Home Buying in 92780>Question Details

Welovetustin, Home Buyer in 92780

Is it normal for a short sale to include a $5000 Short sale negotiation fee? Im interested in a home but the buyer is required to pay negotiation fee

Asked by Welovetustin, 92780 Fri Sep 24, 2010

Help the community by answering this question:


My general advice on this matter is that buyers should, if concerned about additonal cost, only make offers on short sales that are being negotiated by the listing agent (or their organization) and not by a 3rd party negotiator. If they legitimately are paying another entity to do negotiate they can ask it to be paid for (although there is currently a robust debate regarding this I am sure it will be well clarified in the near future by DRE).

I would carefully weigh the amount you are offering against fair market value and lower it by $5k in this case if you definately want to make an offer on this home. You do reduce your chances slightly for success but at least you will make the 3rd party negotiator earn their fee. What is the size of the transaction? $5k is only relative to that figure. We real estate agents are often a bit hypocritical about sliding scale on fees and yet we expect to make more on larger transactions.
5 votes Thank Flag Link Fri Sep 24, 2010
Bottom line is yes they can ask for it, it is not a requirement for a short sale though. Short sale transaction is the most complicated real estate transaction.
It is a trend now, some agents get the listing and do not do the negotiation which is their job. There fore, they ask on top of their fee another fees to be paid to a negotiator. Lots of banks are not approving it though. Seller or listing agent can ask for it to eliminate the offers , which is not for the best interest of the seller.
What is for the best interest to the seller is to get a good strong offer with the home fair market value and send it to the bank as soon as possible to get this house sold and avoid the foreclosure. Buyer only pays the home value and what is customary in that city .

Heba Rayan
Tel.: 925-216-3006 925-216-3006
Fax.: 925-208-2933
Email: heba@calfineliving.com
Department of Real Estate
DRE License # 01722870
1 vote Thank Flag Link Fri Sep 24, 2010
1 vote Thank Flag Link Fri Sep 24, 2010
Felix - this question was asked 2+ years ago........
0 votes Thank Flag Link Mon May 28, 2012
I know Thom...I usually don't answer questions this far back but got into answering questions and just didn't stop. Happy Memorial Day!
Flag Mon May 28, 2012
It is not unheard of to see short sale negotiation fees but I do think they're less common now. As mentioned before, if you like the house you may have to pay this fee. If you don't want to ask for $5,000 in closings costs or reduce your offer by $5,000. Ask your agent about this.
0 votes Thank Flag Link Mon May 28, 2012
This question is 2 years old and no other commenst for the past year
0 votes Thank Flag Link Fri May 11, 2012
These used to be more common but fewer brokerages are allowing them. If you want the deal, you may have to agree to the negotiation fee.

Richard Schulman
Keller Williams Realty
(310) 482-0173
0 votes Thank Flag Link Fri May 11, 2012
There is alomost NOTHING NORMAL about a short sale!.

If you really want the home and are getting it below market value and you can afford to pay the fee, go for it.

If the 5K is an issue for you, move on to another property. Some listing agents handle the short sale negotiation themselves, thus the extra fee is eliminated . Perhaps you will be able to find a home where the middle man "negotiator" is cut out altogether.

Best of luck to you.

Kawain Payne, Realtor
0 votes Thank Flag Link Fri May 11, 2012
This question was asked almost 2 years ago and no one has been answering it for over a year -
Flag Fri May 11, 2012
if the deal is still a good deal, the $5000 fee shouldn't be a problem. third parties normally charge a fee for negotiating a short sale because they are very time consuming so paying them that fee is worth it if you can get some instant equity and if you like the house.
0 votes Thank Flag Link Thu Mar 24, 2011
So, it is now 6 months after this question was posted. Did you go through with the transaction, WeloveTustin?

There are some potentially challenging short sale candidates where it makes sense to engage the services of an attorney based negotiator - for everyone's protection, seller and agents, alike.

The two best that I know of both charge 1% of the selling price, so it depends on that, primarily. Most listing agents would simply apply that to the 6% commission, and then split the remaining 5% between the two agents. In a perfect World, it would be that simple, and easy.

