As published in Scotsman Guide's Residential Edition, May 2012.
In a time so affected by the recession, short sales and foreclosures have become part of mortgage brokers and originators’ everyday lives. And, with that, focusing on local markets has become essential to staying in business, as working locally makes it easier to navigate the waters of the distressed-property market. Brokers working in states like Florida and Arizona know this all too well, where few zip codes remain unscathed by shadow inventories of distressed hold-backs.
Qualifying borrowers to purchase distressed properties, however, presents its own challenges. That said, qualifying the right borrower for the right distressed property — and ensuring that the short-seller remains a potential future qualifying borrower — largely is a question of communication and trust between brokers and Realtors. To a large extent, the recession has brought brokers and Realtors together, forming an alliance that has the potential to restore the housing market to its prior health and stability. Any broker or originator who doesn’t boast a number of Realtor connections should certainly consider expanding their business in this respect.
A savvy real estate agent will want to partner with a broker whose sole purpose is to act as a liaison with lenders, ensuring a timely approval and averting potential disasters, such as the short-seller falling into foreclosure after the buyer has already signed. Of course, if a short-seller becomes despondent and stops making mortgage payments, that person can jeopardize an entire deal.
This early stage of the process can pose a variety of obstacles, as many servicers will not consider short sales unless the seller is late on making payments. The fact, however, is that properly submitted short-sale packages can and will be approved — especially with strong hardship letters, as well as help from programs like the Home Affordable Foreclosure Alternatives program (HAFA). A quality broker-Realtor relationship can make the process move even more smoothly.
The best broker-Realtor relationships have brokers involved early in the process, initially acting as a marketing resource and then serving to qualify and vet patient and well-informed buyers. Considering the hours of continuing education that most originators must complete to annually reinstate their licenses, your Realtor connections may come to perceive you as the very definition of an ideal referral partner, one who has not only embraced industry changes but is thoroughly educated about those changes, as well.
Although some brokers may be reluctant to engage in such partnerships, the resulting referrals can pay a multitude of future dividends. On their end, more and more Realtors are realizing the benefits that a broker relationship can provide, especially after fielding denials from multiple lenders — denials that a well-educated broker could have helped avoid.
Brokers who pursue relationships with Realtors may find themselves dealing daily with credit unions or real estate agents who have disheartened borrowers still reeling from a shocking — or perplexing — denial. In these cases, it’s up to brokers to ensure that a given buyer can be signing documents within a few weeks and, by extension, that the short-seller still can be a future homeowner.
Some people may believe that the independent mortgage broker’s days are numbered, but nothing could be farther from the truth. In short, everyone in the origination industry is in this recession together. It’s more important than ever, therefore, to have healthy and reliable connections in every corner of the industry, whether Realtor or otherwise.
Michael Mekler is the founder and owner of Liberty First Capital.
His office is in Carlsbad, Calif., a suburb of San Diego. His passion for writing about the lending industry drives him to contribute to two blogs: SanDiegoMortgageReports.com and Minyanville.com. His mantra is that the interests of the borrower come first, and his dedication to running an exemplary business is rivaled only by his dedication to his family. Mekler can be reached at (760) 536-6200.