Here in the northwest things are heating up for third party short sale negotiators.  ReMax has asked their agents to NOT make offers on short sale listings with 3rd party negotiators who charge the BUYER a fee. Other companies are asking their agents to keep things in-house with agents who specialize in the short sale niche.Now FHA lenders will not allow the buyer to pay the negotiator. With all of the heat on these 3rd party negotiators, who now have to ask the Realtors to pay them outside the HUD, many are choosing to work around this and get their real estate license...and then co-list with Realtors who want to use their services.  I feel proud that my team and I do our own negotiating, but still it seems somehow unfair to the 3rd party folks who really do a good job and have integrity. Would love to hear what's happening out there with you....? Thanks!

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Moriah, to my knowledge no state has laws stating buyers shouldn't pay for negotiation fees.  It is more and more common to see listings now with buyers paying the negotiation fee.  To quote someone on this thread whom I fully respect:

"As long as it is disclosed to the buyer, and they understand and agree, what is the problem. Any REO contract and disclosure makes the buyer pay for all fees and costs, why are short sales any different?  In fact, I do not think sellers should pay any fees at all.  As far as figures "hidden" in RESPA, why even have a RESPA?  The law is clear, if it is disclosed on RESPA, then it is disclosed to all parties. Period. The sellers lender carefully inspects and must approve of all RESPA terms before funding.  They know exactly what they are paying, and their guidelines clearly state that short sale fees be paid by the buyer.  Their guidelines also state that seller credits of 3%-6% are REASONABLE AND CUSTOMARY.  The argument that by approving sales credit defrauds the bank from receiving a higher net price  holds no water.  This indicates a lack of understanding of how lenders/investors work.  Each lender/investor have different guidelines on what % of the purchase price that seller costs, including credits, are acceptable.  As long as those fees and costs fall below this amount, they are approved.  So long as you do not charge seller fees and costs that are higher than reasonable and customary, you should not have a problem.  This is why you do not see attorney's fees of more than 5,000 approved, you do not see commissions of more than 7%, and you do not see exorbitant title fees.  Once a lender receives a HUD, as long as total costs fall under their % guidelines, they are approved, regardless of whether you think that the lender is getting less net.  They understand and accept this."

Yes I did see this post.  The problem I have is that with REO sales - The market value of REOs is always under current market value NOT at market value. Short Sales are different because the negotiators are working for the seller NOT the buyer AND by charging these fee's to the buyer it is also making it hard for some of the buyers to even make an offer on the home...because of the $3000.00 extra they must now pay on top of down payment and closing costs of 3% because we know most banks will only approve 3%.  Also, Even if the Buyers DO NOT agree with paying these fee's - Then they are not even allowed to consider this property as an option.  If the short sale can be negotiated under current market value then it makes more sense for the buyer to pay this fee...but that is not what a short sale is about....it's about the bank getting current market value...But, even with REO properties - The only extra cost is 2% transfer and 200 to 300 in utilities turn ons.....not the 1% of the purchase price or $1500.00 Negotiation fee's which ever is greater on top of all of this.  So, yes if the buyer understands and agree's FINE - But what if they do not agree? Then the home is not an option and the seller does not even get an offer?

Moriah,

I am seeing most short sale underlying lenders here in the Pacific Northwest accepting 88% of apprasied value.  That is well under current market value.

Hello Pamela!  Thank you for your comment.

Moriah, the lenders I've worked with will take anywhere from 8 up to 20% off market value.  I'm working on one with AHMSI that they are taking 27% off the appraised value so in my experience banks WANT market value but take much less, which is likely why we can get a negotiation fee easily.  A short sale is about getting a short sale approved with ~ fingers crossed ~ a deficiency release...it's NOT about getting the bank the market value.  If you get the sale done and it's under market value, you've accomplished something.

It's likely a buyer won't agree to fees if they don't know about them.  Good third party negotiators disclose their fee right in the listing.  You can't spring a $1500 fee on someone after the transaction has started.  Keep in mind there are many lawyers as 3rd party negotiators too and that's exactly what they do...disclose that fee up front. It's up to the buyer if they want to pursue the property or not and what it's worth to them.


Also, short sales are distressed sales, so they are LIQUIDATED value...not fair market value.  I GET that banks WANT fair market value, but it's not the same thing. This blog describes it perfectly. http://californiashortsalelawyer.com/2010/10/be-liable-for-the-impo...

 

Once again, Smitty is 100% right. Typically, when I present the fee agreement to the buyers at time of contract, I allow them to lower their offer by 3% to compensate.

Thank you Joseph - I appreciate your comment also.

Thank you Smitty for your reply - I feel much better and will check out this blog.

I think it's all about presentation and disclosure.  If disclosed properly in the beginning, most buyer do not have an issue with a third party negotiator with a track record.  If I am involved in a file, I am helping the buyer avoid wasting time on a deal that may never close.  According to Campbell Surveys, only 2 out of 10 short sales are successful nationally.  my record is 8 or 9 out of 10.  With that, most buyers are willing to enter into the deal knowing they are not wasting their time.
:)

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