Charging the Buyer a Fee to Process the Short Sale Listing

My broker just came to me with a question and I didn't know the answer, so I'm looking for some guidance.  We have an agent in the office who is charging the BUYER of her short sale properties a flat fee at the closing to process the short sale.  This fee is disclosed in the contract as well as the HUD.  Is this OK?  Legally speaking?  Does anyone else do anything like this?


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According to FREC and the Office of Financial it is very Illegal in Florida to do that. Although the many agents that do it claim that as long as they have a signed addendum by all parties they are fine. I can't wait till the stuff hits the fan on this matter.

Hi, please read my response to Roberta Hutchings... thanks.

I have heard of 3rd party negotiators charging this fee but not an agent. It may be legal; I'm not sure how ethical.

I wouldn't be surprised to see the banks start to disallow this fee.

I replied back on this earlier and have been getting multiple comments from other agents on this.  Very interesting.  I do a lot of short sales and have for many years.  It is very frustrating when agents are out there taking listings and not taking the time to learn how to do them correctly.  Yes, many use a 3rd party to negotite them. I thought in Florida only a Realtor or an attorney to negotiate a short sale.  Whatever!  I wanted to let you know how it factors in for a buyer when people take listings and just send them off to a 3rd party and don't keep up with it.  I personally tried to buy a short sale a few months back for my family personally.  This was not to be an investment but a home.  The listing agent worked at the mall and could only be reached by email and returned calls after 8.30.  We were told that the seller's bank was close to approval and we had to hurry up and lock in our rate, do the home inspection, pay for the survey as the seller's attorney was going to file bankrupcey after the short sale.  I did everything as I was told and the attorney filed early.  No one seemed to have been told that ?  We would have to wait for another month to take the house that got the approval out of bankruptcey.  I told the agent I was done (I was an angry buyer) and we executed a termination letter and escrow was released.  We were way out of contract. Two months later I got an email and a call from the 3rd party wanting our information for the closing.  I called and informed them that the deal was terminated and escrow from their office had been sent back to me along with the termination letter.  They were confused.  This is what happens .  Properties don't close and everyone loses.

In my state, our association requires all compensation arrangements to be kept out of the contract. All compensation agreements are done in separate agreements, i.e, Buyer Broker or Listing Contract. Curious as to what these buyer agents are doing by allowing another agent to collect compensation from their client. If the buyer agrees to the charge in writing (I would think it would need to be a written document between the selling agent and the buyer since that is where the money is going) and in my state, it could not be in the contract as the contract is between the buyer and the seller. As for the law side of it, my understanding is that under RESPA, any fees charged must be for work performed. If the agent can clearly delineate the additional tasks that are done for the fee, it is probably ok under RESPA. The new MARS rule would also apply as well as any additional requirements from the licensing state.

As a buyer's agent yes you can ask for a fee, whether the buyer will pay it is another thing.

Charging Buyers a fee for shortsale processing may be an issue in many states. I  believe in California DRE is against it and working on this matter but don't know if they come out any regulations. I don't think buyers should be charged for this but saying it is unethical is questionable. It depends. What if it is stated in the Listing Agreement and fully disclosed to buyers and buyers' agents. Shortsale listing agents spend much more time than buyers' agents and I personally think they should be fairly compensated especially when there is a cost of negotiation for a 3rd party. Do you think it is fair if Listing Agents take 1% higher than Buyers' Agents ( 3.5-2.5 or 3-2) to cover for the cost and time so Buyers don't have to pay for that.


I disagree with your assertion Henry that listing agents deserved more compensation. I do both sides and if you think keeping a buyer in the deal is easy, you are misinformed. When you as the listing agent offer less to the buyer's agent, you are saying that you do not value the work they are doing to keep the deal together. You ultimately hurt your seller, because if that agent can find a better deal that pays more, the buyer will walk. Cutting the buyer's agent commission is a short sighted strategy and really hurts the person you owe a fiduciary duty to, your seller.

Whether I am doing a short sale listing and negotiating it myself, or whether I'm just negotiating someone else's listing, I always do a 3.5/2.5% agent split. I am very well aware of the effort it takes to keep a buyer involved in the deal. Part of my obligation to my seller is doing the communication necessary to keep that buyer interested in staying through the entire process. But the listing agent or negotiator does a huge amount of work on these that the buyer's agent doesn't, and I never ask the buyer to pay the negotiation fee. Having said that, if you're a buyer's agent encouraging your buyer to break their contract so YOU get paid more, then you aren't working for your clients, but yourself. And that isn't ethical.

Roberta, I have nothing to say than totally agree with you. I actually have done it in the last 3 years.

Being the listing agent on a short sale is much more than real estate. Its debt mediation and requires approximately 500 emails, hours and hours on the phone, paperwork, converting the jpeg docs that sellers and agents send into pdf docs (Equator doesn't recognize jpeg docs) cleaning up faxed docs by enlarging because agents have faxed back and forth 3 or 4 times, making sure all addenda are signed and dated etc etc etc. It takes approx quadruple the time it takes to sell a listing than it did in the good ole days and compensation for this extra burden should be a given.

See I disagree with you on that Fred.  As already stated, listing agents do much more than just take the listing and present contracts.  There is a lot to learn on how to do short sales and a lot to keep abreast of the changing rules and laws and programs.  Yes, the buyers agents needs to inform the buyer regarding a short sale and also then keep the buyer in the game however, a contract is a contract.  Many buyers get tired of waiting an unreasonable amount of time such as less than 45 days and even 30 days and want out of the contract.  We the listing agent have done so much work up to this point to only have it die.  This doesn't just restart where we left off with the bank.  Once we get a new offer, we start all over because they close the file when the other dies.  As for the sellers, I haven't had any upset with the difference in the commission split.  They know what goes into it from the start because of the gathering of all their docs.  It is a very timely ordeal.  And, we are not guaranteed a sale. 


Now my question to buyers agents is who are you working for when you focus on what commission is being paid? If the house fits the buyers needs then it shouldn't matter what commission is being paid.  they are buying the home and want what fits their needs and wants, not what fits your pocket book.  there I said it. 



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