The tidal wave of foreclosure properties has definitely changed the landscape for Realtors. In my 21 years as broker, there has never been a time when the need to understand the short sale process has been more urgent. Unfortunately, understanding the process is vastly different than being successful at closing short sales. The National Association of Realtors just released a report which shows that only 15% of short sale listings actually consummate in a closing. That means we are wasting a lot of time on deals that we never get paid on. What is wrong with the system? I recently asked this question of Paul Pritchard, CEO of Home Advocate Trustees, a defaulted property acquisition company based in Seattle, Washington.
The core problem is two-fold. First, when you are working on a short sale as a Realtor in a traditional fashion, the lender has all of the leverage. Their word is final, and negotiations are very limited. Second, the sheer volume if defaulted properties has completely overwhelmed their systems. There is nothing that we can do about the second issue, but we can and do affect our leverage with the bank by an aggressive legal defense that puts the leverage on our side, and gets us results.
By approaching the banks from the legal side, Paul's company is able to bypass the loss mitigation' departments, and deal directly with the legal departments at the banks. The result, My Pritchard says, is a much higher success rate. When a seller assigns their property to our company, we immediately begin a legal defense that gives us leverage. We demand the seller produce the original note, and in some cases we also do a forensic audit on the loan to look for TILA, RESPA and various other violations. Because we are the new title holder, we now have legal standing and rights and we aggressively defend these rights. What is our goal? To stop the foreclosure process for the seller, and to buy the paper' or the actual note directly from the banks. What's the outcome? Same result to the seller as a short sale, but we do all the work and our success rate is better than 90%
Will these same techniques help Realtors with our short sale listings? I asked Mr. Pritchard to elaborate on this. Absolutely, said Paul. We close over 100 transactions per month now, all across the country and Realtors are our #1 source of referrals. Often they refer a transaction to us after they have tried the short sale route, but are frustrated. We provide a win-win scenario. The Realtor is paid a referral fee up front, and after we settle and purchase the note from the bank, we re-list the property with the referring Realtor at a 6% commission. The Realtor community has really gotten behind our service, and they see tremendous value for their client and for themselves.
Mr. Pritchard said agents who are interested in becoming an affiliate should visit their website, and click on the affiliate link at the top for instructions to sign up. It's free and they provide video and ongoing training to help you be successful.
One thing is for certain. Our industry will need to continue to find creative solutions to deal with the problems posed by the foreclosure crisis. The traditional models of listing a short sale are just not working, and alternative solutions are needed. Home Advocate Trustees provides an alternative that appears to meet the needs of all parties involved.
Home Advocate Trustees is based in Seattle, Washington. The main website for Home Advocate Trustees is walkawaytoday, and complete contact information can be found on their website.