Making the Buyer's Agent Pay for a Negotiator?

I was talking with another agent in my office this morning and she was concerned about not getting paid on her short sale. She's hired a negotiator (1%) for the deal and is now "expecting" the buyer's agent to split the deal with her.

My issue is that is total crap. When listing short sales in the Central Ohio MLS you are "required" to include in the agent-to-agent remarks "any reduction in commission will be split 50/50 between the agents" (the percentage is up to the listing agent).

She currently has the listing agreement at 7% for commission, with a 2.5% buyer's broker portion. If, or when, the bank cuts her commission to 6% the buyer's broker SHOULD go to 3% by the word of the agent-to-agent remarks.

She is arguing that since this 1% is going to another agent, she is really only getting 5% in the transaction.

What would your response be?

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Comment by Toby Boyce on May 9, 2010 at 10:50pm
Joy - Sorry, it isn't "required" that the listing agent force the buyer's agent to reduce their commission. However the verbage is required to be included if you even might consider asking the buyer's agent for a reduction.
Comment by Jessica Sulliman on April 17, 2010 at 3:41am
First off, Show me a negotiation company that is worth the money. They are few and far between. Kind of like a good lender or good agent! Most are fly by night and don't last very long. Others are like short sale mills and are about as qualified as the negotiators that work for the bank. I have tried farming out the negotiations, but it just doesn't work for me. I negotiate all of my own transactions. I'm not perfect, and I'm not an "Expert", but I am a bit of a control freak. I can't handle not knowing what is going on with my own listings, and I absolutely have a hard time trusting my closing with someone who stands to make a third of what I could/should be making on the transaction. With that being said, I have closed enough short sales and have been doing this long enough that I am confident in my ability to achieve success and know that no one is going to fight harder or get more creative to close the deal than me. There are so many agents out there taking on short sales that have little experience and little training and have no choice but to hire a third party negotiator. First of all....that scares me, but the bottom line is: That is their choice. There are also seasoned short sale agents who hire on negotiation companies because they want to handle more volume or they are working with a cash investor who wants to be the buyer and the negotiator. (That's a total conflict of interest, however, as they are hardly looking out for the seller's best interest.) That is also their choice, so the only one taking a commissionectomy should be that listing agent. Personally, I feel that the listing and management of short sales is completely out of hand and we are going to see the shit hit the fan here pretty soon with lawsuits. I'm not saying that it's always the agent's fault but I am saying that short sales are not for every agent! If the agent cannot get the job done, they shouldn't be taking on the listing in the first place. Refer the listing to someone who can and charge a higher referral fee if it makes sense. I realize that hiring a third party to negotiate is completely kosher and the agent's perogative, but so is adding an additional expense to the transaction. It's bad enough they can't do it themselves....THEY should be the ones to take the hit. Or the bank, I suppose. Not the buyer, not the seller, and not the buyer's agent. The buyers often already have to pay more fees than they should have to. For example, when the lienholder won't pay past due HOA fees, etc. and the seller can't/won't....guess who usually picks those up? If the agent isn't intending on paying the negotiator themselves, they should offer less commission up front so that there is no "guessing" when it comes to how much the buyer's agent is going to get paid. They should never assume the bank is going to pay. 80% of the time, the bank simply won't pay. I add a 1% short sale processing fee to all of my HUDs. It gives me the padding that I will need and once in awhile I get lucky, but I never EVER expect the bank to pay. Here in AZ, listing agents are held accountable to the percentage offered in the listing, regardless of any comments regarding commission reductions. I would love to hear how many agents are even able to get the bank to pay a 7% cobroke. If I get 6, I'm doing a happy dance. Charging the buyer a negotiation fee also must be disclosed.

