Elizabeth Weintraub • Sacramento Short Sale Agent • Land Park

Yesterday I opened a bill from UC Davis. It was for an overage I owed for an annual exam last year. I found another invoice inside my bill for a different patient. I set it aside. When I later grabbed my checkbook to pay the bill, I looked again at the second invoice. It was for a person who lived in Galt. To be honest, my first instinct was to throw the invoice into the trash because it wasn't mine. My hand was 6 inches away from the shredder. Nobody would know. But I couldn't throw it away. I would know.

That little voice in my head said, "How would you like it if somebody threw away your invoice? Just do the right thing." So, I stopped what I was doing, addressed an envelope, wrote a quick note of explanation, put the bill inside, stuck a stamp on it and mailed it.

When clients are looking at homes, I try to point out the negatives along with the positives of each home. Sometimes buyers don't want to hear the negatives, but it's my job and my legal responsibility to tell them what I know. It's also the right thing to do. Maybe that buyer shouldn't buy a home at all? If that's the case, I let them know my thoughts, even though it may mean I don't get paid dime one.

It's not always easy to tell short sale sellers that they may face tax consequences -- that a hard-money second lender might possibly go after a deficiency judgment -- that they may not be able to buy another home for several years after the short sale -- but it's my duty to disclose, and to suggest that sellers obtain legal and tax advice because a Sacramento short sale agent can't give that type of advice.

At the end of the day, we all have to live with our own conscience. My advice to anybody who hesitates is just do the right thing.

The Short Sale Savior, by Elizabeth Weintraub, coming in June 2009.

Photo: Big Stock Photo

I am working with a group of home buyers in Sacramento whom, for varying reasons, do not want to buy a home until this summer. But this is February, and they want to get started home buying. The most logical choice for this group is to pursue short sales. Why? Because the market is still falling and most short sale prices are below the pending sales.

Also, because most regular home sellers would love to close within 30 to 45 days, and those sellers don't want to wait. They want to sell now. That's why their homes are on the market. Moreover, REO lenders also want those bank-owned homes turned over. Since many foreclosures are receiving multiple offers, a buyer who is asking for a 3-month escrow is last on the list of offers the banks will consider.

Which leaves short sale sellers. In fact, a couple of my sellers of a short sale are moving out-of-state this June. They can't close sooner unless a buyer is willing to let them rent back, and very few buyers are agreeable to that scenario. I received an offer for this particular home last night, and it's from buyers who have a home to sell but don't need to sell it to buy. They, too, would like to close in June. That's a viable deal.

One of the problems buyers of short sales face is the long wait. It's up to the short sale listing agent to push the negotiators and follow up on the file to get it closed. Some listing agents have little or no short sale experience, so those files can take much longer to get approval than my 6-week average approval timeline. But I don't ignore those short sale listings because they are perfect for my summer buyers.

If you're planning to buy a home in Sacramento this summer, I suggest you start looking at short sales now. You may find the perfectly priced home for much less in February or March and enjoy the luxury of taking your pick.

The Short Sale Savior, by Elizabeth Weintraub, coming June 2009.

Photo: Big Stock Photo

It's happened twice in the past week with Countrywide. Once is a fluke, but the second time is policy at that bank. Both of these short sales had different negotiators assigned, so it wasn't like we were dealing with one short sale negotiator who simply had a bad day.

Countrywide's new short sale policy is to cancel a file if there are changes. Bear in mind, it doesn't matter if the changes were caused by Countrywide because it made a mistake. And Countrywide has a habit of making plenty of mistakes.

In the first case, Countrywide forgot to add the back taxes to the HUD-1. Oops, file closed. In the second, Countrywide put the wrong buyer on the HUD-1. Oops, file closed. We escalated both files to senior management, which saved about 2 weeks of processing time, but the files could not be reinstated under Countrywide's new policy.

