investors will promise you whatever they think you want to hear. Martha was told such promises and believed them. Last year she lost her home to foreclosure despite those promises.

The investors had her sign paperwork transferring the property in a trust and then continued to give her assurances that everything was fine. As time ran out, nothing happened and Martha was simply told "sorry, the bank wouldn't work with you". Not only is this outcome common, but its a flat out lie. Banks do not operate in this fashion. They were withholding information about what really happened.

The bottom line is these investors took her financial life into their hands and carelessly acted without regard to the consequences for the homeowner. Whittling away her precious time to find a resolution to the pending foreclosure until the 11th hour upon which they said "sorry, we cant help after all".

In all likelihood, the real truth was that they either couldn't come up with funding to complete the deal, or we're not able to find an end buyer to flip it to so they abandoned the deal. Herein lies the major issue of dealing with amateur investors who have taken the latest 'do real estate with none of your own money' course. If they cant resell the property and be the 'middle man' using their buyers money to pay off the sellers bank, they are out of real options for that homeowner who desperately needs real help and real options.

The reason Martha lost her home, is because she did not give herself the greatest chance of success possible. If you are in a must sell situation, like a foreclosure, then you want as many possible solutions working for you as possible. You dont just want one buyer, you want 10-20 or more. You want as many interested parties looking and trying to buy it as possible. This increases the odds that it will get sold before an auction is held. Limiting yourself to one buyer is stacking the odds heavily against you. Using one single investor is unneccesarily tying your hands. For investors reading this, dont think I am poisoning the well here for you. We have figured out a way to...have our cake and eat it too, which I will be detailing in my forthcoming article on this subject from the investors point of view. You can still get first rights to your deals, and do the right thing by your clients. This benefits everyone and truely builds the win-win-win transactions that so many foreclosure insiders tout.

All the risk and none of the reward

The reason investors suggest not using an agent is often explained with platitudes like "they [agents] get in the way" or they imply that Realtors are inflexible in such a way that will make the transaction more difficult.

The reason this often passes as truth is...its often true. Too often real estate agents don't know how to get out of their own way. There are an abundance of agents who simply don't 'get it'...but this is a topic for another day. Today's message is, you need to use an agent when doing short sales, and even more importantly you need to use the right agent.

When I meet with a homeowner about their foreclosure I suggest multiple agents who I have worked with and whom I know will take the utmost care of the clients needs. They take their fiduciary responsibility to the client seriously. One group in Utah, Hartley and Associates, does nothing but short sales and crisis real estate.

Here is a video from Karl Hartley about why you should choose an agent for a short sale. Using the right agent is a tremendously important decision in determining if your short sale will be successful. I have met countless people with our mortgage and credit repair company who needed short sales but use the tired old methods like "I have a friend" or "my mom knows this guy" to find a real estate agent to do their short sale and now we are helping them recover from a foreclosure.

NEVER make the mistake of doing a short sale without an expert to help you through the process. Simply being an agent is meaningless if you are trying to determine experience. Real estate school only teaches people how to not lose their license...it teaches NOTHING about being a good agent, and definitely nothing about advanced topics like foreclosures.

If you are facing foreclosure take the time to weigh your options and interview people claiming to be experts.

Important points to remember

If you EVER get pressure to sign something quickly or commit quickly you would be wise to step back and evaluate why.

If you have stuck your head in the sand and waited until the 11th hour, then you may have little choice but to be rushed into a decision. If you wait till the very end of the foreclosure process you really have very few good options. Even chapter 13 bankruptcy is a difficult route to go last minute due to the passage of the new bankruptcy legislation.

If you have just barely fallen behind or just got a notice of default take a deep breath and get as much information as you can, you don't have all the time in the world...but you do have some time.

And of course use an agent who has years of experience doing short sales and dealing with banks...you will never regret it.

If you need information regarding a foreclosure in Utah please contact us at our blog Foreclosure Rescue Services for completely free no strings attached foreclosure help. If you are outside the state of Utah, we are still happy to help you and answer your questions. If we know of a source in your area we will get you the help you need.