Episode Transcript
[00:00:00] Speaker A: Welcome to AllView360 all things real Estate Podcast. With your hosts, Daniel Gutierrez and Shannon Dempsey, we explore real estate from every angle, giving you insights, tools, and confidence to make smart decisions that support your future. It's time for a new perspective on Property. Welcome to AllView360.
Hello, Daniel.
[00:00:20] Speaker B: Hi, Shannon. How are you?
[00:00:22] Speaker A: I'm good.
I'm excited to be recording another episode.
[00:00:26] Speaker B: Excited about this topic?
[00:00:27] Speaker A: I'm excited about the topic because I just experienced it where it took over my life for about four months, but I'm not excited that it is a topic.
[00:00:36] Speaker B: True. Well, it's a topic that none of us have talked about or really probably thought about in, what, 13 years?
[00:00:44] Speaker A: More. More. Yeah, more. Not ever. In my. We're talking about short sales.
[00:00:49] Speaker B: Oh, yeah.
[00:00:49] Speaker A: Short sales.
[00:00:50] Speaker B: Important to know.
[00:00:51] Speaker A: Yeah, that is important to know. We are talking about short sales. I've always been very familiar with the term for obvious reasons. They were very, very, unfortunately, popular during the recession, after the recession, before my time and your time with being in real estate full time. And now they're starting to become more popular. At least the discussion around them is starting to become more frequent.
[00:01:16] Speaker B: I don't know if popular is the term.
[00:01:18] Speaker A: Perhaps I changed. Yeah, Necessary.
And did you experience a lot? I haven't experienced this maybe in the last five years. But for a long time, there were people always looking for a deal, right? People would always say, like, I want to get a foreclosure, I want to get a short sale, or something like that, because they. They hear the success that people that were able to secure them as buyers during that big boom of short sales and foreclosures, the type of equity they have in their homes now, how all of that went.
And the conversation was always, those used to be very common, but they haven't been. And we see them infrequently. And when we do see them, you know, there's usually significant damage or, you know, whatever it might be, it just has slowly faded away.
And now I think we're entering back into that territory.
[00:02:04] Speaker B: I'm happy it faded away. I was getting so many questions, especially when I started investing, what, 2011 of people coming to me and like, oh, you know, I want to learn how to go to the courthouse and buy these. These foreclosures and short sales and this and that. And for a while there were still some, but they really dried up. And people read the books, heard the stories, and they thought that this was still the magic way to get rich. And by no means was it. And Also, it was not as easy as people thought. You got to go to the courthouse with cash, buy things sight unseen. And if you weren't sophisticated or capable of really managing a process like that, you were in trouble as well.
[00:02:41] Speaker A: I just realized 100% you were probably one of the clients that was saying, I want to buy a foreclosure. Did you?
[00:02:48] Speaker B: No, I never. Oh, should I? Did you?
[00:02:50] Speaker A: Did you bought a foreclosed property? What year was that?
[00:02:53] Speaker B: 2011 or 2012.
[00:02:54] Speaker A: That was right when it was a thing.
[00:02:56] Speaker B: Yeah, but I wasn't going and looking. I think where I was looking in Vegas, there was more shore sales and foreclosures than they were regular sales.
[00:03:04] Speaker A: Yeah. It was the norm from what I vaguely remember. I'll have to ask my mom who was selling real estate then, but that was kind of the norm of what was moving in that little chapter of our history.
Do you regret buying a foreclosure?
[00:03:20] Speaker B: No. I guess I never even thought about it. One of the things that I didn't realize till way, way later is when I went to sell the homes that I bought through foreclosures, the majority of the communities were investor owned. So it caused some issues with buyers being able to actually qualify for loans as primary residences because it was prim.
[00:03:42] Speaker A: Merely investor only or investor owned.
[00:03:45] Speaker B: Yeah.
[00:03:45] Speaker A: I have friends now that own properties that they did purchase. Short sale back then and there. I mean, it's. If you were able to complete a short sale as a buyer back then, you're sitting pretty now. Right. You were able to. You had a ton of equity. You now have a lot of equity, and you were able to refi into that 2 low 3% rate. When that made sense, what, 10, 15 years later, pull out some of that equity. Like it. It's. It's a really good situation for the people that were able to accomplish that. It's a really bad situation and process if you have to sell. Short sale or foreclose.
[00:04:23] Speaker B: You and I have spoke about it a few times, but growing up in Temecula in the early 2000s, we saw a lot of exposure, a lot of short sales. Yeah.
[00:04:32] Speaker A: And that. So just to make it clear for anyone that doesn't fully understand what a short sale is, a short sales, when you have to sell your home, usually for some, you usually don't want to sell it, you have to sell it. Right. So you lost your job, you have to relocate. There's some part of your life that is forcing you to not be able to hold onto your asset anymore or move. You look at the numbers of what you owe the bank on your property. So not what your property's worth, not what you bought it for, but what your loan balance is. Then you look at what your house will realistically sell for you take away all of the commissions, closing costs, what your net number will be after you sell your home. If that net proceeds number is less than what your loan balances and you do not have funds to cover the difference, you're going to have to short sale your home or at least consider it as an option. And I'm starting to see people be in this boat, not a ton, but from what I'm experiencing, it's the 20, late 2023, 2024. Buyers that bought, we've seen a decrease in price. What were the numbers? Like 2 and a half, 3%, 2
[00:05:40] Speaker B: and a half percent in some areas of Southern California.