When asked why, Countrywide explained that some sellers are submitting fake short sale purchase offers in an attempt to postpone the trustee's sale. I shudder to think that a real estate agent would commit fraud by participating in a scheme such as this, but odder things have happened in real estate. As a result, the rest of us short sale agents have to pay the price.

It's absolutely absurd that Countrywide should cancel a file because Countrywide messed up somewhere along the line. I sincerely hope that Countrywide finds some other way to deal with the fraud problem than penalizing short sale sellers who have done everything right.

The Short Sale Savior, by Elizabeth Weintraub, coming June 2009.

Photo: Big Stock Photo

I can't remember the last time a client asked me about sales ratios, but during a counseling session yesterday with first-time home buyers for Land Park, they asked if I would print out my last 12 months' of production. I suppose many agents wouldn't do it, but my life is pretty much an open book.

Buyer Sales Price Ratios

Later in the evening, I looked over those numbers. In case you want to know, the list-price-to-sales-price ratio average of my buyers over the past 12 months is 98.16%. But what does that really mean?

For starters, it means that in the market where I work in Sacramento -- in a market dominated by REOs (bank-owned homes) and short sales, where almost every sale has multiple offers based on artificially low list prices -- my buyers cummulatively paid on average under list price.

But ratios are not really indicative of performance. Some buyers paid 87% or 90% of list price, even in multiple-offer situations. One foreclosure buyer, in particular, opted to pay way more than I suggested, so that ratio came in at 140%.

Do home buyers know how to decipher these numbers, I wonder? The type of market has a huge bearing on ratios, and right now, many buyers are competing for the same limited inventory in a market that is supposed to be a buyer's market but is, in disguise, a seller's market.

Seller Sales Price Ratios

I know without a doubt that when I look back on my listing production ratios 12 months from now, for example, my average list-price-to-sales-price ratio on my short sale listings will be closer to 115% to 120%. All that means is I have listed those homes under market at inception. It doesn't mean that I am selling them for more than they are worth.

The Short Sale Savior, by Elizabeth Weintraub, coming soon to a bookstore near you.

Photo: Big Stock Photo

Some short sale lenders are demanding unsecured promissory notes as a seller contribution to the short sale. Over the past few months, I've witnessed an uptick in this type of activity, specifically from such lenders as Countrywide and Bank of America. I've also received a lot of email from readers about the increase in this practice.

Three of my Sacramento short sales are in this position at the moment. Lenders are examining sellers' credit and cash flow very closely and, if the seller has good credit coupled with disposable income, the lenders are refusing to let the seller skate.

Fortunately, in California, most of the foreclosures are conducted through a trustee's sale, which means first loans that are purchase money are exempt from a deficiency judgment in a trustee's sale. Sellers who refuse to negotiate the unsecured promissory note may elect to go through foreclosure instead and deal with the fall-out and consequences as long as they won't have to pay the lender back. But this might not be the best choice in all situations.

In 3 of my recent short sales, the promissory notes are typically about $10,000 or less on a $150,000 or so debt forgiveness. They are interest free, payable at such rates as $85 a month for 10 years. If paid on time, we negotiate that they are not to be reported to the credit bureaus. For some sellers, that's a small price to pay to do the short sale, especially if the sellers are current on their payments. Being current may qualify a seller to immediately purchase another home under Fannie Mae guidelines.

Moreover, realize that the banks may sell those unsecured promissory notes to a third party after escrow closes. This third party will pay a discount and not "cash value" for the note. If the note is sold, sellers might want to contact the third party to negotiate a further discounted payoff in cash. I'm hearing that some of these notes are sold for 10 to 50 cents on the dollar. That would mean an investor might pay $1,000 to $5,000 for that $10,000 note and may be willing to take a few grand above that for payment in cash.

Something to consider if you're thinking about doing a short sale. If you're a short sale listing agent, prepare your client for this possibility.

The Short Sale Savior, by Elizabeth Weintraub, coming soon to a bookstore near you.

