Have you ever seen Australian Rules football? I don’t know why they include the word “Rules” in the name – as far as I can see there are no rules whatsoever. I love Australian Rules football. It’s a bunch of guys theoretically trying to get a football across the goal line, although usually they seem forget about the football entirely – they break often to have a fight. To my eyes, accustomed to civilized American football, it jut looks like one big brawl. There’s no padding, you don’t know who’s on which team, there’s lots of blood and cussing and sometimes they bite. It’s very different from what I’ve always been used to when it comes to football.

Representing a buyer on an REO or short sale reminds me a lot of Australian Rules football.

REOs, short sales, and auction properties comprise at least one quarter of the available residential properties on the market today. I was surprised at that number, 25%. I thought that it was higher – maybe 50 to 60%. I showed property the other day – out of the 7 properties, 2 of them were owned by “normal” people. The other 5 were foreclosures.

Knowing me as you do, you might be expecting a rant right about now. It’s not going to happen. I’m not going to rant, but I am going to ask us to adapt. If you or I (comfortable with how we’ve always done it here) decide to go to Australia and play football then we’d better learn how to play it in a different arena.

Like it or not, right or not, wrong or not, if we’re willingly going to The Land Of The Deal With The Bank then we’d better learn how their game works there. To come out of the first round of their game bitter and bloody and bitten, whining “They’re not playing fair!” is foolish, and is not representing our buyers. (Oh. “Bloody and bitten” comes from the bank’s asset managers, not our list agents.)

If we’re going to play on their field then we’re going to have to live with their rules or we don’t play. That’s how it is right now. Do I like it? It doesn’t matter. To spend our energy thrashing around instead of adapting to the new game and learning the new rules is a waste of time and is making neither progress nor money.

So what are the rules? That’s the problem. Each team (bank) makes their own rules. However, some trends seem to be in lockstep with all of the banks, so these I will take a stab at. I’m going to talk about REOs today. OMG! What the hell am I doing? I am going to get so nailed for this piece when all I’m trying to do is help. Oh, whatever. Nail away – I can take it.

Our time frames mean nothing to the bank. We can and should write “This offer must be responded to by Seller before next Tuesday the 7th at noon.” This way we have a valid offer with valid time frames. That’s all very nice, but the banks don’t care about our arbitrary time limits. (My favorite is when it takes the asset manager 3 weeks to respond and then demands a 7 day inspection period and a 10 day close. ~Snort.~) Warn your people that they shouldn’t expect a response quickly, and not to take it personally. The banks figure that when they finally respond to our offer we will either proceed (time for acceptance stipulations be damned) or we’ll go away. They don’t much care which one we do.

Now the back and forth of negotiating happens. Expect this negotiating to be verbals on the bank’s part. You will probably get emails or unsigned counter offers or phone calls from the list agent until you reach an agreement – then you’ll get the whole thing in writing in the form of the dreaded bank addendum.

Once you get the bank’s addendum, READ IT. Just as all REALTORS® are not the same, neither are all bank addendums. Some of them get grabby at the Buyer’s earnest money, some of them impose per diem penalties for delay in closing (no matter whose fault the delay is), some of them are just plain ludicrous. If we tell our Buyer to sign something without us thoroughly reading and understanding it first and then things get sticky over the language we’re going to look pretty stupid, and with good reason.

IMPORTANT THINGS TO UNDERSTAND ABOUT THE BANK’S PROCESS.
· The whole thing is totally unemotional on the bank and asset manager’s part. It’s business - pure dollars and cents. They can’t care that this was your childhood home, they can’t care that you love the house more than anything you’ve ever seen, they can’t care that this is your dream home. Show ‘em the money.
· The actual bank might never see your offer. The list agent uploads the pertinent info into the asset manager’s screen. The only thing that this asset manager sees is price, COE date, the amount of Seller concessions (Seller paid closing costs, Homeowner’s warranty, etc.) and the bottom line - what will the bank get when it’s all done? This asset manager can accept or kill a deal without ever consulting the bank. BTW – if the Buyer gets mad and calls the bank and says “Why didn’t you respond to my offer?” and the banker says “What offer?” it could mean that it was never presented, but it probably means that it died at the asset manager.
· Cash versus financing isn’t an issue.
· You will not get an asset manager or bank officer’s signature or a “REJECTED” or much of anything at all in response to your offer until and unless it is accepted. Acceptance is evidenced by the appearance of the Seller’s Addendum.
· If you end up in a competing offer situation and get a request for your Buyer’s “highest and best” it’s time to get serious. No more caginess, no more holding back. Get your Buyers to put on paper the highest price that they can stomach. The asset manager will choose which offer they want and either you win or you’re dead - Game Over.
· If your Buyers blew it at the highest and best stage they can still hang around as back-up. It’s the same story, though – you will not get a signature that puts you into iron-clad first back-up position. Hang and hope, that‘s what I say.

