It seems that every business is always trying to find a way to make a buck. One of the ways to make a buck is to maximize profit -- increase the amount of money that's already pouring into a business. For example, let's say you sell pencils for $1.00 each. If you increase that price to $1.01 and sell 50 million pencils a year, you've made an extra $500,000. But if you break that pencil in half and package it as 2 pencils at $1.25 per package, you've pumped another $1,250,000 into your business.
Don't get me wrong, I'm not against capitalism -- not like my mother, who passed away in 2002. I'm all for capitalism. My mother was a Marxist, which doesn't mean she was a communist, btw, but she wasn't exactly fond of capitalism. But there are some aspects of capitalism that I sometimes find exploitative, which I'll get back to in a moment. Let's just say that I don't worship a dollar bill. I'm not that kind of person.
Several of my closings this week are, of course, short sales. One particular transaction had been very troublesome. It involved Bank of America as a first lender and CITI as a second lender. Citimortgage pulls some pretty sneaky maneuvers. It's not unusual for CITI to issue a short sale approval letter giving the buyer 30 days to close but then CITI might also charge the seller a per-diem charge for every day over 20 that it takes the buyer to close. In other words, it gives the parties a 20-day escrow period and adds on a 10-day per-diem bonus to itself by demanding an additional seller contribution.
If you need an extension, well, that will cost extra, too. And then you've got Bank of America, which might not let the seller pay the per diem. In this Sacramento short sale, CITI was charging the seller $3,000 plus an additional $400 for a 3-day extension. Bank of America would not let the seller pay the $400, so the agents offered to split it. The seller offered to pay the agents back. Nope, no can do. I value my license. That's short sale mortgage fraud. Besides, it's worth it to me to cough up two hundred bucks to get the deal closed and over. The buyer was short on funds to close, so we paid some of those, too. You do what it takes.
That doesn't really tick me off. What ticks me off is United Airlines and some of the other transportation carriers. United Airlines has removed seating, shrunk it, and is now selling those seats back to consumers at a higher price. It is no longer comfortable to fly standard coach on United Airlines. Unless you enjoy being totally miserable, and you don't mind having your knees crammed up against the seat in front of you and in your face. Some people will call this brilliant strategy, but I think it totally sucks.
As a solution, United will sell you an upgrade to premium seating, which means you can get an extra 7 inches of leg room. You're still in coach, though. But you can move up to rows 1 to 12. Those rows are spaced further apart. For an extra $100 or whatever, you can fly in premium class, a class that United just pulled out of its butt. When I asked the ticket counter guy about upgrading to first class, he told me it wasn't worth it. What? Does he hate United Airlines, too? I'm not so sure that guy should be biting the hand that feeds him.
Photo: Big Stock Photo
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
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The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
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That is a raw deal by United. Planes are cramped enough already, but making the space available to a passenger less and increasing prices at the same time stinks.
And don't forget the extra charge for checking bags too. What's next? How about a fee for running the air conditioning, or turning on the overhead light? How about coin operated overhead bins? The possibilities are endless.
Ah yes. The short sales lien holders do sometimes bite off the hand that feeds. That's what makes short sales fund and challenging at the same time.
Elizabeth,
It remains to be seen whether their capitalist entrepreneurial spirit will succeed. Frankly, I hope it doesn't. United has never been one of my favorite carriers.
Rich
Everything is a profit center. I remember when using an ATM from another bank was no big deal. Now, you get charged by your bank and the bank you use- double whammy. Around here, if all you need is a quick 20 bucks it can cost $5 just to withdraw it.
That's not capitalism, it is profiteering. I remember when Senator D'Amato tried to make these fees against the law.
I am NOT sticking up for anyone here but the question begs to be asked. Why do you even waste your valuable time talking about United or anyone else for that matter. Just go to another airline!
BOA and Citi holding their clients hostage is a far bigger matter. They screwed the clients in the first place and now are doing it again with their ridiculous fees, and they wonder why people just walk away. Most of the clients I know in this situation are good hard working people who by doing what ALL americans do, got caught up in the "I can buy more house with less money" syndrome of a few years ago. Mortgage brokers and banks were taking any kind of paper and some took none and gave away mortgages like they were candy. Now they are paying the price and they don't like it so as usual they want their clients to pay the bill once again.
