Life Is Like a Box Of Chocolates...

Have you run into a short sale yet?  If not, it's just a matter of time.  Sellers who absolutely need to sell due to a divorce, transfer, death, pre-foreclosure, or other reason but who owe more than they can sell the house for will need to go through a short sale. 

The Good News About The Bad News
The good news is that banks are really motivated right now to accept short sales.  According to an article from WBZ TV,

"Nationwide, 252,363 homes received at least one foreclosure-related notice in June, up 53 percent from the same month last year, but down 3 percent from May, RealtyTrac Inc. said. One in every 501 U.S. households received a foreclosure filing last month." 

Wait - let's say that again:  one in 501 households received a foreclosure filing.  Is it any wonder the banks are motivated to settle?  They can't afford to own that many homes.

Can You Do A Short Sale?
But do you know what it takes to do a short sale?  It's a lot of work and a lot of negotiating with the banks.  It's a lot of time spent on hold and you need to have the ability to put the negotiations in terms that the banks can easily appreciate.  And then, you need to be willing to hold firm when the bank comes after your commission too (and they often will). 

Ways to Motivate Banks To Settle
Having a current CMA or BPO on hand can help establish value.  Listing the crime rates in the area (if they are high) can help the bank get motivated for fear that the property will be destroyed by vandals if the sellers move out.  Pictures of the property - especially ones that don't show the best side of the place are helpful too.  Having a buyer on the hook who is willing to purchase is required before the bank will even begin to talk to you.  Oh, and the sellers have to be willing to miss a few payments which is guaranteed to hurt their credit.  But without a couple of missed payments, the banks don't believe the sellers are serious and you will go to the bottom of the priority pile. 

What To Expect
The first offer from the bank is almost always not their final one.  They will say that they will allow the house to be sold, but the sellers have to take a personal note for the difference between the net sale and the note amount.  

Example:  House sells for $240,000, after closing costs, the proceeds are roughly $225,000.  The seller owes $260,000 on the property, so the bank would want them to take a note back for $35,000 - probably at an interest rate somewhere around 9%-13% depending on the sellers' credit.  This is obviously not a great deal for the sellers and a fabulous deal for the bank. The bank makes out like a bandit in this scenario because they're getting their money back so they can lend it out again and they're getting a note from the seller for more than they were getting on the original deal. 

When you say "No" to this offer (and you should), the bank will probably come back and offer to split the difference with you.  Seller takes a note for half and bank takes a hit for the other half.  Your sellers may choose to take this deal depending on how much we're talking about IF and ONLY IF the bank will stipulate that it will report to the credit agencies that the note was paid in full and not settled.  This way your sellers can preserve their credit a little in the process.

The Downside to the Bank Owning Property
If not, then we move on to stage three, looking for the bank to forgive the unpaid balance.  You have to do the math here.  If the bank were to foreclose on the property, then it would have to pay the attorney to complete the foreclosure proceeding (usually about $10K).  It would have to take over and pay the taxes and insurance on the property as well as other upkeep expenses.  The insurance will be high since the property is vacant.  The bank also has to deal with keeping power to the property so it can be shown and either heat it or winterize it if it's cold outside so that the pipes don't freeze.  If it's warm, then dealing with keeping the yard in check will also be an issue.  It's not cheap to hold onto vacant property.  Then there's the fact that a bank foreclosure always sells for less than a direct sale from buyer to seller, so they're looking at taking a hit on the value there as well.  It all adds up.

If you can do the math for the lender, then you're likely to be able to get your point across better.  The REO (Real Estate Owned) divisions of banks are overworked and overwrought - help them out to help yourself. 

Short Sales Are A Lot of Work
Basically, you're looking at a lot of work to make a short sale happen.  It's not how you get a great return on your investment of your time spent.  I usually only agree to do short sale work with sellers I truly like and care about.  It's the only thing that makes it worth the time. But it is a way to get money in the door if you're having a tough time with that.  Advertise a specialty in doing this work and you'll find your phone ringing off the hook.  After all - one in 501 homeowners needs you right now.

