Negotiating with the foreclosing lender is the best option to stop a foreclosure. Lenders are in the business of loaning money, not owning homes. Many Real Estate Agents shy away from working on Short Sale transactions because they get frustrated with their mediocre results. Instead of complaining about why negotiating with a lender is so difficult, it is more important to find a way that will make negotiations easier. The following are the Top Ten Negotiating Strategies when dealing with a foreclosing lender.
1) Communication – Lenders do not like to talk to people who are rude or who are disorganized when on a call. Be courteous and efficient when making calls. Have all information and paperwork in front of you and be well prepared time is not wasted. Lenders have to field calls all day and it can be frustrating for them to talk to people who are fumbling for questions and information.
2) Sense of Urgency – If you show a sense of urgency to the lender and respond to all calls, letters and emails in a prompt fashion, the lender will most likely treat your file the same way. They know you are on top of your file and are doing everything you can to make sure the process is moving along. It will be much appreciated as they know they won’t have to spend much time tracking you down if they need something from you.
3) Create a Proposal/Solution: Lender have so many short sale files to process, it really helps when you help them see the light but it must be reasonable. Do not expect that the bank is desperate to give a huge discount. Create a Net Sheet showing what they would get if the home went to foreclosure, then show the current estimated value through comparables and days on the market plus realtor commissions, past taxes, etc. Then show the different offer amounts and show that you are submitting the highest one.
4) Create Feeling of Cooperation – Create a sense of cooperation with the lender that everyone involved is trying to work together to come to a solution. Whether this is the listing and buying agent cutting commissions ˝ percent or showing the buyer to agree to pay a little extra to close the deal.
5) Talk the Same Language as the Lender – The lender doesn’t need to hear another sob story about how the homeowners are good people and really tried to pay their mortgage. Talk their language and give them solutions that will work and do not demand they stop the foreclosure. Understand how the lender will see the deal and what needs to happen to get a short sale approved. This is where the Net sheet comes into play as it is exactly what they need to be looking at in order to make a decision.
6) Knowledge of your File – Make sure you know all the details of your file as the negotiator does not have time to wait for your answers and if can answer all of their questions, they will be more willing to work with you as they know conversations can be expedited. This is where you should have your file in front of you every time you make a call so you are well prepared with any questions they may have.
7) Learn about the Lender – Different lenders will look at your short sale file differently. An institutional lender will handle the foreclosure differently than a private lender. Typically, a private lender would be less willing to budge or make things happen, especially if they are a second lien holder. The type of lender will determine how you will negotiate with them.
8) Mention the Loss to the Lender – Even though a Net sheet is put together to show the costs they will incur if the property goes back into their inventory, but do remember to point out things such as they will lose money due to the costs of the foreclosure, back payments, wear and tear to the property, marketing costs to sell the property, etc. This will prove to them that the costs to do nothing will be much higher.
9) Create an effective hardship letter – Make sure that when the homeowner creates a hardship letter is provides a clear understanding of why the homeowner can no longer carry the mortgage. Do not provide a 5 page report of the hardship, but point out key points that tie into the financial hardship and how it will not be resolved in the near future.
10) Stay on top of your files – Do not expect that the lender’s loss mitigation department is running on 100% efficiency. Many negotiators have hundreds of files to work on and it is easy for them to lose track of progress on any given file. If you requested to stop a foreclosure from going to auction, you need to call the court to make sure it has been stopped. If the court says they received no word from the lender, call your lender back and inform them nothing has been done. If you don’t do this, you may find yourself working months on a short sale transaction and having it lost because you assumed the negotiator did their job.