So, you took a listing on a potential short sale, and the seller's lender is acting as if they are in control. Are they?

Well, to some extent, yes. While your seller still owns the house, will sign any contract, deed and closing papers, their lender will say yes or no to the deal. Since we are asking the lender to accept less than they are owed, they can say no to deal, thus stopping the sale. Thus, they often act as if they are in control, since they do control that part of the deal.

Your seller will have some control once/if the lender approves the short sale. The lender might require something from the seller that the seller cannot or will not comply with. At that point, the seller could say no and cancel the deal.

In essence, the seller's goal should be to sell the house. To do so, they must get their lenders approval. That might mean giving up some control, and if so, if that accomplishes the task at hand, then so be it. Control is important, but not everything.

Always keep in mind; as the listing agent, your client is the seller, not their lender. You should follow any instructions from your seller, yet might be reluctant to follow any from the lender. If the lender puts any obligations on you, be sure to discuss that with the seller before proceeding.

Do you feel like you are working harder for less money?

Does it feel like every deal takes more and more time?

If so, you are not alone, and you are correct in both. We are working harder for less money, and, time grows shorter as each deal takes more time. Here are some ways you might be able to overcome those issues.

1. Time management. Yes, that phrase again. In a lifetime of one or many careers, we have hard the concept over and over again. But, if ever it was a critical tool, it is now. Imagine years ago you learned to be a juggler. Get to three balls in the air, and you were good. Juggle four bowling pins, and the circus hired you. Now, a juggler, just to get an audition, needs to juggle a bowling ball, a sword, a chainsaw, a lit candle and an orange, all at the same time. For the same or less pay. Do you feel like that juggler?

Managing your time will help soften that blow.

Plan your day. That's right, write it down. Use a calendar, and be sure to allow enough time for each activity. Do not overlap and leave time for personal issues, such as; do you need to go to the bank, pick up your dry cleaning, etc.

2. Avoid activities that steal time from you. Sounds simple enough, but many things in a day can cost you time. Once you are determined what needs to be done, often other people can waste your time. It is a fine line between managing your time effectively and insulting other people; but, someone stopping you to waste your time is no different than them reaching into your wallet and taking money from it. Not so easy, but once you master it, you will be more in control of your time.
3. Delegate… get some help, even from your family. Have someone else handle the mundane items, such as submitting ads, paperwork to your broker, and other issues that you must do but does not create buyers or sellers.

Given that each listing and sale takes more time to generate and close, you need to take more time to work on them, therefore using good time management skills and planning your actions will allow you to be more productive.

It might come as a surprise to many homeowners when the letter arrives. They have good credit and a high FICO score, only to learn that their lender has suspended their Home Equity Line of Credit (HELOC). Even if the homeowner has no balance on their HELOC, many lenders have taken a broad-brush approach by looking at the overall market and not the individual owner's credit rating. This might affect the homeowners current or future plans to remodel the home, take a vacation or send a child to college. Lenders are concerned that as real estate prices fall in certain markets, many owners have a combination of the 1^st mortgage and the HELOC which now exceed the value of the property. While a lender would always have the right to suspend a HELOC, many lenders have looked at a city, a zip code, a county or even an entire state, and have sent letters to owners telling them not to use the checks or debit cards that were provided when the HELOC was issued.

Lenders such as Bank of America has looked at zip codes through several market value programs and has sent letters to those owners who are in a market that has declined more than 10%. In addition, the guidelines for obtaining a new HELOC have changed. In prior times, most lenders allowed a 1^st loan and a HELOC to reach 100% of the value of the property. When the owner obtains a 90% 1^st loan, and a HELOC for 10% of the value, that would total 100% of the value. Now, many lenders will only allow HELOC's and the 1^st loan not to exceed 80% of value. The lender wants the 20% “cushion” in case values of property fall.

The homeowner really has no recourse, as the lender includes language for suspension in the loan paperwork a seller signed.

So, be sure to read all letters and other communications from your lender, in case they send you such a letter.

In today's current climate of short sales and lender owned properties, there is an ever-increasing downward pressure on commissions being paid. In so many cases, brokers representing buyers are finding that the co-broke commission that was originally offered in the MLS was reduced somewhat and often significantly at close of escrow.