[00:05:43] Speaker A: In some, yeah, the. So in your property value. So you bought it at this number in 2024. We're now in late 2025, 2026, your home value has decreased. If you did a loan or you purchased the home with no money down 3% down, a small amount down, you have not paid off a lot of your loan balance because it's been primarily interest.
You cannot sell your home to net what that loan balance would be. And you are going to have to short sale it. And that's not fun.
[00:06:12] Speaker B: And to put some numbers to that, you figure you buy your home, let's just say $100,000 for easy numbers. In the course of, you know, two, three years, you put down 3%. So you're at 97,000.
You've paid two years of payments. The majority of it's going to go towards interest for the amortization table. So your loan is still 96,000? Yeah, 96,000. And then you're going to go to sell it, let's say even at $100,000, exactly what you paid for it, you're paying 4 or 5, 6% commission to the agents, you're paying title, you're paying escrow, you're what, six, one low end, let's say five to $8,000 in transaction costs. So right there, your $2,000 underwater, best case scenario.
[00:06:59] Speaker A: Best case, that's a short sale. Yeah. And the only way, when you do not net what your loan balance is in the sale of your home, the way to avoid a short sale would be if you had, you know, money in your savings account and you literally have to write a check to escrow. You have to pay during the process for your house to sell. And you would do that to avoid actually having a short sale on your record or going into that short sale process.
And if you don't have those funds, that's it's really the only option.
[00:07:30] Speaker B: But the short sale is also a better option than a foreclosure and a bankruptcy which lasts seven years on your records as opposed to the two years for the short sale.
[00:07:38] Speaker A: Yes, from what I understand it was if you did an FHA loan when you purchased. So now you're short selling with your FHA lender. You are going to have. It's the same actually with a short sale versus a foreclosure, which is worse. You're going to have it on your record for three years, but your credit score is going to take 100 to 150 basis point hit if it's a short sale and over 200 points if it's a foreclosure. If you have a conventional loan, it's significantly different impact wise from a short sale to a foreclosure. You're still looking at three years. If you short sale, meaning you can't purchase for three years, you're not going to qualify. You're not going to be able to purchase a home. Even if you come into a lot of money, whatever it might be, your hardship's over and your credit score is still taking that 100, 250 point hit. But if you foreclose now, you're looking at not being able to purchase for five to seven years and you're so, and you're looking at that 200 plus hit. Five to seven years is significant to not be able to purchase a home or kind of be. I don't know, what would you call it when you're just frozen credit wise
[00:08:41] Speaker B: with option and opportunity to do that?
[00:08:45] Speaker A: Yeah, obviously you want to attempt to do a short sale before a foreclosure. I just completed my first full short sale process on the listing side. It was a doozy. We got it done and I think I got lucky from understanding how other people's short sales have gone. This one, there's so many different rooms for there to be hurdles and so many parties that have to be involved and on the same page and understand the process. In this particular case, we opened escrow with a buyer. I think it was on. I had it on the market. We listed June of 2025, which was right around when the tariffs had hit. You know, May was kind of when the tariffs hit and the market was really, really frozen for A while we listed a little bit above what they had purchased it for the previous June. In 2024, we did open escrow with a buyer on it at a price where they were not in the short sale territory and, you know, all was good, they were going to net nothing, but they weren't going to have to short sale it. Right. So ultimately we were comfortable with that. That buyer ended up falling through. During the process of us being an escrow with that buyer to do a traditional sale, the market just continued to freeze up and go down.
So by the time we went back on the market, we could not get another offer at the price that we were originally in escrow at. And I said, we, we have to start looking at the short sale process. This is. They are in a boat where she had lost her job. They ended up having to move back to the country that they were living in prior to this. Like it was a true hardship. Like everything just kind of hit them at once. They genuinely went from one year thinking, we've accomplished everything. We've purchased our house, we're living here, we have great jobs, we're doing all of the wonderful things that we've been wanting to do in less than a year. All of that completely unraveled. Hardship after hardship. They had to sell the home.
[00:10:33] Speaker B: A sad story.
