In the struggling housing industry, entrepreneur Alex Charfen has a problem: His real-estate seminars are selling out so quickly he has to turn people away. 

Charfen, 38, is one of the few in real estate who have figured out how to turn falling home prices and persistent foreclosures into a viable business. In the four years since he launched his company, the Charfen Institute, struggling real-estate agents have flocked to his seminars on short sales. More than 35,000 agents have gone through his short-sale seminar. 

“The potential market for short sales is huge,” says Charfen.

In short sales, borrowers who owe more than their home’s value sell their property back to the lender at a discount to avoid foreclosure. This allows borrowers to avoid a devastating blow to their credit rating. Banks usually end up taking less of a loss on short sales than on foreclosures. 

But until recently, short sales were still a rarity. Most homeowners and agents didn’t understand how to pull them off. Big banks shied away from the complicated paperwork and negotiation process.

Lately, however, the federal government has thrown its weight behind short sales and encourages banks to streamline the process. With a glut of potential short sales clogging their books, banks have begun to open up. 

Short sales now make up more than 12 percent of all home sales, up from less than 1 percent before the crash.

“It is a positive sign that the market is starting to deal with these distressed properties,” said Daren Blomquist, a spokesman for Realty Trac.

Every week, agents desperate to book sales pile into conference rooms of places like the Ramada Hotel in Toledo, Ohio. While speaking at events, Charfen sometimes sports the well-groomed beard, suit jacket and microphone headset of a motivational speaker. Agents pay up to $599 for a two-day short sale boot-camp where they learn the ins and outs of the negotiation and paperwork process. Some agents are headed toward bankruptcy. Others just want the institute’s résumé-boosting Certified Distressed Property Expert designation, or CDPE. 

In 2010, its third year in existence, the Austin, Texas-based company was already generating $9.9 million, putting it at number 21 on Inc. magazine’s 5000 list, which ranks the growth rate of start-ups. 

Charfen’s success is built on the ashes of a failure. When he started the company, he and his wife Cadey were in bankruptcy court after losing everything in the housing crash. Before the bust, for example, they owned three $140,000 condos in south Florida, the epicenter of the bust. Those homes are now worth $29,000 each. “It was humbling and eye-opening,” he said.

Surviving his darkest hour motivated him. He started the Charfen Institute going door to door among at least Florida 15 real-estate offices seeking students. His first class was 62 people at a Holiday Inn in Boca Raton. Now the company employs more than 60 people and holds 300 to 400 classes a year across the country. About 600 to 1,000 students enroll per month.

The U.S. government, eager to avoid foreclosures, has passed measures like Housing Affordable Foreclosure Alternatives, or HAFA, to encourage consumers and banks with financial incentives to pursue short sales. Charfen says such moves have helped cause a “paradigm shift.” 

Big banks like JP Morgan Chase offer delinquent borrowers as much as $30,000 to short-sell. Chase has doubled its short-sale staff and has begun to more aggressively connect distressed borrowers with CDPE agents. 

The average loss on a short sale in the second quarter was about 20 percent, with the loss on a foreclosed home at about 40 percent, according to Realty Trac. Lenders are also finding it easier to unload short sales than foreclosures.

Yolanda Querubin, who sells homes in the greater Los Angeles area, enrolled in the class after her traditional real estate business had all but vanished. She’s working 10 times more, making 10 percent of what she used to, she said. 

She recognized short sales were one ray of hope in a desolate market and would likely be active for three to five years. 

Through the class, Querubin learned the negotiation process and marketing skills, but like many she still struggles in this unforgiving climate. Querubin has closed in 60 days representing buyers, but representing sellers can be trickier because of low housing demand, unresponsive banks and skittish homeowners. For one Reseda, Calif., property, she’s sent out thousands of mailers with no luck over 10 months. “Representing a seller is like having a baby, and you don’t know when it’s due or when it’s coming,” she said.

Joseph C. Alfe, a real estate negotiator who heads the Chicago-based company Short Sale Negotiators, questions the value of expert designations such as CDPE. He’s skeptical that a two-day seminar can teach agents what they need. “It’s good that more agents are getting educated,” Alfe said. “But when they start calling themselves experts after one class, I have a problem with that.” 

Charfen contends, however, that CDPE agents are far more effective at closing short sales than other agents.

Diana Ortiz, a Los Angeles real estate agent, got her certification in 2008, but already had short-sale experience. She saw there was a clear demand for agents with the CDPE label. 

She has dealt with sellers confused about the process after hearing conflicting information. She recently took a call from a man who thought he couldn’t short-sell his Pasadena property because of the $300,000 lien against it from the IRS. “He was ready to just give up,” Ortiz said. 

In the course of the 30-minute phone call, she explained that the lien could be removed for the sale.

To her, the expert certification was more about marketing. “If you don’t do short sales, you’re missing out on the bulk of the market,” Ortiz said. “The only way to learn is by doing it.”

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