NOTE:  I published this article in my newsletter earlier today and was corrected by one of my subscribers.  He said that I should clarify that only about 20% of all foreclosure filings actually go through foreclosure.  That would make it more like one in 2505 go to foreclosure.  But I will point out to you (as I did to him) that just because the other 80% don't go to foreclosure doesn't mean that they don't need someone to help them with a short sale.

Do you want more information on how to coach your clients through the sales process?  Sign up for my FREE 10-Part Audio training program. 

Kelle Sparta is the author of The Consultative Real Estate Agent - Building Relationships that Create Loyal Clients, Get More Referrals, and Increase Your Sales, as well as being a speaker and trainer specializing in the real estate industry. Kelle is the founder of Sparta Success Systems, a real estate training company that provides tools, products, and training to empower agents and brokers to create lives and businesses they can love. For more information, visit her website at http://www.spartasuccess.com/. © 2008, Kelle Sparta.

I've been hearing a lot lately about "Man Speak" and "Woman Speak" and how the two often don't overlap.  While I think that these gender definitions are pretty limited, there is some benefit to exploring them here so that we can understand how to adjust accordingly when dealing with clients. 

DISCLAIMER:  I am about to make some HUGE generalizations.  They are not intended to mean that EVERY MAN or EVERY WOMAN speaks in this fashion.  They are only meant as aggregate samples for illustration purposes only.

Man-Speak
Men tend to be bottom-line speakers.  The focus of the conversation is on communicating the problem and coming up with a solution.  Rarely are emotions considered in either the content or context of the conversation.  (In other words, men tend to say what they think straight up without much thought as to how the person receiving the communication will feel about it.)

For Instance:  A man says "this thing didn't get done, when are you going to do it?"  And that's ALL he means.  He's not placing blame, he's not trying to make you feel bad, he's being task-oriented and simply wants a response.  Another man (or woman) who speaks man-speak would simply answer the question and go on with their day. 

On the other hand, because it wasn't couched in terms such as "I'm not upset about this not being done yet, I just need a timetable for it so that I can plan accordingly", a woman speaking woman-speak might get upset thinking that she had just been upbraided for not having completed the project yet.  Because she assumes that there is always more to the message than is said.

Woman-Speaku
Women on the other hand, are intensely aware of the emotional content and context of the message and as such are more likely to talk around the issue to leave space for the receiver to decide how and when to receive the message in a way that is more conducive to emotional harmony and well-being. 

For instance:  A woman may say "we need more paper for the copier" when she means "would you buy more paper for the copier?"  In offering up the comment in this way, she gives the receiver the option of asking her to buy the paper or in offering to purchase the paper themselves.  In the latter case, the receiver does what the woman wanted, but they also get to be a good person for offering to do it.  It's considered a gracious way of asking in woman-speak. 

The downside of this type of communication is that it tends to fail to actually make a request or point and can be lost on someone else who is not skilled in this communication style.  Let's take the same example.  If the comment "we need more paper" were made to a man (or woman) who is not skilled in this form of communication, then it is likely that he will simply take it as a statement of fact, not as a request.   He merely assumes that she is talking out loud to herself and will take no action. 

The Problem
The challenge lies not in the styles of communication themselves, but in an inconsistent use of them.  Either style works fine when all parties are using the same form.   It is when the person speaking and the person listening have different styles that it becomes a challenge.

Not Just These Styles
There are many styles of communication.  As agents, it is our job to keep those communication styles in mind as we try to connect with clients and prospects.  If you're not making a connection, perhaps your communication style is out of sync with the person you are speaking to.  Shift gears and try again.  If in doubt, ask someone exactly what they meant.  It's always OK to clarify - it shows you're listening.

Do you want more information on how to coach your clients through the sales process?  Sign up for my FREE 10-Part Audio training program. 

Kelle Sparta is the author of The Consultative Real Estate Agent - Building Relationships that Create Loyal Clients, Get More Referrals, and Increase Your Sales, as well as being a speaker and trainer specializing in the real estate industry. Kelle is the founder of Sparta Success Systems, a real estate training company that provides tools, products, and training to empower agents and brokers to create lives and businesses they can love. For more information, visit her website at http://www.spartasuccess.com/. © 2008, Kelle Sparta.