[00:10:34] Speaker A: Yeah, it breaks my heart still. All of it. So then we started the short sale process and I was very honest. I've never done a short sale before, but we're going to figure this out. I understand enough about it. And so they started the short sale process with their current lender. At the time was Loan Depot. Loan Depot. They reached out, said, hey, we need to short sale our home. We can't sell it for, you know, they explained it to them. Loan Depot was really responsive because from what I understood from the past, it was hard to communicate with the actual bank. And you know, that was part of the holdup. I thought that they were, in hindsight, they definitely were responsive compared to the second bank. But here's. They gave them step by step. Here's what we need from you. Here's the process to get this approved. It started with them demonstrating hardship, truly being able to show that they're not just choosing to not make their payment. So they were able to accomplish that. Loan Depot said, okay, yeah, let's move forward with a short sale. We'll start the process. So we did that. There were some steps that we had to do from the MLS side, from all of it. So we start moving through. We secure a Buyer. So we reduce it to a number. They did not give us a number of what they were going to approve, but they basically said, once you bring us an offer, then we will review the offer, and from there we will give you the short sale approved number. So we're like, okay, like what? You know, that's kind of. You have to put it at a number that you think is close enough to accomplish what Loan Depot, or whoever the lender is, is going to approve, but not too high to where you're not gonna get offers because it doesn't officially start until you get an offer. Right. So we reduced it well under the market value, but still at a number that I thought was gonna be acceptable. I think we went down to 8. I think we listed at 825. And this property appraised, for perspective, it had appraised at 9. 25. So we listed. We didn't know that at the time, but that is what so. But we had listed at 825. We had multiple offers. Everyone understood it's a short sale. Every agent on the other side was like, I've never done one of these. I'm like, cool, me too. We're going to figure this out together. Right? Like it. We all kind of were just in the same boat, but we secured a really good buyer with a wonderful agent on the other side. And we submitted that 825 offer to loan Depot, jumped through a million hoops, the normal transaction stuff. And then probably like 30 other steps that were required. We submit that package, we all hustle to make it happen, and then we sit and wait for them to. Their turnaround times are like 30 days. Like, thank you, received. You'll hear back from us in 30 days. So then we're just like, cool. Meanwhile, I have become a pool person, a landscaper, like, trying to keep this vacant house, you know, in the condition that it was. Yeah. It's just.
So we go through all that, and then Loan Depot spits us back that you need. It wasn't an exact number that they gave us. And in that first 30 days that they were processing our offer, they sent an appraiser out on behalf of them to spit back that number. So then their appraisers, who came up with that 925 offer. So now we're at an8.25 offer price, not net proceeds, because it still includes commissions and everything like that.
Yeah. And then they're saying 9:25. So I don't know if it's like this for every bank, but this was My experience, they said in order to approve this, we need to net 80% of the appraised value. So did the math, figured it out, worked in, you know, all of the closing costs, everything involved there. We determined instead of 825, 865 was going to be the number that was going to net the bank. I think it was like 8, 14, 80% of the value. So then we go through that process, renegotiate the price with the buyer. They understood that that possibly could happen. They're on board, everyone's great. We hustle again for like five days, getting it all back and forth, everything over to them, send it back to the bank. Okay, we need 30 days to process this. Cool, cool, cool, cool. So then we sit there for 30 days. I'm doing the pool, doing like, you know, like keeping it all going. The buyers are texting for updates. We don't have them because the update that we have is that we're all just waiting. The sellers were so committed and I think that's part of why this ultimately ended up closing and was it was a four month long short sale. And I think that's pretty decent for the process. But they're on a completely different time zone. They're in the Netherlands. So he's staying up all night when the bank needed stuff.
[00:14:49] Speaker B: The sellers in the Netherlands.
[00:14:51] Speaker A: The seller's in the Netherlands at this
[00:14:53] Speaker B: point and the buyer is in the
[00:14:55] Speaker A: house now, but in, in our zip code.
[00:14:58] Speaker B: But they also have to be a very specific buyer because they have to be able to wait that long for it not to be an issue. They have to be able to come up.
[00:15:05] Speaker A: Yes.
[00:15:06] Speaker B: And 20 some odd or 40 some odd thousand dollars.
[00:15:09] Speaker A: It's asking so much from a buyer as far as like unknown. Right. Okay. You want to buy this house. We don't know if this is going to actually be the price that you can buy it at. We don't know when you're going to close escrow. We do know you're not getting any credits, repairs, nothing. We do know that things might happen during the process. In this case, the fence blew over. Like there's so much risk with the known for the buyer, they're getting a
[00:15:32] Speaker B: discount on the purchase, which is ultimately why they do it.
[00:15:35] Speaker A: Yes. And they understood that. And then also if you have to move in at a certain time, if you don't have accommodations in the meet, like there's just so much. So this is where we got lucky. We never had to restart over with another buyer, which is what I hear happens Often by the time you actually get your short sale approval, your buyer has already moved on to another house, you know, whatever it might be. And you have to just hope that your buyer sticks with the process. So I was overly dramatic about that in, you know, like, this is what needs to happen. The agent fully understood. He communicated it really well to his buyers.
You know, constantly, like no updates, but just letting you know the buyers are still on board, the buyers are still excited, the buyers keeping everybody calm. Yes. And so that was. We did get really lucky there, but we went through all that and then when we finally got to the point where they approved the number that we were at, then came all of the paperwork that we had to do.
And at in that process, by the way, Loan Depot approved it and then sold off the loan to a different.
[00:16:36] Speaker B: Which is wild.
[00:16:37] Speaker A: Which is wild. So now we have this other bank and we're like, well, what do we do? We have like a approval, but now we don't have. So then that bank had a different approval process. We had to restart over with that bank with the whole deal. Where I ran into unexpected challenges is that bank didn't operate only in California. And California has a lot of different escrow laws and lending. You know, like, it's just a different.