Photo: Elizabeth Weintraub

A drawback to being a short sale listing agent in Sacramento is the fact that the inventory stays on the market a minimum of three months before closing, which means my lockboxes can't be reassigned every 6 to 8 weeks. In a faster selling market, an agent can take 20 listings and use 10 lockboxes, because as they sell, lockboxes can be removed and reassigned to another home. Not so with short sale listings.

I had no choice yesterday but to sit in the slow moving traffic on Business 80 crossing the American River and hope I could make it in time to the Sacramento Board of REALTORS® store. As I inched along, staring at the back of a Toyota pickup -- I really dislike having the butt-end of SUVs and pickup trucks slammed up in my face -- I wondered what I would do if, when I got to the store, all the lockboxes were gone. I tried to find used lockboxes among the agents at my Lyon office in Midtown, but nobody had any extras to sell.

How do those REO agents do it? Some list more than 100 foreclosure homes, and each must, according to board rules, have a Supra lockbox. Those things cost $115 each, and Metrolist doesn't give discounts for buying in bulk. Those agents spend more than $10,000 on lockbox inventory. That thought made me feel better about the cost of those lockboxes.

I finally arrived at the REALTOR® store 40 minutes later. Just as I yanked open the door and entered the store, my phone rang. I went back into the parking lot. It was the seller of one of my short sale listings. He wanted to know why several buyer's agents who showed his home thought it had a pool. Oh, yeah. His next-door neighbor has a pool, and I had included a photograph on MLS, which showed that view from his balcony. I was very impressed by the beautiful landscaping, pool and spa. It gave one a feeling of being on vacation, surrounded by palm trees and water features.

Of course, I noted in the caption that the photo captured the yard next door. Just for giggles, I added that if the new buyers got to know those neighbors, maybe the neighbors would let them use their pool and spa. And if not, it was a nice view, regardless.

You know what's coming next, right? The next-door neighbor had called me the day the listing went into MLS. She was furious. She was "appalled" that I would suggest she would let anybody use her pool and spa. She doesn't know my sellers and, in fact, doesn't care to. I listened to her rant for a while, wondering if I should tell her that Google has placed a photograph of her back yard online. It also occurred to me that because the homes in this subdivision were built about 4 to 5 years ago, unless every home owner put down substantial amounts of cash, most are upside down right now, mortgage-wise.

Perhaps this was what pushed that neighbor over the edge? You'd think she'd be more concerned about her equity position, but to keep the peace, I promised her I would remove the photograph from MLS. I don't need the neighbor feeling resentful toward me nor my seller. And I shared this story with my seller. Yup, the photograph in MLS was gone, so now agents can't get confused because they don't read the captions. Problem solved.

I walked back into the real estate store. Ordered my lockboxes and stood at the front desk, pondering a rather large sign on the cash register. It informed customers that the clerks cannot offer proper assistance if customers are talking on their cell phones. As I waited, a guy strolled in the store, yakking his fool head off on his cell. He stood about 3 feet away from me. Yak. Yak. Yak.  I caught the eye of the clerk and said, "I don't think that guy read your sign."

"They don't care," she shrugged. "None of them care." What's worse, she says, is when she's ringing up a sale for an agent and the agent answers his phone. Then agents stand at the cash register talking on their cell while other agents are lined up behind, she complained, inferring that real estate agents are a rude lot.

For once I was glad that I had walked outside to take my phone call.

The Short Sale Savior, by Elizabeth Weintraub, coming to a bookstore near you.

Photograph: Pool at Cabo San Lucas and not a short sale listing, by Elizabeth Weintraub

Sacramento's real estate market -- Is it a buyer's market or a seller's market? -- a client asked yesterday. The answer is, for those buying short sales and foreclosures, it's a buyer's market behaving like a seller's market. That's because inventory is low, which is one of the signs of a seller's market. On the other hand, prices have declined, which is one of the signs of a buyer's market.

