Home Buying in Irvine>Question Details

Dguintu, Home Buyer in Irvine, CA

Can a listing agent also be the short sale facilitator and collect additional fees?

Asked by Dguintu, Irvine, CA Thu Dec 17, 2009

I am a buyer and am currently in escrow for a short sale. It has been approved by the lender. As the buyer, we agreed to pay the "short sale facilitator" fee that the seller would typically pay. I understand short sale facilitators are legal if they are licensed agents (DRE), but I can't find any regulation stating whether the listing agent can act as the short sale facilitator as well. It just feels fishy... Thank you!

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Dguintu - I specialize in short sales and I understand your situation very well. You might even be a buyer on one of my short sales! ;)

I don't think you got a good answer yet. Let me tell you that as a listing agent/broker, I can charge a "short sale processing fee" and that fee can go to me directly. Of course, lenders won't pay this fee (in 99% of the time) and this fee gets passed off to you.

I don't know why agents do this. Maybe it's because they feel this is the best way to get compensated for their time or maybe they don't know any better. It's not a violation of RESPA as it gets disclosed on the buyer side of the HUD. Where agents will find issues is if this fee is not disclosed to the seller or if the seller never agreed to a "fee" as it is the seller who takes a loss.

The proper way to do this is to have a normal listing agreement with the seller and have the buyer simply pay "commissions" that the lender won't pay. Maybe the listing agent doesn't want to tell anyone that they are getting this additional fee because they don't want to split it with your agent. Again, I think it is ignorance on the listing agent's part as to why they call it a "short sale facilitator" fee.

Who knows, maybe they are paying a third party to do the short sale.

Hope my answer helps. Also, I would only pay this fee if I am getting a great deal on the property! If not, then have the agents pay for it or look elsewhere.
0 votes Thank Flag Link Fri Dec 18, 2009
Dguintu -

I forgot to ask..... Is the Listing Agent / Broker also representing you as the buyer ?

Thom Colby
Broker / REALTOR
Orange County, CA
949-887-5500 Cell-OC
Web Reference: http://www.thomcolby.com
0 votes Thank Flag Link Fri Dec 18, 2009
Thank you all for your valuable input. The listing agent is actually the broker, so there is no one higher than him that we can address the issue with. I completely understand the negotiator fee that the Lender or Listing Agent/Broker could request payment for. In the addendum, we agreed to pay this fee in the event the lender refused.

What I am not comfortable with is the Listing Agent (Broker) also being the collector of the "third party negotiator" fee because:
1) He is not a "third party";
2) It was not fully disclosed that HE (the listing agent) would receive this fee.

I feel like it may violate Code of Ethics Article 2 (Misrepresentation) or maybe even a violation of RESPA.

Your thoughts? Thank you!
0 votes Thank Flag Link Fri Dec 18, 2009
Folks-

It's simple - with more than 40 Short Sales closed this is my .02 :

When the Listing Agent / Broker signed the Short Sale Listing, they also assumed full responsibility to negotiate the short sale with the lenders on behalf of the seller. If the Listing Agent / Broker wants to have someone else negotiate it, then the LISTING AGENT / BROKER needs to pay that cost.

In my more recent experiences, the short sale lenders are specifically including that they will NOT pay any third party "negotiator" in a short sale. They are also reducing other items such as HOA transfer fees, HOA Docs, HOA deliquencies, etc.

In some cases, buyers are willing to pay many of these items because they are getting a fairly good deal and Short Sales are typically in much better condition than REOs.

If I were a buyer, I would NOT pay for the negotiator as that was a choice made by the Listing Agent / Broker and they should pay for their business decision.

Best of luck,

Thom Colby
Broker & REALTOR
Orange County, CA
949-887-5500 Cell-OC
Web Reference: http://www.thomcolby.com
0 votes Thank Flag Link Fri Dec 18, 2009
Dguintu I agree with you the listing agent is a principal in the transaction and not a third party in my opinion. Have your agent talk to the listing agents broker and try to get this taken care of.
Web Reference: http://www.Find1Home.com
0 votes Thank Flag Link Fri Dec 18, 2009
Dguintu:

I'd talk to the broker - it is not reasonable or even appropriate that you pay any fees.
0 votes Thank Flag Link Thu Dec 17, 2009
In our addendum, the buyer agrees to pay the cost to the third party negotiator in the event the lender does not pay the fee.

I'm screwed.
0 votes Thank Flag Link Thu Dec 17, 2009
Dguintu:

You don’t pay the fee … the bank does. You should not be paying any upfront fees of any kind. It’s bad enough that you can no longer afford to live in your home … if your Realtor is charging YOU a fee, that’s downright fishy.

What is finally paid to any realtor for commission and/or negotiation fees is totally up to the lender. And paid by the lender as well, not you or the seller.
0 votes Thank Flag Link Thu Dec 17, 2009
Yes, I agree that short sale negotiations are a long process and everyone should be justly compensated. This is the exact reason that we are willing to pay the negotiation fee. But I feel the listing agent is acting unethically because he did not disclose that he is also the short sale facilitator, and the collector of this "third party negotiator" fee in the addendum.

How can he be the listing agent and a third party negotiator/facilitator at the same time? It is my understanding that third party means an independent body?
0 votes Thank Flag Link Thu Dec 17, 2009
The listing agent usually is the negotiator for the short sale and can charge an additional fee. This fee is generally paid through escrow or paid by the seller. It seems that they probably are padding this fee into the escrow which is typical. Short sale negotiations are a long process which is why this fee is created.

John & Sarena Villaescusa
Owner/Reator/Broker
Keller Williams Realty
Cell: 562-818-2671
Email: 562-818-2671
Website: http://www.VGroupHomes.com
Web Reference: http://www.VGroupHomes.com
0 votes Thank Flag Link Thu Dec 17, 2009
It is not the norm for the listing agent to charge the buyer for a "negotiation fee" if the listing agent is also acting as the negotiator.

Then again, are you buying in an area where there is very little inventory? Is it still worth it to you? Did the bank approve a really great price? These are important questions. IF you got a kick butt price compared to current comps, then the agent did a good job & deserves what he negotiated with you & you agreed to.

If there are a bunch of other properties available to you, that you could get for the same price, then maybe you're going to back out on this deal & go elsewhere.?

Me, personally, I don't charge the buyer anything, I just hope the buyer will be pleased with my work and will refer to me future clients.
0 votes Thank Flag Link Thu Dec 17, 2009
Dguintu:

In MANY cases the listing agent is the negotiator – we used to do it until we had too many short sale listings to manage on our own. Since then, we’ve found that a full-time dedicated short-sale mediator is the best way to go. If your listing agent isn’t doing much else or enjoys pain, then why not?

As for the listing agent acting as the negotiator AND getting paid a separate fee on top of commission – I’ve never heard of that before. Usually, listing agents do their own short sale mitigation to save the 1% commission paid to a professional mitigator.

Sounds like your agent is trying to save the 1% AND get an additional fee? That’s a new one on me. I’m really not sure any lender would go for that. We’ve found that if an agent appears to a bank to be too close to the transaction, they don’t get a commission at all.
0 votes Thank Flag Link Thu Dec 17, 2009
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