So they would ask for things that we just don't have. Like we, like in California, you do the final settlement statement 24 hours after the deal closes. I'm assuming based on their request. That's not how it goes down in other states. Because I'm like, we just don't have that. We have a closing disclosure that is signed 72 hours before the buyer sign closed loan docs and they have that 72 hour wait period, then they sign loan docs and then we close escrow and then we get the settlement statement. So it was things like that, that they're like, we need this. We need this by end of day tomorrow. With what? Signatures from five other individuals, all in different. You know, so it just was a challenge in trying to understand what they were asking for and then being able to communicate what we have here in lieu of that and will this work? And so it got really, really crazy in the final 30 days of actual paperwork process. It was anytime I'd send something to the buyer's agent that their team would jump right on it, get everything signed. I mean, I was sending stuff to you like, this needs to be printed, wet, signed, scanned back, and we need it by the end of the day. Like if you didn't have the ability to do that. Or if I didn't have a direct connection to my broker. Same thing with the buyer side. Like he had to track down who his broker was. Like, we were hoping that, you know, it just, there was so many little hoops.
Then we finally get the official approval approval. All your documents are in, I think. So we started December 1st.
I think it was like end of March is when they said, okay, you're approved. No, no, no. First they said, you're denied.
And we're like, okay, after all that. And they listed all of the forms that they were missing for why they denied us. So then my seller stayed up all night and said, actually, you've received all these forms. Here they are. And then they said, oh, never mind, you're approved. So we're like, okay, this is just such a roller coaster. And then not only did they say, you're approved, they said, and you have to close this by April 8th. And I think it was less than 20 days from this whole four month waiting process to now you have 20 days to get this closed. And that's when we started. The buyers started doing inspections. We started that whole process, the lending process, everything ultimately down to the wire. Got it closed yesterday. I don't even know if my sellers fully believe it yet. Like, it is closed. The buyers are in there. But there were so many moments where if we don't get this done by this time and submitted, this will just go into foreclosure. And it was difficult to not be working with. And no fault of the bank, they're a bank doing short sales. I don't know even what that entails. But to not have a direct point of contact or be able to pick up the phone to that particular lender and say, you know, what do you need? Walk me through this or help me understand. It was just scary for all of us that we're doing everything used to working with strong communication and then just sending everything off and hoping for the best. That was a long winded story of that particular process.
[00:19:53] Speaker B: Well, first of all, congratulations on getting it done.
[00:19:56] Speaker A: Thanks.
[00:19:56] Speaker B: But I think also testament on the quality of service that you provide to your clients and also to just kind of who you are and just figuring stuff out.
[00:20:03] Speaker A: Can I tell you the. Usually it's like, yay, congratulations, you closed. I'm like, I don't know, like, I'm so happy this closed for everyone, but not really. Like there's, you know, it's like, it's so sad because you're like, okay, this closed. You get $0 and you don't have your house anymore. And I'm so sorry you went through all this. Like, it's just I was nervous and so grateful that this never even wavered. At any point with these particular sellers, they're not coming back to the States. Their credit doesn't matter to them anymore because it's only impactful here. They're not looking to buy a house in three years, five years, 20 years. At any point they could have completely just said, no, I'm not going to stay up all night and deal with all of these bank requests. I'm not gon through this process.
We're done. Like we're out mentally. I don't. Maybe that's what I would have done. Like they just chose to take on the burden, the mental load and committed to getting this closed at a principal. Essentially like they, they text me last night because I obviously was very grateful and acknowledged their commitment to it. And they said we could never move on without closing a loop that, that we had the power to close. And that's really all they're getting from all of this, like satisfaction that they. I don't even know. Yeah. So all that to say that was that short sale experience.
And I have a feeling we're going to see more.
[00:21:21] Speaker B: Well, the indication is that there are more still very, very low numbers, but similar to our childhood, there appears to be more in the Inland Empire, San Bernardino county areas where you see a lot more of those FHA low payments and you know, tighter margins on the financial situations. Uh, but I feel like you also forgot an important point and potential hurdle or potential issue throughout this whole process.
[00:21:48] Speaker A: Did I forget it or did I black it out?
[00:21:51] Speaker B: Starts with an H, ends with an A and there's no in the middle hoa.
[00:21:55] Speaker A: Is that what you're referring to? Yes, I am still.
There is such a fire burning in me about that that I'm like this particular transaction in the final hour literally had to end up bypassing it became contingent on after all of that four months of I don't even know how many documents, paperwork, how many signatures, people involved, parties involved, multiple lenders, multiple brokerages, all of that. Everyone made it happen. We get down to the last thing the lender needs for the buyer, the buyer's lender is an updated HOA demand.
And that is a one page accounting document from that property's HOA property management company that says here is what the current balance is on this particular property. She refused to send it for. I still can't put logic to why she was choosing to not be helpful in that scenario. So here we are thinking we have everything done. The only thing that we need is this HOA demand. Normally it goes like this, hey, hoa, we need the updated HOA demand. No problem. Congratulations, you're closing. Here's the updated HOA demand. That's normally how that goes. It did not go that way.