Sales are rising, which is a sign of a seller's market. But the homes that are selling are mostly foreclosures and short sales, which is a sign of a buyer's market. Are you with me so far?

Throw into the mix low interest rates in the range of 4.5% to 5.5%, and you've got a lot of buyers vying for the same inventory, which results in multiple offers, especially when that inventory is superficially priced way below comparable sales.

Every deal is different. Depending on the circumstances -- which can vary from the bank wanting only the highest and best offer to banks who want to see every offer or only those offers within a specific time frame, to agents who sandbag offers to agents who try to double-end their own transactions, to clueless agents, clueless sellers and clueless buyers, the combination possibilities are too many for me to type this morning -- trying to buy a home is like entering a war zone.

A home buyer's best defense is to hire a knowledgeable agent with REO / short sale experience. This is not the time to hire your Cousin Louie to help you out.

Hiring Cousin Louie is like throwing a live mouse into a snake pit. Sacramento home buyers -- if you find yourselves writing offer after offer and all those offers are rejected, I can almost guarantee you that you're not working with an experienced short sale / reo buyer's agent. It might be time for a change.

I wonder about this because when my buyer's offers are accepted, it often means that 12 or so competing buyer's offers were rejected. That's a dozen home buyers and investors who are told no. Where do those buyers go? Who ends up helping them buy a home or do they simply give up?

The Short Sale Savior, by Elizabeth Weintraub, coming to a bookstore near you in February.

Photo: Big Stock Photo

I'm going out on a limb here today to suggest that most short sale sellers -- and regular home sellers -- don't give a hoot about a comparative market analysis. They don't want to examine charts, bars and graphs of market movement -- half of which are confusing. They aren't as dedicated to our profession as real estate agents, nor do I expect them to be.

Whether median prices slip or inventory declines or pendings fall off course, for the most part, is not important to sellers. Agents care about facts, trends, prices per-square-foot, inventory, median prices and comparable sales -- we live and breathe by market stats -- but I'm not seeing the same kind of enthusiasm for the numbers in the faces of sellers.

When I'm about to take a short sale listing, for example, I always ask: "Would you like to see how I arrived at a suggested list price?" Sellers say yes, but with hesitation in their voice, as in "Hurry up, get it over with and give me the bottom line." They are polite, but much more interested in hearing about how I am going to negotiate with their lender(s), how long it will take to sell and when they have to move.

I listed a short sale home in the Sacramento region yesterday, which is owned by a real estate agent. This seller was very interested in examining the comparable sales. He knew how much two of his last comparable sales sold for. I'm certain he had a listed price number in mind, most sellers do, but when I showed him the pending sales -- which would become his comparable sales by the time he closed -- his eyes widened. I explained my strategy, and he was all ears.

Rarely, do I get to have that much fun at a listing appointment.

The Short Sale, by Elizabeth Weintraub, coming to a bookstore near you in February.

Photo: Big Stock Photo

Many Sacramento listing agents are receiving multiple offers, and not just on REOs or short sales. Any attractively priced, well appointed home in a desirable Sacramento location is likely to draw the attention of more than one buyer. The listing agent plays an important role toward helping the seller figure out which offer to accept because the highest offer isn't always the best offer.

On top of that, sometimes the listing agent will bring his or her own buyer to the table. In that case, the agent is operating in dual agency but it does not relieve the agent from protecting the seller's interests.

Take, for example, California taxation on debt forgiveness. Although the federal government will not tax mortgage debt forgiveness on an owner-occupied dwelling in 2009, the state of California is no longer exempt. The exemption expired Dec. 31, 2008. That means it is extremely important for a short sale listing agent to get the seller the highest price. A higher price equals less debt forgiveness. The lower the short fall, the lower the tax.

Yesterday an agent emailed to say she was about to write an offer on one of my Sacramento short sale listings. I told the agent that a buyer had expressed interest in writing an all-cash, full-price offer, so she would need to beat that offer. Fortunately, the buyer hadn't yet contacted me directly to write the offer, so I had no fiduciary relationship to the buyer.