While we are on the subject.....there is a company here called Curtis Johnson Realty. Most of their agents offer a 2% cobroke AND charge the buyer a $3k negotiation fee. The best part of it is that the company that gets paid that fee is owned by Curtis's wife. It's outrageous. The worst part of it is that their splits with their agents are just as outrageous....which explains their high turn over of agents. I avoid their listings like the plague.
Comment by Terry L. Osburn, SFR on April 12, 2010 at 10:31pm
Our MLS has us put the verbiage in the confidential remarks that final commission allowed by sellers lender will be split 50/50 with cooperating agent. Even though we are a dual agency state I will not even try to double end the commission on short sales . It is complicated enough with the banks as it is.
But the reduction has nothing to do with outside negotiator fees......It has to do with what the banks will allow. Many have allowed up to 6% with some at 5 to 5.5%.
So I do my best to get the 3% to the buyers agent. On the other hand with all of the work and hours I do in negotiating and I have brought many back from the dead I will not take less than the buyers agent. The agents who have worked with me know how hard I work to get things done.
Comment by Joy Baker on April 12, 2010 at 10:19pm
So, Toby, are you saying that your MLS "requires" that the listing agent reduce the selling agent portion if the total commission gets reduced? Here in New Hampshire, the requirement is that IF the Listing Agent intends to ask the Selling Agent to contribute in the event of a reduction they must disclose it upfront by placing the verbage you mention in the agent remarks. However, there is no requirement that the listing agent do it that way. I find it more expedient to take the listing at 6% and offer out a 2% cobroke (which is not an unusual amount around here regardless of the circumstances). If I successfully negotiate the shortsale without a commission reduction, hooray for me, I get 4% for my hard work. On the other hand, if I run into problems I have the option of negotiating down to 4% without having to get into a harangue with the selling agent.
Comment by SHANNON McGREGOR ~ CSSG, HRC on April 2, 2010 at 6:24pm
Riverside county California, by the way.
Comment by SHANNON McGREGOR ~ CSSG, HRC on April 2, 2010 at 6:24pm
Out here in riverside county Ive seen many comments in the agent remarks in the mls adding to their commission. "$2000.00 negotiator fee" to be paid by buyer. In one instance, I spoke with the listing agent, and it was actually himself that woudl be paid this additional fee. He said that it depended on the listing price how much he was charguing. That he is so busy, he has to charge that extra fee.

I'm still shaking my head over it. Greed.
Comment by Steele V. Propp on April 2, 2010 at 12:07pm
My thought is that if I hire a third part negotiator to help me with the work load as a listing agent, then the fees are ultimately my responsibility. Yes, it is nice if they can be paid by the lender as well as receiving a full commission but more and more that may not be possible.

One company of negotiators that I am considering is very up front. Similiar to the situation you described the charge a 1% fee. It is part of the total commission (they are licensed). If I were to use them I would offer a 2.5% to the buyer agent and hope for a total of 6% so I would get a similiar amount. But if I didn't I am not going to ask the buyer agent to discount his/her fee.

In our MLS what is offered is what is offered. We are not even allowed to have any language suggesting splitting 50/50 should a fee be reduced. So we have to be prepared to pay out what we offer from the beginning.

But it is odd. I heard a similiar comment on another forum that buyer agents were expected to pay for negotiators. The only way I see that happening is if they hire a negotiator themselves and who see a buyer doing that unless maybe an investor?
Comment by Obed Montez on March 31, 2010 at 2:39pm
I feel that if you take a short sale listing you as the listing agent should famliarize how to do the paper work. Listing agent should not expect the buyer to pay for their inablity to talk to the bank. I feel that negoiiaions is nothing more than picking up the phone or e-mailing and finding out what the bank wants. The banks already knows what they will accept and what they will not. plus they will tell you what they need. They might not approve what you submitted, but most likely they will tell what is missing. What is next? The buyer's agent to pay to have the the property advertise or maybe have it staged, Come on listing agent become professional and render a service you promise you client. I am sure that you told the client that you was going to negotiate the short sale, not outsorced.
Comment by Terry L. Osburn, SFR on March 29, 2010 at 11:36pm
Several of the lenders are now NOT allowing 3rd party fees for negotiating to be paid by buyer or seller whether or not it is on the HUD.
Comment by Terry L. Osburn, SFR on March 29, 2010 at 11:35pm
Frankly i think this is a bad practice all the way around to expect the buyers agent to pay for a negotiator. In terms of the splitting the commission 50/50 with cooperating agent that is typical and usual for our area. I try to obtain the maximum commission allowed and generally speaking have been fairly successful. On a few occasions the banks refused to give what was indicated in the contract. They are actually getting better about it. Typically the 2nds are the ones who try to screw with the commission and frankly it is none of their concern. Our commissions have nothing to do with them. The first lender calls the shots.


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