So this was a hurdle that I didn't expect because it's not. It's so out of the ordinary. My escrow company is like, in 20 years, I've never, ever once had someone push back like this on providing a legally required document. By the way, I can quote the civil code if you'd like me to. So what we ended up doing there, again, everyone jumped in through hoops, you know, compliance with escrow got involved. We figured out what we had to do. All parties were in agreement that they understood what was happening, what this means. So now I still have this unknown that I will be covering whatever. If there weren't dues paid from January to March, because our demand was January 1st, we closed April 8th. So the ultimate risk there is if there's an outstanding balance on the previous owner's HOA account.
That is something that the new buyers will have to, you know, take on, which they were literally screaming like, we will pay whatever is owed on that account. Like, we want this house, we want this deal.
And yeah, so that was out of left field that the HOA property management company, after all of that ended up being who was going to derail this entire transaction. But that was the reality. And by the way, we ended up closing, they still have not sent the demand and have no idea that we close. Like, they were just sitting pretty, like, we don't care if you foreclose on this property, we're not going to help you.
[00:24:26] Speaker B: Which is unprofessional.
[00:24:28] Speaker A: A whole different issue.
[00:24:30] Speaker B: I remember after the crash, like 2010, 11, 12, when I was looking at a lot of these properties, you would see the purchase price like, oh, my gosh, this is wonderful. And then you'd get the information that they owe, like $50,000 in property taxes and, you know, $30,000 in HOA dues and you have to pay those out in order to actually be able to buy the property. Oh, man. No way.
[00:24:50] Speaker A: No way. That was. Yeah. And I think, like, from what I remember when I wasn't actually practicing, but that it was if people were short sailing or walking away from their homes, they were taking, like, everything of value. Like, people were mad at the bank so they and the banks were what screwed a lot of people or whatever the bank process was at that time. But I remember showing properties early on that were kind of later in the process foreclosures, which is when I had jumped in. And they would take like they were taking the pipes, the toilets, the cabinet doors, like if you could remove it from the property, like what do I. What were they doing with that stuff?
[00:25:26] Speaker B: Yeah, well, there's two. There's people taking it, but there's also a lot of vandalism after the people moved out. And people would break in and see all of those things. Like I remember when I was in Vegas buying, we would. The biggest ones we look for is make sure. Saw the piping and make sure to have the air conditioning condenser unit, because those were easy ones to steal. And they would go and they just cut the lines and just take the unit and just so expensive to replace that we were looking for ones that, you know, weren't completely stripped of those. Replacing a toilet, replacing some lights. I mean that was almost every property wasn't a big issue. But the air conditioners and the pipes.
[00:26:02] Speaker A: Was the copper. Just for the copper?
Yeah. I remember like you'd walk in and there'd just be wires like everywhere. And I'm like, what used to be there? Whatever it was, they took it. So that was not the case here. And you're right, a lot of delinquent property taxes. And in this particular case, the sellers continue to pay the HOA dues. They, their property taxes were already in an impound account. You know, so that was something they. That was already being paid out. So they had very little delinquencies on the property, just that they stopped making their payment.
[00:26:33] Speaker B: How does this affect the loan side from the buyers?
[00:26:38] Speaker A: How so?
[00:26:39] Speaker B: Like on financing for the buyers, how does that affect it? Because they went from offering what, 820ish thousand to going up to 860, waiting just days and days, days and days, months, weeks, whatever it is. Because especially right now, interest rates are fluctuating. A lot of times the rate locks are only a certain amount of time. It has to also be super difficult on the financing side for a buyer.
[00:27:00] Speaker A: Yeah. So their lender was actually Chase and the lender was super awesome, really strong in communicating, got it done. So she didn't start the actual loan process until we had that approval towards the end of March.
So she jumped in with the. They had an appraisal waiver, obviously because it was so significantly under the property value. She had them locked and ready to go.
We understood. And I think it's important for everyone to understand this. Like, we're making this offer at 8:20, whatever the original was, in the 8:20 range that they needed to be prepared and approved to pay more. Um, I think the number that I had said, said I would potentially be prepared for was 8:75.
And he. And they knew. They're like, okay, no problem. We're approved up to this amount. So if that number goes up from the bank, then we. We can still accept that price. If someone wasn't transparent about that, or if it was a buyer's agent that didn't take the time to figure out what's going on or have the experience and their buyer is capped out at the number that they're offering, all of that would fall apart. Right. When you finally get your approved number, if your buyer can't qualify for that or if the rates have gone up in that time and for that reason, they can't qual. Say, yeah, you can't. You lose the buyer, and then you start the entire process over again. Which is what I hear happening with a lot of people that have closed short sales that they finally. After their third buyer and, you know, starting over multiple times and all of that. I still need to do a full, like, action plan for the next short sale based on what I experienced in this process. Like, what points need to be clear, what needs to be understood.
I keep saying it, but I. I think I got lucky with a lot of these things because as they happen, you're like, oh, this is where this would go wrong. This is where this would fail.
[00:28:47] Speaker B: And so many variables.
