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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As long as it is clearly disclosed to all parties at the time of the offer, it is neither illegal or unethical.  To those who disagree, how do you explain Fannie purchase guidelines that now specify buyer paid short sale negotiation fees as "reasonable and customary"  If Fannie says it's OK, it's OK.

This applies only to third party negotiators and not listing agents, who are generally prohibited to from charging fees not outlined in the listing agreement or disclosed on MLS.

www.ssprocessors.com

Absolutely ridiculous to charge the buyer a short sale negotiating fee. While some buyers may be okay with it, I've also had buyers object and move on to other properties because of it. Ditto for paying a 3d party negotiator. Aren't we breaching our fiduciary duty to the seller if our own in-house "fee" prevents a sale? If listing agents don't like the extra work of short sale listings, then they shouldn't take them. Just because it's legal [i.e., disclosed] doesn't mean it's right. Also, I've been told by fellow realtors that the way to get the buyer to pay the fee (for in-house or 3d party negotiator) is to tell them it increases the chances of a successful short sale approval. Is this really true? (I doubt it).

Kathy, a third party negotiator like myself or Smitty does not work for the agent.  We are retained by the seller.  We also have a much higher approval rate than most agents, and we are usually able to get a lower price approved for the buyer. This is what makes it worth the buyers time. If the deal doesn't make sense for all parties, including the buyer, we wouldn't be in business.

www.ssprocessors.com

Here in Spokane, WA there is one company that uses seller paid closing costs to pay for their negotiation fee.  This is usually 3% of the sales price.  That means the buyer cannot have any costs to be paid by the seller. The negotiation company has an addendum drawn up that says the seller will pay 3% of their costs and use that towards their fee.  I personally don't thinks it is very ethical but they get away with it.  We also have a company that charges the buyer almost double in their closing fee to negotiate their short sale.  I do not charge the buyer any additional fees to negotiate the short sale regardless of where the property is located.  The pay my normal fee which is usually $450.00.  I think it all boils down to how you want your office to be viewed and if you want that buyer to come back the next time.  Thank you.  spokanecloser@gmail.com

I feel like charging the buyer also, But I do not feel this is appropriate. What I have been considering is asking the Brokerage firm to give me a higher percentage cut on the commission . I spend so much time on these short sales to get them closed that it doesnt seem like we get paid enough for our time spent. I think the brokerage should handle that internally. 

I agree Rosalie

It happens in California every day. I don't think there is anything illegal about it. A lot of agents split the commission 3.5 and 2.5 to the buyers agent.

I was the selling agent on a transaction where the listing broker was charging the seller a 3% short sale transaction processing fee in addition to the 6% commission. The seller's lender would not approve the 3%, so she wrote an addendum to give it to the buyer as closing costs and have him pay it to her at close of escrow. This would have been disclosed on the HUD settlement statement.

Agent Option,.. Agent responsibility,.. Period. It is a cost of doing business,.. if the cost and the effort is too much for the agent,.. then the agent should focus on alternative listings.

Agent is not a party to contract, contract is between Buyer and Seller and commissions due agent, overhead, administrative costs to the agent should not be passed on to Buyer or Seller.

Tracie,

In Miami this is legal as long as we disclose it on the purchase agreement, the HUD and as long as we stated it as additional commission to the listing broker. The buyers and buyers agent do not have a problem with this fee because they NOW know how hard it is to negotiate and process short sales, we are a team of four and this is what we do all day we negotiate short sales in house. For anyone out there that has negotiated short sales themselves I am sure you will agree that it is not any easy job to do and it is totaly fair and ethical that we get the additional commission becasue we are making inventory affordable and availbable for the buyers agent to purchase. If it wasnt for our hard work and dedication to process these short sales there would not be available inventory for the buyers agents,and when you look at the big picture whether is a cash investor or an end user the fee charged is minimal.

 

Regards,

 

Pili

Every agent has a choice when it relates to work the short sale market or not to,.. this is part of that market and part of what the agent knows will lie ahead when they take the listing. The affordable inventory would still be available,.. only as foreclosures, that would be listed and sold so your argument that the short sale agent is providing affordable inventory is a straw argument with no substance. The Buyer nor the Seller should be required to cover your overhead fo a business that you chose to do. If Short Sale costs are too high or too hard for you,.. then you have the right to represent a different Seller where a short sale is not involved.

Wow...this thread has gone 10+ pages!

I'm probably just repeating what others have said: This can be considered a FIDUCIARY violation when you REQUIRE the fee.

The obvious issue from a seller's standpoint is eliminating the cash-strapped buyer. Many FHA buyers can barely pay the minimum 3.5% and need closing costs. Adding an additional 1% cash needed makes the deal dead.

Yes -- sometimes the "highest and best" buyer is an FHA or 95% CONV buyer. When you reduce the buyer pool for the sake of your commission, you are not looking out for the seller's best interests.

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