Editor’s note: This is the final article in a two-part series that details companies that offer services, technology or training to expedite sales of distressed properties. Some companies charge fees that are passed along to consumers. Click here to read Part 1.
By MATT CARTER and PAT CURRY
Alex Charfen is co-founder and chief executive officer of the Distressed Property Institute — which has trained a number of in-house transaction coordinators and bestowed its "Certified Distressed Property Expert" designation on about 12,000 agents and brokers who have completed its courses.
He is leery of third-party companies that offer to act as short-sale negotiators and make "outrageous claims about their closing percentages," and those that "claim do be national processing centers for foreclosures."
And he said consumers shouldn’t have to foot the bill for participating in short-sale transactions.
Some third-party companies offer services and systems that they say help facilitate sales of distressed properties and alleviate real estate professionals’ workload associated with these properties. But such companies have drawn criticism from Charfen and others who say consumers shouldn’t be saddled with added costs for choosing to purchase these properties.
There are plenty of agents, Charfen said — like those certified by his company — who will handle short sales without extra fees.
Hiring an outside company to handle short-sale negotiations can put a broker’s license at risk, Charfen said, because they in some cases perform licensed activities.
Listing agents working with outside negotiators who charge extra fees can be at a competitive disadvantage with those agents who don’t charge such fees, he said. That’s especially true at the lower end of the market, where there are plenty of homes to choose from and fees represent a greater proportion of the asking price.
Short sales are already difficult enough to pull off without adding additional roadblocks, Charfen maintains.
"On a $75,000 deal, if you throw a $1,000 fee in, they (prospective homeowners) are not going to buy that," Charfen said.
Charfen doesn’t dispute that short sales can require more time and effort on the agent’s part. But done right, it’s not as challenging as many think, he said.
The fees charged by outside short-sale negotiators are frequently rejected by banks, he also said.
"What ends up happening is the buyer pays the fee, or the agents end up paying it out of their commission."
"When you have a property that’s already been subject to legal action — usually at least a notice of default, you have to get bank approval for a sale," he said. "Now, on top of that, you’re going to make the buyer pay the fee?"
Meanwhile, Stephen Weiss, chief operating officer for Foreclosure Response Team — a company that assists real estate agents and brokers in handling short-sale transactions — said his company has reduced the average closing time for its clients from 150-240 days down to 60-150 days. …CONTINUED
Realtor Scott Coloney, who launched the company with Weiss, said that one of the first issues that Foreclosure Response Team sought to address with its services is document management. All of the paperwork is scanned and uploaded into project management software so that everyone involved in the transaction can view the status of the deal at all times.
"In our system, when the loss-mitigation processor puts a note in to the lender, it’s sent to the Realtor," Coloney said. "Technology is the glue that keeps everyone together."
OfferSubmission.com, owned by Southfield, Mich.-based Woodward Asset Capital, offers an online system for submitting offers on bank-owned (REO) properties.
Ron Jasgur, OfferSubmission.com president and a real estate broker, said he was inspired to create the company after testing offers on several REO properties and in some cases never receiving a response.
"The offer was not getting to the decision-maker," he said.
The system is straightforward. Buyers’ agents are required to submit their offers electronically, and the asset owner agrees to respond to all offers within one business day.
The offer is presented to the listing agent, the asset manager, the service and the asset owner in real time, and everyone involved in the transaction knows when the decision to sell is made.
The fee for the service is $300 and is paid by the buyer at closing.
Jasgur notes that his company’s business model differs from some others. "The fee for our system is paid by the party receiving the largest benefit in an REO sale: the buyer who is able to purchase a property at a substantial discount form the property’s book value," he said — the company does not charge the lender, asset managers or agents involved in the transaction that use the OfferSubmission.com platform.
Additionally, he said, the company does not act as an agent of either party in a transaction.
The buyer fee is "disclosed up front in the MLS and in at least two places within our site that the agent has to acknowledge," Jasgur said. "It is listed on the (HUD-1 form) and is considered an acquisition cost of the real estate because the seller requires it to be paid. We have had almost zero pushback from lenders" on this fee, he added.
Typically this fee is disclosed in the agent remarks section in MLS listings, he said. "It is a flat fee not predicated on the sales price."
There was some confusion and resistance by buyers when the platform first launched, Jasgur noted, though he said, "The system is now accepted in the marketplace."
Since OfferSubmission.com went live this spring, Jasgur said, lenders’ REO properties are selling closer to list price and in less time — he said clients’ properties sell in an average of 28 days using the system, and without the use of OfferSubmission.com were taking an average of about 90 days.
"If our success wasn’t verifiable, we’d be out of business," he said.
"Inventory is moving quicker at higher dollars using Realtors on the street. Our site is not consumer-facing. It is a portal for agents to transact business," he said, adding that the company is not involved in any property negotiations.
Bailey said she found the OfferSubmission.com system "was very easy to use. I was shocked when I heard that I’d get a response within a day."
Charfen, of the Distressed Property Institute, said that for agents who prefer the do-it-yourself approach in handling short sales, the institute trains them to perform "70-80 percent of the work up front," and to "walk out of that first meeting (with the homeowner) with all the information they need" to complete a sale. …CONTINUED
"Agents are closing them on their own," Charfen said, although many do employ transaction coordinators to manage the process for them.
Lenders are learning from their mistakes and getting better at handling their end of the equation, Charfen said. One of the biggest challenges to completing short sales is that many Realtors don’t understand the process, he said — and in some cases they’re still learning the lingo, too.
A "high percentage" of deals that Realtors consider to be short sales are not actually short sales, Charfen said.
"Just because a (seller) is upside down, they list the property as a short sale," he said. "If they are employed and have money in the bank, that’s not a short sale. They must prequalify and submit a complete package" to the lender.
Then it’s a matter of submitting a standardized offer package and riding herd on the sale to completion.
Thom Colby, a California Realtor who specializes in short sales, said, "What I learned from dealing with different banks was to standardize my short-sale package. I have a very standardized format, and a way of taking care of it electronically, even though they only take stuff by fax."
When the market eventually turns and the flood of distressed properties starts to slow to a trickle, Colby thinks brokerages that bulked up on staff to handle short sales and bank-owned (REO) property sales will regret it.
"Agents need to be able to do all aspects of the business — FHA, VA, it doesn’t matter — I should be able to do it all," Colby said.
Some of the big asset management companies are already starting to lay employees off, Colby said, because foreclosure starts are slowing and the government and banks "are controlling the spigot of foreclosed properties so the market is not flooded."
What does that mean for Colby’s business, and the expertise he’s gained during the downturn?
"Once the market starts to normalize, great," Colby said. "I don’t have to do short sales anymore."
Read Part 1: "Real estate’s new intermediaries."
Matt Carter is a staff writer for Inman News and Pat Curry is a freelance writer in Georgia.
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.