[00:28:49] Speaker A: So many variables.
[00:28:49] Speaker B: A lot of variables you have no control over.
[00:28:51] Speaker A: Yeah.
And I hope to not have to be doing a lot of short sale. Like, I hope that this doesn't become the. The common process or more frequent for people.
[00:29:01] Speaker B: Yeah. The norm in the market.
[00:29:02] Speaker A: Yeah. It is not unlikely that we'll start seeing them more. All of the people that are tiptoeing around this being possibly the route they have to go seem to be buyers that purchased in 2024 that are having to move quicker than they had anticipated and did not put down significant funds.
[00:29:21] Speaker B: Well, since from 2024 to now, rates haven't gone down, prices haven't increased, and all of the realtors that were saying, what is it?
Marry the home, date the rate. Yeah, yeah, they're. They're divorcing the home because they're really divorcing the home.
[00:29:38] Speaker A: And the dates did not go well.
So for my Particular clients, they stopped making their mortgage payment. I think back in November, you had to miss a mortgage payment for the short sale process to start. That was a requirement before they would even talk about it with you. And they couldn't make their payment anymore because they had to relocate. And whatever funds they did have were now going towards their, you know, actual housing.
[00:29:59] Speaker B: Moving across the world.
[00:30:00] Speaker A: Yeah, moving across the world and trying to find a new job there. So I kept trying to figure out, like, what would be the best possible solution because they were now not making their mortgage payment. If they had put down more, it's like say they did a 20% down loan. They would have been able to close traditionally because they would have had that equity to make that happen.
[00:30:21] Speaker B: But they would have been at a loss.
[00:30:23] Speaker A: They would have lost.
[00:30:23] Speaker B: It would have been out of their pocket.
[00:30:25] Speaker A: Yeah, they would have ended up losing more money by putting more down.
So it's like unfortunate that they had to short sale because they had put less money down. Silver lining. I, I, they were at less of a loss after the whole process because of it. So. But those are things you can't predict.
[00:30:42] Speaker B: Yeah.
[00:30:43] Speaker A: You know, because their plan was to be here for the next 10 years or whatever it might be. There was, it was just circumstantial.
[00:30:50] Speaker B: Overall, it's a sad situation. I think banks have gotten a lot better vetting buyers to ensure that they're in a solid financial position to be able to afford the home. But life happens.
[00:31:00] Speaker A: Things happen, life happens, things happen.
And then the other.
So do you remember all the short sale negotiator, like you had a short sale negotiator before, and then they, you know, had part of the commission and that was, it was a third real estate approved short sale negotiator that would come in the mix. That didn't happen. I thought maybe that would be. So I wonder if like a bank requires that or some banks do.
[00:31:22] Speaker B: I think things have changed. And I just remember this now. I don't know if you remember. Remember we were, when you're helping me buy a home in Huntington, the first property we looked at was a short sale. I believe it was like short sale about to go into foreclosure. Remember we walked through, we're like, this is kind of awkward. Like the family was there, but then we found out that they're renters and it was owned by someone else. But I don't remember there being that many short sales over the last decade.
[00:31:48] Speaker A: Oh, do you remember what happened there? The, the agent actually said, I have another One coming on.
[00:31:53] Speaker B: Yeah, we just walked across the street.
[00:31:55] Speaker A: We just walked over there. And then that's the one you ended up buying. But, yeah, it wasn't common. And when I listed this one as a short sale, I was.
I knew my lack of experience with the process just because it hasn't been happening, but I was shocked at the amount of agents. Wonderful. Like, nothing. No fault of them, but that would call and be excited about the price and my clients really interested and. And then not. And I beg, okay, do they understand it's a short sale? And here's, you know, the first few key points to make sure they understand. And they had no idea even what a short sale was. Like, well, what do you mean? Well, what do you mean? And so then I'm like, explaining the whole process and, well, what do you mean that might not be the price? And what do you mean it might take that long? And it just. The knowledge of a short sale even being a thing wasn't there for a lot of the people that were calling.
[00:32:43] Speaker B: Yeah, well, really, anyone who started practicing after, what, 20, 11, 12, then didn't grow up in an area that was full of foreclosures and short sales. They never would have heard about it.
[00:32:55] Speaker A: They never would. Yeah, they just thought we were listing this property a hundred thousand under and their clients willing to buy it. And let's get this done.
[00:33:01] Speaker B: And yeah, also, the market has changed. The market's changed where the clients just send you the Zillow listing or the red list listing, and you're like, okay, let me call the agent. Let me get this.
Sometimes you call before you even log into MLS and look what's actually happening. And, you know, rude awakening under those circumstances.
[00:33:19] Speaker A: Rude awakening. Yeah. So. And then I also. So for our mls, we go into contingent status. So we're no longer active on the mls, but we're not pending because we don't have that approval. So we're contingent upon short sale approval. The amount of calls I got in that three months that we were contingent upon short sale approval of people thinking we were waiting for a buyer to sell or, you know, something like that. And, well, we'll submit an offer and we'll get in there and, like, lock us into backup and. And repeatedly just saying, like, no, we are, you know, trying to explain what we were contingent upon and what that actually means. And it just wasn't clicking with so many people. I should send them all this podcast. Right?
