Heather Davis is a “short-sale goddess.”The deity designation was bestowed on her by Catherine Rogers, a Coldwell Banker broker in Fort Collins, who has used Davis to facilitate short sales, the complicated and frustrating process in which lenders agree to take less than the mortgage amount. Davis is part of a growing, cottage industry – short-sale transaction management – that help take the hassle out of the mind-numbing but growing part of the home sales market in the Denver area and across the nation.
“Heather is such a star,” said Rogers a top Coldwell broker. Collins said she had a “tough experience” with other groups in the industry, before learning about Realty TMS, the Broomfield-based company Davis works as a short-sale transaction specialist. Rogers praised Davis for her connections with banks, procedural knowledge and communication skills.”I’m very flattered,” by Collins’s praise, said Davis, who said on average she helps Realtors close six short-sales each month. Davis said she encourages any broker tackling a short-sale transaction to enlist the help of a reputable transaction specialist. “Short-sales are really complex and every bank handles them a little differently,” she said. “And it can be very emotional. I typically have to speak with the seller to get financial documents and information.”
Help relieves short-sale stress
Tara Rogers, chairwoman of Realty TMS, said that her firm “basically takes a lot of the headaches out of handling a lot of the administrative process that eat up a lot of time. That way, the Realtor can focus on keeping his or her pipeline filled and serving their clients.”
The company, which has been offering the short-sale transaction management service since 2008, is working with several hundred brokers along the Front Range.” She has signed an agreement with RE/MAX Alliance, as well as Land Title Guarantee, a sponsor of InsideRealEstateNews. Brian Hamilton, a senior vice president at Land Title Guarantee, said it became apparent that because of the huge volume of short sales of short sales – by some estimates accounting for 20 percent or more of sales in the metro area – that it needed to offer its clients a solution for dealing with the complicated process.
Land Title chose Realty TMS
“We investigated starting up a department within Land Title,” but rejected that idea. Instead, it out-sourced the service to what it determined to be “the best of class.That is how we found Realty TMS. They already had two years of experience behind them. They knew the lenders. They knew their submittal process. Their fee structure seemed fair.” TMS Realty charges an initial fee of $299 and another $699 fee at the closing. The former, in about 80 percent of the cases, is paid by the home seller, while the latter typically is paid by the lender at the closing, Rogers said.
TMS Realty has relationships with more than 65 banks, including all of the big players, such as Bank of America, Wells Fargo, Citicorp and others. “We have contacts at each bank and we have a proprietary system that provides all the different paperwork required by each bank. For example, Wells Fargo might want some additional paperwork and forms that other banks don’t require. So we have all the forms on file and know what to include when we send a package to the lender.”
Fees vary
Some short-sale management firms charge on a percentage of the deal basis, but Rogers said she thinks a flat fee is more fair. ‘The reality is that we do not see a big difference in the process, whether it is a $600,000 or $250,000 home,” she said. “We don’t feel we are entitled to take a bigger fee just because it is a more expensive sale.”
Rogers said the industry is “fragmented,” right now, with a lot of mom-and-pop operations. “Some title insurance companies offer it as a service. Sometimes someone who used to work with a title insurance company will offer their services to a Realtor.” TMS Realty recently signed an agreement as a preferred vendor with Short Sale ProLogic, which sells a search engine to Realtors that helps them quickly and easily find short-sale prospects. Short Sale ProLogic doesn’t make any money from the short sale management companies it recommends, but it does screen them first. It doesn’t have an exclusive relationship with TMS.
Short Sale ProLogic sees value
“We’ve got four or five of them engaged in our system right now,” said Ryan Lantz, a co-founder of Short Sale ProLogic and its parent company, Claremont Information Services. Lantz doesn’t want to publicly name all of the short-sale management companies he has on board, but another one he is high on is PMH Financial. And it has another company on its roster, Carpe Diem Partners, “whose claim to fame is that it doesn’t charge the Realtor or the seller a fee. It negotiates its fee directly from the banks. There are all different kind of fee structures out there.” Lantz said it is crazy for a real estate broker not to use a short sale transaction manager.
“If a Realtor is going to have three or four short-sale listing that becomes a full-time job,” he said. “It is really pushing that rock up the hill. Every minute a Realtor spends on hold or negotiating with a bank, is time he could better spend on listing presentations, marketing a property or finding more listings. If you have a partner like a Realty TMS, they are doing the heavy listing for you.”
Success rate climbs
He said statistics show that a broker tackling a short sale on his own, has only a 20 percent to 24 percent success rate. But if they use a transaction management firm, the success rate jumps to 75 percent to 82 percent.
“So they will be able to close almost four times the amount of short sales,” Lantz said. “If you are closing only one out of five of your deals, that is not a sustainable business model.” Despite the benefits, Lantz said that few Realtors he meets with has ever heard of them. “The No. 1 response I get is, “What is a short-sale transaction management company? The No. 2 response I get is, “I work with some lady.”
Ryan Carter, a broker with 8z Real Estate, fits into that former category. Some brokers almost exclusively do short sales, but Carter has only done one. But when told about TMS Realty, he was intrigued by the concept. “That sounds like a great model and their fees sound reasonable,” Carter said. “Although I’m not immersed in doing short sales like some brokers – they’re not a huge part of my clientele – I think a short-sale facilitator is worth having on your team. They can be very valuable.”
Questions to ask:
Realtors, however, should screen companies before they decide who to choose, advised Lantz, of Short Sale ProLogic. Questions should include:
- Who is going to handle the files? A team or an individual? Lantz said he prefers having one individual assigned to each file.
- The number of short-sale closings it has facilitated and its success rate?
- Are they experienced with dealing with HOA liens?
- Can they help negotiate removing any potential deficiency judgements against the seller?
Regulation needed?
Lantz said that he expects a great deal of consolidation in the field. He also said he would like to see it regulated, something that may not be endorsed by everybody in the business. “Right now, it is is totally unregulated,” Lantz said. “You and I could open a short-sale transaction company tomorrow. No degree or experience is required and you don’t have to pass a test.” Marcia Waters, director of the Colorado Division of Real Estate, said that it would be up to the General Assembly to decide whether the industry should be regulated.
She said she is not aware of any complaints against companies engaged in short-sale transactions, but even if she received complaints, she could not pursue them, unless it was alleged that they were negotiating between the buyers and the sellers, as that could be construed as selling real estate without a license.
In any case, Waters said that an improving housing market may eliminate the demand for the services.
“If we continue to see foreclosures drop and that ultimately leads to fewer short sales, there may not be a need for these kind of companies,” she said. For now, however, most observers expect the short-sale market to continue to grow in 2011 and probably 2012, and possibly beyond.
And that gives Heather Davis, the short-sale transaction specialist with Realty TMS, plenty of time to add a word to her business card: “Goddess.”