Welcome to our world!
If I have to start paying clients late fees on closing the short sales, then I will just have to raise the commission rates on the short sales transaction.
"Besides, it's worth it to me to cough up two hundred bucks to get the deal closed and over. The buyer was short on funds to close, so we paid some of those, too. You do what it takes."
Sounds like we share the same mindset. The most important thing is to get the transaction closed - after all - it's more about helping the Seller avoid foreclosure than it is about the commission...
Dave: I had to fly United because it was the only airline going to my destination on the day and time I wanted to depart.
Keith: I take it you don't do short sales, LOL. There is no such animal as "raising the commission." Wish there was.
Jim: You made me laugh, but the scary thing is you could be right!
Elizabeth, you're clearly an experienced short sale agent and I respect you greatly. And I agree that there are times when you have to decide when to fold and close a deal. Every situation is different, and our clients financial well-being is more important than our own. But there may be a bigger picture to consider as well.
The banks are constantly trying new strategies to squeeze a larger net out of a short sale, and they track each to see which is most effective and profitable.
To carry your theme forward, it's only $200 to get the deal closed, but when CITI squeezes 10,000 agents, it's a couple million. Some banks focus on commission ("our investor only allows 5 percent, sorry!"), others cut third-party fees (BofA always try to cut escrow to $750).
If, however, we all have honed our escalation techniques and developed contacts inside the banks, these are EASY obstacles to overcome. But without unity by the negotiating agents, these bank "policies" become the norm -- even agents will spew them as fact.
Earlier this year, it was "common knowledge" that BofA wouldn't release liability on recourse loans. That disinformation from the bank will for years to come haunt many home sellers whose agents either chose not to stand up and fight -- or didn't know they could.
BTW, I only fly Southwest now : )
Elizabeth, I share your position to do what it takes to get the deal done. I want to save the deal and help the client not only for that one deal but for the referrals that will come from them opening up their little black book.
Oh, Brian, you're singing my tune. It is true that Bank of America will release sellers from liability. I've seen it happen.
Elizabeth - I'm smiling, because I just ordered four 3'x5' pirate flags for a penny each. Yet the shipping cost me $19.95 for the four.
I'm fascinated with your airline story. My friends from Florida recently returned to their state, from a vacation in Colorado, and Yellowstone. They flew Delta. At the airport, they had a choice of ditching 4 pounds in their luggage, or paying a hefty fee, to fly the extra weight. They "reallocated the weight, by taking things out of their bags, and "wearing it." They did this in front of the airline employee. After they boarded the airplane sat on the ground, at the for gate 2 hours, while they waited for a pilot. When they arrived in Atlanta, they found the connector flight, had been canceled. They arrived home at 3:00 am in the morning.
I don't know what you would call me politically. . .I'm upset with government right now, but I'm upset with capitalism too! The system currently is all but totally dysfunctional! I feel the nail in the coffin came with one of our latest supreme court rulings, which allows politicians to take campaign funds from corporations, AND foreign countries. Much of it without full disclosure where it is coming from. The common citizen no longer has any meaningful clout!
Elizabeth, I've seen it happen too -- on all of our BofA files. 100% of them.
Always enjoy your posts!
The banks keep looking for ways to create a profit center out everything. The candy on the closing table will be a $1.00 each pretty soon.
Elizabeth ... There are always ways for businesses to make a buck, by "confusing the consumer!" A pound of coffee weighs 12 oz; ice cream bars go from 6 to 5.5 oz; and countless other examples ... but the price stays the same! The ads read ..."same old price ...."
Over time the consumers just "get over it" or pout and use the service, buy the product ... etc. What your mother may have seen is that consumerism is the driving force of capitalism. If we stop buying, flying, driving etc., then the "corporations" will re-think their positions. But then what price are we willing to pay for the convenience?
The same thing applies to those "lenders" that continue to squeeze and ignore ... if you're not going to take that listing ... then someone else will ... at 5% plus extra deductions as necessary ...