Whereas a short sale could be a property that is in foreclosure and headed for status as an REO, but a short sale is also a home that might not be in foreclosure. It is not a foregone conclusion that a short sale will become an REO because not every short sale requires a seller to be in default. Moreover, not every seller wants to stop making mortgage payments just to do a short sale. But a short sale is always a property that is underwater. In other words, a short sale property is worth less than the amount owed to the bank.
A company that developed a cloud-based platform to process REOs for banks was REOTrans, which bought the domain name in 2003. This online platform attracted many major banks and provided a product to bring together the asset managers with the real estate agents who were selling and closing the REOs. Agents joined REOTrans to do BPOs in the hopes of establishing a relationship with an asset manager who would later assign them REO listings. REOTrans became very successful in the REO business. It was a natural development for REOTrans to do the same thing for short sales. It created Equator.com in 2009 to process short sales. Equator can be accessed from any computer with an internet connection, as long as the user enters a USER ID and password.
Who Belongs to Equator?
Two basic groups belong to Equator. The banks give access to their short sale negotiators, and real estate agents sign up as individual users. Generally, the public does not yet participate in Equator. Following is a partial list of the short sale banks that use Equator:
- America's Servicing Company (ASC)
- Bank of America
- GMAC / Ally
- Homeward Residential
- JP Morgan Chase
- Wells Fargo
How Does an Equator Short Sale Work?In some ways, the banks have found a way through Equator to transfer much of the clerical work to the short sale agent. Personally, I would not trust a real estate agent with this much power, but I suppose the thought process is the agent should be able to easily enter names, telephone numbers, email addresses and other clerical information, including the costs of sale and sales price. Agents are known for their sales ability and people skills and not necessarily for their paperwork skills or attention to detail.
Don't believe me? Go into any real estate office and yell "squirrel." See how many heads snap. Ha, ha, little joke . . . just messing with ya.
The Equator platform system creates "tasks" and gives a deadline for each task to be completed. One such task might be to enter the buyer's name, home address, a portion of the buyer's social security number and phone number. Since most agents do not collect such private and confidential information, some of that information is made up.
Each bank has its own forms in Equator and its own procedures. Some banks will let the real estate agent initiate the short sale and other banks will require that a bank employee initiate the short sale. Each HUD is different. Short sale agents and bank negotiators communicate through Equator emails.
After all of the paperwork has been uploaded to Equator, and the banks have completed their internal tasks, including a BPO, a counter offer might occur. If a counter offer occurs in Equator, it is not what you would think when you hear the term counter offer. It is an offer adhering to the guidelines of the investor, which generally involve eliminating or reducing certain costs of sale. But it could also involve the sales price. The short sale agent either accepts or counters the counter offer.
After the final terms have been agreed upon between the parties, a final HUD is often uploaded. Some banks have established a lofty goal of a maximum of 2 HUDs -- while other banks have been known to request 25 HUDs. I will leave it to you to guess which bank is the guilty party. It starts with a B. When the short sale negotiator is satisfied with the documentation and terms of the offer, an approval letter is typically generated by the bank.
When the transaction has closed, the short sale agent uploads the final closing documents to Equator, and the file is closed out. Hopefully, never again to see the light of day.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.