Title and escrow companies. Oh, what a bone of contention this is! Very simply, since the big banks are doing so many escrows they worked out a deal with their favorite title company for a volume discount. They used to like to insist that you use their title company or no deal. OK - cool, except that that’s a violation of RESPA and Fair Trade and Arizona State law. So now they say that they will pay the title company fees if you use their favorite. The Buyer is welcome to use any title company that they want, but in that case the Buyer will usually pay all title fees, both sides. Since Buyers think that all title companies are the same and they don’t want to pay all of the fees, we end up with a title and escrow in Far Away and a title officer that we don’t know, and who may or may not be competent.
You know what? Deal with it. Either your Buyer pays the fees (which they won’t want to do) or we work with the bank’s choice. Pick your battles – this is one that (in my opinion) is not worth the fight.

Once you get into escrow the battles that you and the list agent can (and have to) win will commence. The asset managers seem to all live together in a basement in New Jersey. They don’t understand easements or wells or septics or private roads and they don’t want to acknowledge our State mandated Affidavit of Disclosure. They also don’t want to understand that when they’ve accepted an offer that includes these items as a Seller’s expense they do have to deal with them. Instead, they want to throw up their hands and scream “As is! We won’t do it!” Or, “We don’t need any stinkin’ disclosure statements!”
The list agent goes head-to-head with them at this point and it’s usually fixed pretty quickly. If the list agent doesn’t win, tell them to tell the asset manager to consult with their legal department – that usually takes care of it. We might have to provide the statute for their legal department, since Arizona is so very different about a lot of these things.

Requirement for the Affidavit of Disclosure can be found at www.azleg.state.az.us/ars/33/00422.htm
Requirements for certification and transfer of septics (cost is negotiable in contract): www.azdeq.gov/environ/water/permits/download/septictank.pdf

Let’s talk about the agents who specialize in listing foreclosures. Most of them are doing their best to do a good job in a tough niche. REO list agents are bound by Article 1 of the Code just like everybody else – if the instruction from their client is lawful then they have to do what they’re told, so don’t shoot the messenger. That said, yes, I repeat, REO agents are just as bound by the Code of Ethics and Arizona law as anybody else. Just because the banks don’t want to follow the rules doesn’t mean that their agents are bullet-proof. Forgive them if they’re having an unmannerly moment – maybe you’re the 40th person to yell at them so far today and it’s only 10 AM. (No, it’s not ever OK, but if it’s just this once try to forget about it.)

I spent my Wednesday at another Association of REALTORS® sitting on a Professional Standards panel. The Respondent (the guy defending himself) is primarily an REO list agent. This whole process just bit him. The Complainant/Buyers did not believe that he had presented their offer on his listing, since there had never been much traditional-type response from the bank. We (the panel) knew that he had presented the offer because the bank issued a “highest and best.” The buyers dinked around and didn’t get the house and were mad. I wish that this list agent had kept all communication with the asset manager to email, and saved his “sent” emails. Even better, there is a little button at the top of my keyboard. It says “print screen.” I can’t get it to “print screen” (Maybe Mary knows how?) but if it does capture the image of what I’ve just done (like upload an offer) this will be an awesome CYA. If I was an REO agent I’d sure as heck learn how to make it work, I would email copies to everybody involved, and I would keep the “printed screen” in a file somewhere until the statute of limitations runs out.

Yes, List agents must disclose the existence of accepted offers by changing the status in MLS. When I call on an active listing and am told “We have an accepted offer, 2 back-ups, and 6 more in the wings but we’re leaving it active so that we can collect a few more,” I get mad.

List agents must also present all offers. Just because “it will confuse the bank and delay closing” is not an excuse to bag somebody’s offer. The only time that it’s permissible to sit on an offer is when you’ve got a letter from the Seller instructing you not to present anything after the property goes into escrow, and even then I’d let them know about it, anyway. (I am NOT talking about short sales. If during a short sale the Seller says “Don’t let the bank know about any other offers” that could be construed as mortgage fraud. I’m just saying.)

There you go. As a NON-REO agent, I did my best. You foreclosure list agents out there, thank you so much for consulting, and I look forward to your kind and constructive feed-back. If I got anything really wrong I will happily print a clarification next week, so let me know. It would be good if you start out with “thank you.”