Certainly, there may be an issue with the listing broker owing additional commission to the selling broker, yet that process could take months to resolve with an uncertain outcome. The process is arbitration through the Association of Realtors, which up front requires a deposit, sometimes reaching $500. If you ultimately win, you get that deposit returned. But if you lose the case, you also lose the deposit.

So, how can you insure that you will receive the full, anticipated commission at close of escrow? Have the buyer execute an Exclusive Buyer Retainer Agreement, whereby the buyer would agree to pay you a commission if the listing broker does not offer one, the seller does not offer one, or if the agreed upon commission changes.

There tends to be a resistance in the real estate community to bind the buyers to an obligation to pay a commission. That resistance tends to come from years of doing it one way, which was relying upon the listing broker to pay the commission and not involve the buyer.

But, times have changed. Not only is there pressure on our commissions from the listing side, we have to ask ourselves; “Are we entitled to be paid if our buyer buys?” Many agents fear that if presented with such an agreement, most buyers will bolt and find another agent.

That is simply not true. Explained properly and thoroughly, a buyer should understand that you do not work for nothing and that you have a right to make a living. With such an agreement, most buyers would have no exposure anyway, if the listing agent pays what is owed. The buyers would only have an obligation to pay you if you end up with less than what they agreed to pay you, or if they wander out alone and buy something without you.

So, for example, let's say you tell your buyer that in signing the form, they agree that you will receive $10,000 for any property they buy. If you sell them a listing that offers $10,000 and you receive that, the buyer owes you nothing.

If you sell them a listing that offers $8,000, and the buyer knows that when you show it, then they would owe you $2,000 at close of escrow.

If you sell them a FSBO who refuses to pay you, and they know that, they would owe you $10,000 at close of escrow.

Just like a listing agreement, a Buyer Agreement is a contract whereby the buyer would owe you commission if they buy and the listing broker or seller does not pay you. In a listing, the seller would owe you a commission if the property sells. Why not have the same assurances to be paid for your hard work from the buyer?

The choice to use this form belongs to you and your broker. Be sure your broker supports your use of this form and also be sure to know what rules your broker imposes in such usage.

Real estate agents often take the path of least resistance when it comes to generating new business. While many agents flourish in a good market, those same agents often flounder when the market turns rough. Why? Simple. Those agents allow business to come to them, albeit often with some reasonable marketing efforts. That works fine in a strong market; but could spell doom in a down market.

Here are some key tips to ride out the storm and stay busy in all markets.

1. Have several sources of business at all times. Building a base of business on one source might work well for a while, but if that source becomes exhausted, or stops producing, you are out of business. Focus your marketing efforts on at least 3 sources of business, with sales and listings coming from all 3. Then, if one or even two sources slow down, you still have another producing income. An example of 3 sources might be 1. Prospecting your past clients, friends and relatives, 2. Work a large geographic farm and 3. Prospecting first time homebuyers, For Sale By Owners or expired listings. Doing all 3 well might help you ride out a bumpy market.
2. Stay on top of trends. Look for opportunities that might be around the corner, and be prepared to move quickly. In a market with falling interest rates, more and more first time homebuyers would be ready to buy. Seeing that coming and preparing for it puts you ahead of the competition. A slowing market and declining values often brings a higher level of foreclosures. Develop relationships with several lenders so that when they are ready to list those properties, you might be near the top of the list.
3. Never stop prospecting. No matter how the market shifts, it will come back around. Yes, you might need to continue spending money to do that, but any business requires on-going investment. While some buyers and sellers will make instant on-the-spot decisions on which real estate agent to use, most will make a decision to use a Realtor and will consider who they have seen or heard from the most. Consistency and repetition builds your business.

It is not impossible to stay busy in a down market; it simply requires focus and perseverance. With several sources of business, it would be odd that all sources would slow down at the same time.

Your mental attitude will have a lot to do with your success. If you believe the market is bad and there is no business, you are correct! If you believe that there is business to be had, again, you are correct.

Does this sound familiar? You represent a buyer, and you have an accepted offer on a lender-owned property. In their counter offer, the lender stated that they are not responsible for utilities, and if the buyer wants utilities turned on, they must do it themselves. So, that puts you in the position of either helping the buyer do that, or worse, you do that for them.

