I was doing a little research on line today trying to find updated information comparing short sales versus foreclosures and bankruptcy. I ran across some interesting investor sites and investor written materials that alarmed me greatly. The advice given on these sites were to have homeowners work directly with investors to short sale their homes and NOT contact Realtors. The investors warned against high Realtor fees and said that the banks did not want to work with Realtors because of their commissions. Several sites boasted that the banks understood investors better and preferred to work with investors over agents. In addition, one site in particular stated that the banks understood that the investor would need a 15% to 20% profit margin on average per deal. Now let me see, the banks are willing to pursue an investor transaction in which the investor would receive a 15% to 20% profit margin; but, the commissions paid to Realtors were too expensive? The investor’s profit margin is double to triple the average commissions paid to the agents by the banks. In addition, a home sold via an agent should be sold at market or very close to market, not 15% to 20% below market. This will minimize the deficiency on the short sale, which is extremely important! I was also flabbergasted when I read tips from an investor on how to influence BPO and appraisal values. What was also alarming was that these were the sites that came up as informational sites and the top sites from the search terms I used through Google. These predatory investors are out there marketing to and praying upon families in distress.
Here’s some advice to those homeowners in distress. Please know and research your options. Talk to your lender, talk to a counselor, talk to a tax expert, talk to an attorney, and talk to a Realtor. There are many programs available currently to assist homeowners with refinancing (HARP), loan modifications (HAMP), credit counseling, and yes, short sales. Understand your market and your consequences regarding any of the options available to you. There is an alarming trend for homeowners to just walk away without doing anything. In fact, many families, over 50%, that I meet with after the foreclosure has occurred, never made one phone call to their lender or to a trusted advisor. Foreclosure is a terrible ordeal with far reaching consequences. The deficiency judgment from a foreclosure will include legal fees and recording fees that will be significantly higher than other alternatives. Recently, more banks are following up on these deficiency judgments and are pursuing collections on these debts. It is important to minimize or eliminate these deficiency judgments. Working with an investor at a 15% or 20% profit margin may leave these families with a higher balance owed and larger deficiency judgment. If you, or anyone you know is facing challenges making the mortgage payment, please urge them to get some help (and stay away from investors looking to profit off their misery). There is a better way!
Please note that not all investors are predatory.
Northern Virginia REALTOR®
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