[00:33:56] Speaker B: Did anyone. Were people receptive or was anyone, like, questioning what you were saying or doing?
[00:34:01] Speaker A: Most Would listen and want to understand more and then be like, well I gotta go. I gotta go to deep do a deep dive on what this means. And you know that sort of some people were argumentative with like they almost as if I was like trying to pull a fast one and would seem angry with me and I'm like, these are just the facts. This is what's happening. Like I, you know, I don't, this is not what I would be doing. I. But most just kind of took in the information and then kind of went quiet and I'm hoping went and did some training or research on what that actually means.
[00:34:31] Speaker B: Yeah, I can see it now though. The argumentative agent thinking that you're lying.
Yeah.
[00:34:37] Speaker A: Well, what do you mean?
[00:34:38] Speaker B: The bias, unfortunately too common in our industry.
[00:34:41] Speaker A: Yeah. So it is possibly our new normal for some people.
[00:34:46] Speaker B: I hope not.
[00:34:47] Speaker A: I hope not too.
[00:34:48] Speaker B: Yeah.
[00:34:49] Speaker A: You want to know my main takeaways
[00:34:51] Speaker B: beyond the main takeaways? I think depending on where you're at, the demographic psychographic, certain areas I think are going to be much more prevalent. Similar to 2008 when you saw Riverside County County, Inland Empire, San Bernardino county, you know, Tucson, Phoenix, South Florida, Tampa. Those areas, they shared a lot of the same demographics. Psychographics all get hit in the same fashion. I think you're. We're probably going to see something similar now, albeit at a much smaller level hopefully at least, but it probably will happen.
Areas, you know, more affluent areas, higher end areas even relevant to one of our previous podcasts, they're much less on the margin when it comes to being able to afford Ford properties. Generally much higher down payments.
You're not getting a $5 million home with an FHA. So you're going to see it more towards those, the areas of lower value relative to other neighboring counties or neighborhoods. But at least in Southern California that's what's happening. I haven't looked in other states.
The research I did mention a bit more that that was happening in the Midwest. But you also see a lot of prices in the Midwest stagnate. The market's also just been completely, you
[00:36:09] Speaker A: know, annihilated over Austin, Texas.
[00:36:11] Speaker B: Yeah, exactly.
[00:36:13] Speaker A: So I do think that we will see.
You're right. Like certain areas, certain zip codes, certain demographics. But also like in this particular case, the party that lost their job had a really high paying job. Like it was incredibly educated, incredibly experienced, locked in this job. There was no bad decision made.
Hindsight, you know, you can see what different decisions would have been made, but with the information, the income, everything that they had at the time that they made the choice to take on this loan balance and purchase the home like it was under what she could afford.
They made wise decisions and then lost that high paying job out of the blue. And that her industry was one that had a 30% cut back in January overall. So it was not a result of their decisions, just circumstances.
[00:37:07] Speaker B: Yeah, but that's also one of the reasons why there are such strict laws, especially in California, protecting consumers because things do happen and we don't want another situation in 2008 where everyone has super low credit scores and is just trying to get out of terrible financial positions. And it's hard to dig yourself out when you're that deep.
[00:37:26] Speaker A: I wonder what. Because I didn't see the, the hardship approval process from the bank but I want to do a deeper dive on that because I would imagine there is abuse with this process. Like if you just don't want to make your payment anymore because you bought a house somewhere else and, and you don't want to go into foreclosure. So you do. So I don't know what the actual hardship requirements are. I know they had no problem demonstrating it. You know, here's where we were, here's where we are. All of it was out of our control.
But I'm going to do a deep dive on that. Do it and I'll probably tell you about it.
[00:37:57] Speaker B: Cool. So what are your biggest takeaways?
[00:37:59] Speaker A: I didn't jump in as an authorized third party with the short sale bank early enough. A lot of the forums communication processes were between the seller and their bank. And then we figured out that I could be an authorized third party which then I was on every email I was able to complete a lot of, you know, really assist with the process of everything that the bank was requiring from the seller at that point. But I think when I do this again, I will tell the seller, please add me as an authorized third party with all of your communications from the get because then I'll, you know, be more involved and understand, have a clearer picture. I think with the particular buyers we got lucky but being more clear about what this actually looks like and I have a better understanding now of what this actually looks like.
And then the other takeaway is realizing parts that could derail it that you wouldn't necessarily predict are also there. So with this particular HOA property management company, maybe actually I don't know if that would have changed anything. They did not seem to care. But being very, very clear about what's happening when the Docs are ordered. Because when the docs were ordered, I don't. They were just ordered like a normal transaction versus them. Understanding this is the beginning of a short sale process.
So now I know maybe we don't order the docs in December.
Maybe we just order them when we actually have approval and it goes forward. Because then that would avoid what should not be an issue, but the updated demand at the end.
[00:39:33] Speaker B: And that gets expensive too, if you have to order multiple times.
