Chris Willette became a short-sale expert the hard way: He did his own. Almost three years ago, the Edina Realty sales agent found himself in the unenviable position of having to convince the lenders that held the first and second mortgage on his Golden Valley townhouse to let him sell it to a willing buyer for less than he owed. Willette, a second-generation real estate agent who knew when he was just a kid that he wanted to sell houses, said that the process opened his eyes to one of the most challenging -- and emotionally taxing -- segments of the market. The experience also led him to one of the few market niches that is experiencing any growth. During May there were more short sales on the market than foreclosures. Almost all of Willette's listings are now short sales, and he's on pace to close 100 deals by the end of the year.
Q Banks are notorious for not processing offers and paperwork quickly. What gives?
A Even to this day, it's still a kind of game. Banks are not attached to the transaction. We're in a declining market where prices are dropping daily -- it makes more sense for a bank to approve these more quickly because the longer they're leaving money on the balance sheet, the more likely it is that a buyer will get uneasy and walk. Buyers are always looking for the better deal.
Q How long did it take to do your own short sale?
A About 4.5 months.
Q Why does the process take so long?
A Nobody intended for this happen, so with so many defaults and short sales, they [banks] weren't set up for this. They're negotiating 100 to 350 files at once. I try to get my file to the top of the pile. They have such a workload they can't handle what they have; banks need to hire more people. This trend is not going away anytime soon.
Q How do you get your file to the top of the pile?
A I'm always nice to the negotiator. I've dealt with a lot of them, and I know exactly what they're looking for as far as a complete file. These negotiators will always put a prepared file in front of one that's not prepared. And they want all the documents provided at once. Once a bank has done its due diligence, mine is on top of the pile because it's complete.
Q How thick is the average file?
A 200 to 250 pages. If you have someone who is self-employed and has corporate or individual tax returns, the file can be 400 or more pages. And I never fax the file; I always send it certified mail with delivery confirmation. If you fax 200 pages and if their fax machine gets clogged, they're not going to get it. That's why you need confirmation.
Q How do lenders decide who gets an approval?
A There needs to be credible hardship -- that's the No. 1 factor. You can't have a borrower (or seller) who simply saw their neighbor sell for $100,000 less than they paid and they simply want to walk way. Mainly, that means an illness, death in family, medical hardship or a loss of a job, which is obviously very prevalent lately.
Q Have loan modifications taken away some of your business?
A About 99 percent of the people I meet with have tried to do a loan modification. They don't want to move; they want to keep their house. People are embarrassed about losing their house, but after all is said and done, people just let the house go if they don't have good advice on a foreclosure versus a short sale.
Q If short sale is really a viable option, why do many people end up in foreclosure?
A People are getting bad advice. They're not being told if they have a second mortgage, it doesn't go away, so whoever owns the second will get a judgment and go after the [seller] for that note. So that's why some people are more apt to do a short sale. If there's a second mortgage holder, that bank will settle for about 10 percent if properly negotiated by the Realtor in the short sale.
Q How long does it take to get an approval?
A Some banks are better than others, but on average it takes 90 days from start to finish.
Q Do you miss the normal market?
A I like the challenge of a short sale. Obviously, dealing with short sales has helped make my patience level higher. Business has been good to me in this market. I also get great comfort helping a seller get through the emotional toll the short-sale process can have on one's family.
Q Are you making as much money now that you focus on short sales?
A I'm making more. In the past my highest inventory was maybe 10 listings; now I will have 25 to 40 listings at one time. It's a lot more work, and sometimes I'm in the office until 5 or 6 a.m. processing paperwork.
Jim Buchta • 612-673-7376