If you read 100 different agent blogs about foreclosures and short sales and you undoubtedly will have 100 different opinions about how to successfully achieve and complete one. You will also hear to (1) avoid them if possible; (2) tasks to complete when you have a short sale listing; (3) what you should do first; (4) what lenders to avoid and which to work with; (5) and what to do as a buyer or seller stuck in a short sale scenario. All good advice by the way…and there really are no wrong opinions. This is a business that truly has no rules, and as much as "the experts" would like to give you advice to this problem, it really is a "learn as you go approach." Each problem and situation is unique.

Providing advice via a blog like ActiveRain, seminars or training classes; criticizing or bashing lenders about the short sale process; and giving our own personal direction and secrets on doing short sales all seem to be a tactical and misguided approach to the overall inflating foreclosure problem. As agents and legal professionals, what is our strategic approach to resolve this problem? Tactical vs. strategic defined as: If you no longer want milk in this world, do you take on the overwhelming task of killing every dairy cow in the world? (Tactical approach), or do you simply destroy the few dairy farms that are producing the milk? (Strategic approach)

It's fairly obvious that a tactical approach to our nation's short sale problem is never going to get the job done. We, as professionals need to define a strategy that does not include facing this major systems flaw one short sale at a time.

I've completed so many short sales I've lost count. I've trained agents across the country on every facet of short sales, and I've done radio, television and blogged until my fingers hurt to help and assist homeowners and agents facilitate and streamline the short sale process. Overall, I feel great on the work that I have done, so why does the situation seem to be getting worse? Like most, I did not focus on the strategic problem, only the tactical solution.

Recently, my focus and energies have been to create a group of professionals and with the help of some of the top consulting firms, address these lender process issues from a more strategic approach. This goes way beyond me trying to create a short sale business selling homes; it's more of a 911 call to the lenders. (If you've completed quite a few short sales in your area, and would like to be an professional associate in this venture, you can email me directly fwible@remax.net).

For example, a hedge fund buys the paper (a mortgage note) from the lender. The purchase price for this note is thirty seven to forty five cents ($0.37) on the dollar. The lender sells 500 notes to this hedge fund, and they are paid "today", in advance for these notes. However, the hedge fund requires the lender to continue to service the note until a short sale or REO sale is complete. When money is ultimately collected, all proceeds go the hedge fund. Remember, the lender already took the loss and got their money back at the beginning! Have you ever heard as a short sale agent, the "investor" has to approve this? Now you know what that statement means. In some cases, it's the initial investor of the loan, but lately, not often.

What motivation does a lender president or CEO have to implement a streamline process in order to facilitate a quick short sale? They have already taken a loss on the note when they sold it to the hedge fund, received their money upfront, and now are nothing more than collection agents for the hedge fund. And remember, in most case they do not receive any additional money once the loan is closed with the borrower (via a short sale or payoff). Have you recently receive a counter offer on your short sale that you thought was crazy? That could be the lender trying to receive a bonus for collecting more than the hedge fund was expecting on the return. Additionally, lenders are paid, (almost as commissioned agents), from the hedge fund if they have to take the property back and sell it through their REO department. In other words, they get paid more to take it back!

If you as a short sale agent ever thought you were fighting an uphill battle, you're right. This is big business and huge profits are made on these hedge fund levels. I personally never have a shortage of hedge funds calling me asking if I have REO tapes (lists) for purchase. Now we all know why.

So, the lender collects the money they need fast (to stay afloat and pay margins), the hedge fund makes a ton of profits for their investors, and the collateral damage is well worth the return.

The major flaw is simply that the damage it is creating is more than just collateral. We see the damages continuing and starting to worsen and dig deeper as these hedge funds continue to get rich. The real estate market is never going to correct itself as long as qualified buyers continue chasing the fantasy of this foreclosure inventory. If this continues, traditional inventory will sit much longer and become stale. It could even force traditional listing into short sale or foreclosure scenario. This circle will never end until this is cleaned up. As we see it, this will eventually affect more people than they can call collateral. Just FYI, quite a few politicians have money in these hedge funds!

Don't believe that greed cannot blind! The amount of money being made at levels is more than you and I may never understand…is amazing. Let's face it, if that was my/your money in the hedge fund we would not see the flaw either, or maybe we would not want to (blind by greed).

The example above is only one of the process flaws we've identified in the lender short sale systems. So I ask, helping sellers on an individual short sale basis does help, but how much? We are so focused on the tactical planning, training, education and assistance of the short sale that we never thought about if we were really helping the overall situation. And do we care? We as agents have to make a living, so knowing how to do a short sale is not a bad thing and it keeps us going. However, overall, I would rather focus my talents and knowledge to assist in the normalization of this insane market. My opinion is that it does not, or did not, have to be this bad, but studies show it will get worse before it gets better.

Thanks for reading!

Frank Wible