[00:39:35] Speaker A: Yeah, they got so like you shouldn't have to order them multiple times. You can get updated minutes and financials from the months from the original. I feel like the way that this went down with this particular scenario, it was like, okay, no problem, here's a demand form. And then all of the sudden. And I. It was actually, you need to pay us fifteen hundred dollars, which is like three times the amount of the original docs to get a new set of docs. And we're not comfortable issuing the demand unless you do this. And the disclosure, HOA disclosure process and the HOA accounting demand are completely separate. Like, you can't withhold that while demand, obviously they couldn't do what they were doing because we were still able to close because of what they were doing. We didn't. That wasn't. Ended up not being required, but just kind of getting ahead of that stuff.
Everybody involved knowing what the timeline is, not just the buyers.
[00:40:26] Speaker B: This is a completely different topic, but I feel like people, primarily HOA boards, don't do a good job of asking the HOA property management companies how much they charge for demands until it's too late. And you have these companies coming in and charging astronomical fees to get demands. And you know, people transact a lot. It's. It's absolutely crazy with some of these HOA management companies demand for producing docs. It should be legal.
[00:40:52] Speaker A: Like if I were interviewing an HOA property management company, I understanding their process, the softwares they have in place, the fees that they charge, what does your real estate transaction process look like? And do you have a staff member that is handling those? Because this particular one, they literally say the words, it's not our problem. And I'm like, but it's gonna be.
[00:41:14] Speaker B: It's your job.
[00:41:15] Speaker A: Yeah, like it is something. And I. This has been, I mean, you hear me complaining all the time. This has been a battle that I have been on with this particular one strictly because I do. It's. It's my farm, my area. So I do a lot of transactions. And so I experience the process, the Inconsistencies with it, how it affects people often in this particular neighborhood. I don't think in general there's enough sales for residents within a particular neighborhood for it to stay on the board's radar. Because at that when someone's selling a home, if it's rocky with the HOA property management company, they're pissed off during the transaction, the property closes, they're gone. They're not going to fight report, go through the process of calling it out because they're gone. And then same thing with the buying process for us, the onboarding, a new owner to like our guard gate and our online platform and everything like that, the transponders, all of that's really slow in a broken process.
But now it's new people coming in. It happens out of the 690 homes maybe in the high years, 25 times a year in the lower years, you know, 12 times a year. Out of 690 residents you have 12 that had a bad experience but they finally get it solved and they're like whatever, we live here now, we have access to everything. They're newer to the community, they're not going to call it out and they're
[00:42:35] Speaker B: not going to get on the board.
[00:42:36] Speaker A: And then from the agent's perspective, they're doing one deal in there for the entire year. So they to them it feels like a one off that things were messed up. But I did my numbers like a psych. Like I've done over 20 transactions in the last few years in that particular neighborhood. And over those 20 transactions it was I could list seven that had had significant impact because of the HOA property management's processes. And I feel like that's a unique experience to be able to gather that amount of information firsthand. And so I think a lot all that to say I think a lot of the HOA property management companies probably get away with really high fees, really shitty processes because they just don't have enough oversight or consistent oversight to process it. Why are you smiling? Because.
[00:43:22] Speaker B: Well, because we could talk about this for another hour and I was just laughing in my head because we're going off on the tangent. We said we weren't going to go off.
[00:43:31] Speaker A: True. Sorry, but. And then they have the ability to really mess up and send a client's property into foreclosure. And that to me is where it's wild.
A new line.
[00:43:42] Speaker B: Thank you for this story. Thank you for sharing. I think this is going to be super valuable and important for people to learn. Hopefully it doesn't happen more often. But the reality is it probably will. And I think this is a great opportunity for people to get some insight in regards to what the foreclosure process looks or the not the foreclosure, but the short sale process looks like. Help them through the process and, you know, really ultimately help our clients through tough times.
[00:44:06] Speaker A: Also, I want to be clear, I am nowhere near an expert on short sales, obviously, but that just was my, this was my one experience. But if anyone is looking to have that conversation with their clients or if their clients have brought it up, they can definitely reach out because I'm happy to explain how I explain the process and kind of the first few steps that they will they have the power to do as the agent to see if this is something that would work for their client. So anyone can reach out anytime. I have a few agents that I've walked them through that. Because you do. It's your job to bring the information and help your client make the best decision for them.
And then also if you need therapy during a short sale, feel free to reach out.
[00:44:46] Speaker B: Perfect.
[00:44:47] Speaker A: Yeah.
[00:44:48] Speaker B: Well, Shannon, I'm sure everyone appreciates that. Thank you for listening. Don't forget to like and subscribe.
[00:44:53] Speaker A: Like and subscribe.
[00:44:54] Speaker B: And also too tell us your thoughts. Let us know what you think, anything you want us to talk about. We love getting the feedback and you know, this has been a lot of fun. Thank you.
[00:45:03] Speaker A: Bye bye.
That's a wrap on this episode of AllView360, all things real estate. If you found this helpful, don't forget to subscribe. Subscribe, leave a review and share it with someone navigating their own real estate journey. Connect with us anytime on Instagram @AllView360 and on LinkedIn @AllView Real Estate. Until next time, stay curious and keep your perspective. 360.
