The games we play...

There is a popular definition of insanity that goes, ‘doing the same thing over and over and expecting different results.’ In real estate these days that definition might be better stated as, ‘doing the same thing over and over and expecting the same results.’ The market we are in is just insane. Each sale is a whole new adventure, with a steep learning curve and no predictable end result. What few “conventional” sales there are these days are subject to the whims of ever changing mortgage and insurance rules, as well as the interpretive magic of those wizards behind the curtains – the underwriters. Even long-time mortgage agents can’t predict what will happen when a loan request is sent to underwriting.

And what about short-sales and foreclosures? This is about as lawless a landscape as can exist in what is supposed to be a business environment. Business is normally done under a set of accepted norms and rules that everyone buys into and understands. Not so with short-sales and foreclosures. There are no norms or rules, except those that each bank makes up as they go along. Each bank has its own set of procedures and creates its own set of requirements, which become its rules (for that sale anyway). And, within each bank, individual asset managers (or whatever term is used by the bank for the people in charge of dealing with distressed assets) seem to have wide latitude (sort of like the notorious underwriters) to set requirements for each sale.

The result is a game, although not a game where anyone appears to have any fun playing. The game starts out when an offer is tossed into the black hole that is the bank’s short-sale process or maybe their foreclosure process. The players are instructed to stand around and await an answer. How long should one expect to wait? Players are not told. What things will the bank evaluate about the offer to make their decision? Players are not told. What other terms and conditions may the bank impose on the sale? Many times players are not told ahead of the decision; but, sometimes players are given a peak at those terms and conditions. How can a player find out the status of the decision making process? Most times even the listing agent player is not told. Just be patient and wait for your answer is the answer.

The game was recently thrown into even great turmoil (seems hard to imagine it getting any worse) by the legal challenges to the foreclosure processes being used in many states. That, in turn was exacerbated by the whole securitization process for pools of home mortgages, which left the question of who really owns the mortgage on each home open to further debate and legal action. Who has the right to take foreclosure action on assets within those pools of home mortgages that have been turned into securities? The players aren’t told and the banks who packaged and sold the securities don’t know. Even the holders of those securities are too sure about that, but the inquiring minds of the Attorneys General of several states would like to know.

So, what’s a Realtor to do when facing this mess? I think the biggest thing that we need to do is to focus upon counseling and educating our clients (both sellers and buyers) that they are facing an uncertain process that will take an undetermined amount of time and has a very unclear outcome. Client-players who decide to play this game should be prepared to respond to or deal with what may seem like unreasonable requests from the lender(s) involved. Client players may have to make the decision to sink money for inspections or loan processing or repairs into the process, with no guarantee of success. They may be asked to pay for services that have nothing to do with the sale or their mortgage. They may be asked to assume debt obligations that they did not incur, but which come with the property. Realtor-players will often be asked, after the deal is struck to reduce their compensation, even though these are the most time consuming sales that they work upon. It’s all a part of the game. Good luck. Let the games begin.