The thing is I don't know if most agents would sabotage the chance to double-end their own deals just to net the seller more money, but that wasn't my first thought. I was focused on getting the seller the highest price. After I clicked "send," I watched my chances of earning twice the commission slip silently away. I thought about it before I clicked the send button, so it's not like it just dawned on me, yet it was the right thing to do. I don't think we can ever go wrong in this business by listening to our conscience and doing the ethical thing.

Having been on the other end as a buyer's agent, I'm wondering how many agents would agree with me.

The Short Sale, by Elizabeth Weintraub, coming to a bookstore near you in February.

Photo: Elizabeth Weintraub -- this photo has nothing to do with short sales, but I thought you might like to see my three cats.

As many of you know, my book about short sales will be available in bookstores shortly. It is called The Short Sale Savior and will be published by Archer Ellison. As with any venture, writing a book is often a collaborative effort. It doesn't write itself.

I would like to thank the following contributors who shared their short sale stories with me for my book. Without their valuable input, I'm afraid the book may have been lopsided and not nearly as entertaining. These Active Rain bloggers are my Short Sale All Stars! Here they are, in alphabetical order:

Erin Attardi, a senior executive associate at Lyon Real Estate's Sierra Oaks office in Sacramento.

Erin discovered that banks don't always accept the highest short sale offer. She also found out what horrors can lie in store when a pest report notes that part of the home is "inaccessible."

Photo: Erin Attardi

Chris Ann Cleland, a Realtor at Long & Foster in Braemar, Virginia.

Chris Ann worked on one short sale for more than a year, asking herself along the way at various developments, "Is this like the movie Groundhog Day? Am I being punked?"

Photo: Chris Ann Cleland

Pacita Dimacali, an agent with Gallagher & Lindsey Realtors in Alameda, CA.

Pacita had to sell one of her short sales twice. Plus, she learned that some banks will run you around in circles without disclosing that they no longer own the loan.

Photo: Pacita Dimacali

Florida Realtor Katerina Gasset, at International Properties and Investments in Wellington.

Katerina swears persistence pays off and even when it looks the bleakest, miracles in short sales can and do happen. She knows the pain inflicted by out-of-area appraisers who don't know the marketplace.

Photo: Nestor and Katerina Gasset

Evelyn Johnston, a real estate agent with Prudential One Realty in Elkhart, Indiana.

Evelyne shares a heartwarming story about how she sold her first short sale as a new agent. After tallying the conversations she had with employees at the mortgage company, she talked to no less than 57 people to get her short sale approved.

Photo: Evelyn Johnston

Wendy Rulnick, a real estate broker at Rulnick Realty in Destin, Florida.

Wendy says that upper-end homes are just as vulnerable to a short sale. She successfully closed a short sale on a waterfront home on the Santa Rosa Sound that had been all but demolished at one point by Hurricane Ivan.

Photo: Wendy Rulnick

Frank Wible, a foreclosure specialist at RE/MAX All Pros in Turnersville, New Jersey.

Frank talks about a deal he double-ended and closed as a short sale. After closing, the buyer discovered a note on his door that said his newly purchased home had been sold at a Sheriff's sale.

Photo: Frank Wible

Roland Woodworth, a Realtor at Exit Realty, Clarksville, Tennessee.

Roland survived a five-month struggle, which resulted in a surprise short sale. On top of the file turning into a short sale, the title company initially missed a lien, and Roland had to learn how to deal with two loans on a short sale.

Photo: Roland Woodworth

Thank you, all, for sharing your insightful stories with me and, in turn, with everyone else who will read The Short Sale Savior. I appreciate your generosity, wit and writing style. Knowing people like you is what makes belonging to Active Rain such a delight. Soon as the book comes out, I will mail each of you a free copy. Thank you, Active Rain Community.