Steinhoff: I had a friend who just got their real estate license and they needed some help getting a house sold. I already had a college education and I decided to get my broker license. We opened our own office and that’s how I got started. My specialty was in commercial, but our office dealt with both residential and commercial real estate and we grew to have about 40 agents.
I’ve wanted to write a book for years and my daughter always encouraged me. When the market took a turn and I started to see all this bad information out there, it became apparent that this was the right time to write a book that helps people by giving them good advice from someone inside the real estate industry.
You include 90 real estate myths in your book. Which ones, in your opinion, are the most important to understand?
Steinhoff: I originally write more than 100 myths, but we cut them down to 90. There’s a whole section on how to find a good agent. Also, the section on short sales and foreclosures are must-reads for people.
What do you cover in the short sale section of your book?
Steinhoff: Well, it’s a complicated field. The book covers the basics, what people’s options are, and what sellers need to do to qualify for a short sale. I discuss the difference between short sales and foreclosures. People don’t always have to go through a foreclosure–there are other options. I also outline the tax implications of a short sale and how it affects a seller’s credit. The whole process of how a short-sale is handled is outlined in the book, including the type of documentation that lenders require.
Short sales are taking an average of 90 days to complete now. I don’t think they should be called short sales anymore, because they are in no way short. But I really like the first myth under the short sale section: “Tall People Can’t Utilize a Short Sale.” There’s a lot of humor like that throughout the book, which gets people’s attention. I also offer a lot of tips on transaction dos and don’ts.
How do you think a real estate professional can benefit from this book?
Steinhoff: It’s beneficial for agents just entering the business to get a footing on the misconceptions that are out there and how to handle objections. But it’s really a beneficial gift to give your clients. I’ve given one to every one of my clients. There’s so much information packed in there, you’ll continually hear people having “ah-ha moments.”
It’s not written like a text book; I incorporate a lot of humor, graphs and charts, as well as tips – pre-emptive tips. Plus, it really explains to clients why they should use a REALTOR®. A lot of articles in the newspaper and in the media just skim over the basics of things. Your clients need more than text book answers to things. They need to know what’s happening in the trenches.
I think a lot of REALTORS® would appreciate you covering Myth #67: Should I Wait for Prices to Increase Before Selling? What advice do you have for agents trying to communicate this issue to their clients?
Steinhoff: Right now so many people are waiting. Buyers are waiting for prices to go down and sellers are waiting for prices to go up. But here’s the thing: interest rates have a much higher impact on what people will pay. It would help for buyers to understand that if the price for a median value home (nationally) goes down 5 percent, assuming the interest rate is the same, your payment would only go down about $40 per month. On the other hand, if the interest rate goes up just half a point, their payment would go up $45. So the client could actually be losing money by waiting. And sellers are going to have a long wait if they are waiting for prices to come back up. They may be waiting five or six years.
The entire “Selling Lessons” section looks particularly helpful and could be incorporated in listing presentations. What practices do you reinforce in that section?
Steinhoff: The segment about offers–I don’t think a lot of people understand that process. For real estate professionals, because this is in print, the book can serve as a verification source and an authority when you’re making your presentation, to back-up your advice to clients.
When you were doing research for your book, was there anything that surprised you or that you learned?
Steinhoff: What I learned most about was about government programs such as HAFA and HAMP, but they’re not working. People are not using them. I think it takes so long that people end up losing their house before they qualify and the program can do anything. They were expecting to help 8 million people and maybe a few hundred thousand have actually been able to utilize those programs.
GET A SNEAK PEEK:
Myth #28: Short Sales are Simple and Easy
Fiction: A short sale is a transaction in which the lender agrees to allow the borrower to sell the property “short” of the balanced owed on the loan. Hence, the term “short sale.” In this situation, the owner’s mortgage balance is greater than the probable sales price of the home. Since the lender has not yet foreclosed, this creates a window of opportunity for the owner to sell the property on their own.
It is, however, a complicated process. The biggest problem in a short sale is that the home owner must persuade his lender to discount the loan.
It becomes even more complicated when there is a second mortgage and/or an equity line. These lenders must also agree to discount their loans.
Not an easy task, as you might imagine.
The process starts when the home owner receives an acceptable offer. He must then submit a “Short Sale Package” to each of the lenders. This package consists of numerous components, as outlined in Figure 3.1, and is typical of what REALTORS® submit to lenders. If any element is missing or incomplete, the process will be delayed. The key ingredient is the seller’s hardship letter. A sample seller’s hardship letter is shown in Figure 3.2.
The large increase in number of short sales has created a new job title:
Short Sale Negotiator: This is an individual who will, for a fee, negotiate with your bank to obtain a reduction in the amount of their loan. He must, however, have a real estate license and work for a broker.
Once the lender agrees to a short sale, they will issue an “Approval Letter” stating the terms they find acceptable. An example of a lender’s approval letter is shown in Figure 3.3.
You might ask why lenders would ever agree to discount a loan. There are many reasons, but the primary consideration is that they will lose less money than by going through the lengthy foreclosure process.
Once the lender’s approval letter is received, you can open escrow (if you are in an escrow state) and proceed with the transaction in the usual manner. If you are in a state that doesn’t use escrow, you proceed with the transaction in the usual manner.
TIP: Make sure your agent is trained and certified in handling short sales.