A short sale is a technique where you negotiate with a lender to accept less than is owed to them.  It is a highly effective tool when you have a distressed homeowner who owes more to the lender than you are willing to pay for the house.

I love doing short sales because I enjoy beating the bank.  When a house is in foreclosure,  the lender stands to lose a LOT of money if it has to go thru the entire foreclosure process.  In effect, the lender is over a barrel.  When I negotiate with them, it is fun to have them in a weakened position.  Maybe I’m a sick puppy, but banks have been getting a lot of money from me over the years, and I figure it’s time to get some of it back. 

Short sales are not always successful. You win some, you lose a lot of them.  I get much better with practice, and still I lose quite a few.  Typically, a bank will accept about 80% of Fair Market Value as determined by a BPO (Broker’s Price Opinion) or an appraisal.

When you negotiate a short sale, you contact the Loss Mitigator who is assigned to that account. This is the person to whom you will submit all documentation , and he/she is the person who will do all the negotiating with you. 

The most frustrating type of Loss Mitigator to deal with is the one who does not understand the game, who acts like the discounts you are asking for are coming out of her personal paycheck.  I know I am in for trouble when a Loss Mitigator tells me “We will only accept Fair Market Value”.  In effect they are saying to me “We will only sell you the house today, for the exact same price that we expect to get after we spend large sums of money on the legal fees, wait about 10 months to gain actual possession of the house, and pay insurance, taxes and water for that whole time, and when we do own the house we will be paying a Realtor a 5% commission to sell the house, and will probably have to wait at least another 3 months for the house to sell.” “Oh, and we have no idea what the homeowner will do to the house when they leave”. The only way they will do business with me is to receive let’s say $100,000 today, instead of spending about $27,000 to go thru with the entire process and receive $100,000 about 1 year later. 

I recently had a very embarrassing run-in with a Loss Mitigator,.  Let’s call her Beth.  I contacted Beth because she was the Loss Mitigator for a house owned by Mary.  Mary was about 8 months behind in payments.  Beth stated in the very first phone call, that they would only accept FMV of $130K.  I was offering them $100K.  I thought the house was worth $150K.  When I am presented with such an attitude I have my secret weapon that I pull out. It is a sheet detailing all the costs that the lender can reasonably expect to lose over the coming months.  I show them that 100K today is exactly what they will net in one year.  100k today is worth much more than 100k in a year.  If you don’t believe me, try borrowing 100k from your credit card and expect to pay 100k back in one year. I sent  my secret weapon sheet along with my short sale package to Beth.  When next we spoke, she admitted that the detailed analysis was impressive, but still no go.  We went back and forth for about a half hour, with me trying to explain why the bank would benefit by money now as opposed to money later.  Beth’s main problem with the whole offer was “I can’t hand you 30 thousand in equity”.  After half an hour, we were exhausted, and on the edge of screaming at each other.  It was time to break off, and move on to my next killer technique when faced with this problem.  Do nothing.  I let Beth sit for 2 weeks with no contact from me.  I don’t know if this technique works, but I did know I needed a breather from dealing with an irrational Loss Mitigator. 

Two weeks later, when I spoke to Beth, I calmly explained that I would like to speak to her supervisor to verify that her position was acceptable to the supervisor.  I assured her that I was not trying to get her in trouble, but that I just basically wanted a second opinion.   I have asked to speak to supervisors before with a 50/50 chance of success of getting a different opinion.  When I do kick it up a level, I always start out by assuring the supervisor that I am not unhappy with their employee, or that the employee is misguided, dumb, or anything negative.  In fact I often praise the employee, and express how wonderful they are at their job, and very easy to work with.  Don’t burn any bridges, because you might have to pass this way again.  Beth said that she would have the supervisor give me a call.  That was my first mistake.  I should have asked for his name and number and called him myself. 

Beth’s supervisor, Bill,  called me an hour later, and I swear he must have been Beth’s twin.  We went back and forth, over and over, and still it boiled down to that they were not going to let me walk away with “their” money.  He also told me that he sat behind Beth all day, every day, so he was very aware of all that had been going on with this account. 

Now begins the embarrassing part, and what ends up not being my finest hour.  I noticed that Beth’s area code was 904(Florida), and her boss’ area code was 713 (Houston).  It seemed funny to me that someone could sit next to someone else when they were a thousand miles apart.  I reasoned that Beth had called up a buddy in Houston, and had him pose as her boss, so she would not get into trouble.  I was not going to let her get away with that cheap trick.  So I called the lender’s directory assistance to get the name and phone number of her supervisor.  The operator called Beth, who told her, her supervisor’s name was Wes W.  The operator was unable to find such a person in her directory, and she was unable to reach Beth again to get it from her.   I figured  Beth continued to compound her lying by making up a fictitious name for her supervisor so I could not find him and tell him all that was going on. 

By now, my blood was boiling. I don’t know why I cared at all, except that Beth was beginning to look like an evil employee to me.  I know the short sale deal was good and dead. There was nothing I could do to save it, so I was going to let Beth have a little piece of my mind.   I called her up and said “Beth this is Laura Duncan. I do not appreciate being lied to.  You had your boss call me, but he said he sits next to you all day, and he is in Houston (his area code is 713) and you are in Florida (you area code is 904). I guess you just had a friend call me to get me off your back”.  She replied calmly and with no hesitation “Ms. Duncan, Bill is my boss. I work in Houston. I have never set foot in Florida, and I don’t know how the phone system is set up by my employer”. I said “Oh sure, how come you told the operator that Wes W. is your boss?” She replied again with no hesitation, “Wes W is Bill’s supervisor, but Bill is my direct supervisor”. Suddenly instead of feeling self righteous, I was feeling pretty mortified.  Either this lady was the smoothest liar I had every encountered, or she was telling the truth, as implausible as it seemed.  I stammered “Well, I apologize for jumping to the wrong conclusion, and I am going to hang up now”. 

Even now, two days later, as I write this story, I don’t know what the truth is.  But liar or not, I personally still am embarrassed.  I hope I never have to attempt a short sale with that lender ever again.  I’m probably black balled there. 

Laura Duncan