Here's the rub… neither you nor the buyer own that house, and really do not have authority to enter the premises and turn on utilities. Yes, the lender said in their counter that they would turn them on, but still, that puts the buyer and the agent in a real bad position, since the lender technically did not authorize the buyer to turn them on, nor does the lender indemnify the buyer if something goes wrong.

Case in point… Buyer's agent arranges for water and electric service to the property. Buyers FHA appraisal required the pool to be filled and running. Agent shows up the afternoon both of those services were to be set up. He sees the water meter, turns on the main valve. He then turns on the main circuit breaker to the house. The agent proceeds to his car, picks up the hose in his trunk and walks to the rear yard. He connects the hose, turns on the faucet and drops the hose in the pool. He then returns to his car and sees water running down the driveway. This all occurred in about 7 minutes. He immediately turns off the main valve, goes through the front door to find most of the downstairs flooded. Someone left the hot and cold faucets for the washing machine in the laundry room turned on, and when he turned on the main valve, that immediately started flowing. By the time he realized it, the house had a good inch or two of water everywhere.

Who pays for the damage? The agent, and his broker, and their E & O carrier. The agent damaged someone else's property, so the agent would be liable, and technically, entered that property without authorization nor indemnity.

I heard of another case where a previous occupant left wires crossed in a ceiling when they pulled out a ceiling fan. By the time the agent got into the house, the crossed wires sparked before the circuit breaker shut it off, and that spark ignited something in the ceiling. By the time the agent realized it, the entire ceiling was on fire. Again, damage in someone else's property that the agent caused, thus; the agent, his or her broker and their insurance carrier will be liable.

Bottom line… as a buyers agent, stand your ground and either require that the seller have all utilities on for inspections and walkthrough, or cancel the contract. When enough buyers cancel these deals, the lenders will realize their obligation and turn on utilities in the properties they own.

You might remember that line from a movie. Ahh, but what movie?

Most people think it comes from “Alien”. No, it comes from “The Fly” (the 1986 remake with Jeff Goldblum and Geena Davis). The scene has two women and a man. The one woman, fearful of doing something, says, “. ..But I'm afraid…” The man says, “No, don't be afraid…” and the other woman says, very sternly, “Be afraid, be VERY afraid”.

This brings to mind the fear and paralysis that affects some real estate agents who fear the unknown. I have talked to so many agents who tell me “… I refuse to do a short sale or lender owned deal”. Why? They are afraid of the unknown, but the difference here, versus the movie, there is nothing to be afraid of. What most agents fear is the process, which is unknown to them, and sadly they have heard the horror stories and use both of those factors to take that position.

As a result, they are staying away from a large segment of our current market, which likely will stay that way for most of 2009. We will see more foreclosures before we see less, especially with the government-imposed moratorium being lifted last week; thus the sheer number of pre-foreclosure and lender-owned sales will increase. If you are fearful of that part of the market, you might be out of business.

So, if you decide to go after those foreclosed, lender-owned listings, you should answer these questions.

First, are you going to work harder for potentially less income? Yes. These deals take longer, require more documents and certainly require patience. With prices at a record low, and pressure on commissions, your income will be less. That's a fact, but there is not much we can do about that.

Next question. Will I lose some control of the deal? Yes, as lenders make their own rules, we need to far-more flexible in dealing with many of our standard rules. Your brokers are here to help you with that.

Last question. OK, how do I get these deals? How can I get listings from lenders? This takes work, good ole prospecting. Talk to every mortgage broker and title officer you know. They deal with lenders and asset managers every day. Ask for names, or have them put in a good word for you. It's just like prospecting for listings. Knock on doors, call people, and make yourself known. Lenders are assigning hundreds of listings to real estate agents all over the valley every day. You might just get in front of that person (or on the phone) on the right day, when they need another agent. Timing is a big part of success. You certainly won't get these listings unless you prospect for them every day.

Remember when you started in the business? Did your phone ring the first day, with a buyer ready to buy, or a seller ready to sell? Probably not. Think of this as your first day in the business. What should you do to generate leads?

Fear is the #1 killer of successful sales careers. Fear of anything… Fear of rejection, fear of failure, fear of the unknown, even fear of success. Each of these can be overcome by a desire or need that is stronger than fear. That is up to you to decide what that is, but if you do, there is a lot of money to be made in this market.