Home Buying in 90016>Question Details

1st Timer, Home Buyer in 90016

Can Escrow company hold closing hostage for buyer or buyer's agent to pay seller's escrow fees bank won't cover in short sale?

Asked by 1st Timer, 90016 Fri Jan 14, 2011

Bank is only covering $500 of the $1500 Escrow fees charged to the seller in a short sale. Escrow offered to reduce fees $200 if both the seller's agent and buyer's agent each gave up $400 from their commission. Since seller's agent picked the Escrow company isn't is their responsibility to work out their fees? Escrow submitted the HUD doc to the bank, couldn't they have negotiated this then? Escrow threatened to go back to bank to reduce the buyer and seller agent commission fees to 2.5% if they don't do this. Escrow also threatened to charge cancellation fees to me if they changed Escrow companies. Being that this is only now coming up as were about to close I feel like something shady is going on. Please advise. Thx

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All transaction fees are spelled out in the Short Sale approval letter, what does the letter say? To make the transaction work....everyone should pitch in including the seller, buyer, both agents, the lender, termite company, title, fire insurance, escrow, etc. 1000 bucks dived among everyone is not too a bad thing and it will get the transaction closed.
1 vote Thank Flag Link Fri Jan 14, 2011
First of all, its up to the listing agent to negotiate with the lender, not escrow. Escrow has no authority in this matter, they are a 3rd party non-partial company who only acts on the instructions from the listing and selling agents. Furthermore, they can't act on one-sided instructions, both sides have to agree. Also, they can't charge cancellation fees unles they have stated they can when escrow was opened. Was this in your escrow instructions?

I agree with Ron, and that I would probably just pay (as the Broker) and close the deal. Don't loose sight of the end result...do you still want the home?
Web Reference: http://PhilandBev.com
0 votes Thank Flag Link Sat Feb 19, 2011
Hi 1st Timer!

I have to agree with Steve. I'm not sure these claims would hold up in small claims court either? I also don't believe escrow has the legal right to influence a sale, threaten to sabatoge the realtors commissions and much less communicate directly with the bank. Short sales are usually negotiated solely via the listing agent or a third party negotiator. By the way, who says a seller (homeowner) cannot make a monetary contribution? That isn't true!
0 votes Thank Flag Link Fri Jan 14, 2011
If I were the broker, I would just credit the money and call it a day... Short Sales take Team Work, from all involved entities... sometimes buyer would kick in, sometimes escrow, sometimes all involved parties...

is not really about right or wrong, is about getting the deal done and moving on.. helping to stabilize the economy...

Congratulations on gettng to this point! You are almost there!

Ron Escobar, MBA
Web Reference: http://shortsalecentral.org
0 votes Thank Flag Link Fri Jan 14, 2011
Essentially the bank is saying they will pay $500 and someone else has to come up with the $1000 difference. And they probably stated this from the point of the approval letter. If you don't wnat the house then cancel and if you do then work it out with all parties. This is a short sale and not a standard sale so the MO is different. The Seller cannot receive money but they usually can contriibute. Escrow probably worked harder on this file than most so you can grind them on their fee but it would not be fair. If you want the house then all parties need to negotiate this one.
0 votes Thank Flag Link Fri Jan 14, 2011
Hi 1st Timer, I agree with Emily, split the $800 3-ways (~$267 ea.) and move on!

Re: The escrow company’s ability to charge a cancellation fee.....
The State of CA's Department of Insurance Bulletin No. NS-35E (dates back to 1965-66) allows the Escrow company to charge a fee. See: http://docs.Steven-Anthony.com/NS-35E_EscrowCancellationFee.pdf
In my personal opinion, I'm not sure the cancellation fee would hold up in a small claims court case due to non-disclosure.

Best, Steve
0 votes Thank Flag Link Fri Jan 14, 2011
I appreciate your responses & found them all helpful. I mostly wanted to know if this was legal and/ or ethical because it just doesn't sound right. The seller's agent says he works with this escrow all the time...
House price is $460K. Bank only approved these closing fees. Seller not allowed to kick in any $. Real Estate Commission: $27,600, Taxes '10 %5,561, Settlement fees $500, title ins $2,510, tax stamps $506, NHD report $125, payoff 2nd lien $3,000. From my lender I got an approximate loan cost listing title/closing fees: Settlement $1,095, notary $200, lender's title $1,391, comprehensive endorsement $25, CA loan tie-in fee $200, closing protection letter fee $35, closing agent courier/fax/edd/wire $100, owner's title $1,862 (optional), recording fee $140, city transfer tax $2,070 & county transfer tax $506. There is at least $200 is "BS" fees from the Escrow company here so I think I was looking for them to be as flexible as they were asking the agents to be. My agent has proposed a few options for them including sharing the pain but the seller's agent hasn't gotten back to her on it yet.
0 votes Thank Flag Link Fri Jan 14, 2011
All escrow companies have about the same fees for a short sale transaction. Because the seller or listing agent chose the co. doesn't mean they should have to pay for anything. The Seller in the short sale transaction is the bank. The actual seller (Mr. Smith) probably can't show a contribution going towards the escrow co. for any fees. The bank looks at it as "heck if Mr. Smith can pay $400 to the escrow co., that money should really be going to us, the bank!)

In an effort to get everything closed, the shortage amount should be split 3 ways between You, Your agent & the Listing agent.

Yes, the escrow co. could charge you a fee after they've done so much work already on your file if you switch to another escrow co. where they're going to charge the same fees anyway & still the short selling bank is still Not going to agree to pay the whole thing. So, you're going to be right back where you started.

Are you getting a good deal on the house in general? Just pay the 1/3 & move in to your new home!

562-430-3053 cell
Realtor Since 1996
0 votes Thank Flag Link Fri Jan 14, 2011
Wow! that's a sticky situation but not unsolvable.

1st, it doesn't matter who chose escrow because that was agreed upon in the contract (usually). Besides, it sounds like escrow has already lowered their fees to make the deal happen.

2nd, banks are jerks sometimes! :)

Not sure what the purchase price is but the buyer's agent and seller's agent responsibilities are to their clients...although we often do what we can to make a win-win for both parties and close the deal. It sounds like both agents are being asked to pay the closing costs for the Seller. Did the listing agent not inform/educate the Seller that their would be closing costs? If the listing agent is getting 3% they should help their client close this deal...because if they don't they will get 3% of nothing.

I am not one to discount of give up my hard earned commissions, but at the same time I continually educate my clients and set expectations...especially in a short-sale situation.

0 votes Thank Flag Link Fri Jan 14, 2011
This all sounds extremely fishy indeed. You are not responsible for anything not agreed to under contract, neither are the agents involved. I would presume that the contract read that each party was to pay their own escrow fees. Unless something was negotiated later with the bank, then the seller is still responsible for paying their part. They are in default if they change something after the fact. Your agent and the listing agent needs to sit down and sort this mess out.
Web Reference: http://www.homejane.com
0 votes Thank Flag Link Fri Jan 14, 2011
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