Unfortunately, some agents get greedy. One example I've heard about is a listing agent taking 3.5% for themselves, offering 2.5% to the buyer's agent, and then demanding the buyer has to pay the 1% - or more - negotiation fee. ( Burying the extra .5% they're making, on the HUD1 submitted to the lender, because they're working harder than the other agent - supposedly.)

By the way, I've known of certain agents who habitually take 6% listings, on normal listings, and still only offer the buyer's agent only 2.5%. Nobody ever said that real estate had to be fair. When there is a shortcut, or a way to scam someone on a transaction, a small % of scalawags will take advantage of an "opportunity".
Web Reference: http://BobPhillips.net
0 votes Thank Flag Link Thu Mar 24, 2011
Hello home buyer, no, it's not normal. I don't think the buyer should have to pay this fee. Most negotiation companies are not worth a $1,000 fee. The fee of $5K is excessive! This will keep many buyers away, which in turn will hurt the seller. Without an offer their home will go into foreclosure.

I have a solid team that negotiates my short sales, best of all...we don't charge a fee to the buyer or seller.

Best of luck!
Web Reference: http://www.ajsocal.com/
0 votes Thank Flag Link Thu Mar 24, 2011
In this Real Estate market, The word "Normal" is hard to use. One question you should ask yourself is "How much do you like this house?" If you love the house and are comfortable paying an additional $5,000 out of your pocket I say Go for it. If you do NOT feel 100% comfortable and have mixed emotions with the house then keep looking. Are you walking into equity?? that is something to consider as well.
Remember you have to love the house..go back visit the property and then ask yourself ..is it worth it???

Good Luck..!!!
Lucy Proulx
First Team Real Estate
Web Reference: http://www.homesbylucy.net
0 votes Thank Flag Link Fri Sep 24, 2010
First off Is NOT a requirement that a buyer pay any short sale negotiation fee. Weather or not it's being driven by the listing agent or the short sale negotiator or even the seller. In a short sale the bank will not allow the seller to walk away with any money in any way shape or form. There is potentially an ethics violation and breach of contract of the listing agent's fiduciary duty to the seller. So the answer is NO on and requirements
however this does pose a problem for you as a buyer and getting your offer accepted or even looked at!
You as a consumer have to ask yourself are you willing to pay the extra $2,500 or $5,000 to make a successful purchase? This is where the problem is and unfortunately there is little can be done about it at the time your sitting there making an offer with your agent especially when there are multiple offers on the property and all your doing as a consumer it trying to get your offer accepted.

Jason Isley
Seven Gables Real Estate
Newport Ave Tustin Ca
Cell # 714-478-6750
Lic # 01453868
0 votes Thank Flag Link Fri Sep 24, 2010

This is seen a lot. Although the listing may read this way, you can ask your agent to try to renegotiate this term.

This negotiation fee is sometimes asked to be paid by the buyer as in this instance. Other instances include the listing agent subtracting the whole fee from their commission or both agents subtracting equal amounts from their respective commissions. There is sound advice below and there are always more homes that come onto the market. You just have to ask yourself if the house is worth it to you.

Here are a few things you can ask and answer for yourself to determine what is the best decision for you and your family:

1. How much do we like this house?

2. Can we wait for another to come on the market in the neighborhood or is there one elsewhere we like?

3. How much attention is the property getting and how does that affect our chances of getting the house?

4. Will we be OK with someone else buying this property?

5. Why do we want this house?

Best of luck to you!
0 votes Thank Flag Link Fri Sep 24, 2010
In this Real Estate market, who knows what "Normal" is. One question you should ask yourself is "How much do you like this house?" If you love the house and are comfortable paying an additional $5,000 out of your pocket I say Go for it. If you do NOT feel 100% comfortable and have mixed emotions with the house then keep looking there will be a lot more houses in the near future.

Good luck

Indalecio "Andy" Del Real
Web Reference: http://www.AndyDelReal.com
0 votes Thank Flag Link Fri Sep 24, 2010
Find another house. There are plenty of short sales out there where you do not have to pay "negotiation fees": This is certainly not how we do short sales here in New Jersey.
0 votes Thank Flag Link Fri Sep 24, 2010

You're talking about the house off Irvine Blvd right? I saw that and dismissed it because the price wasn't so undervalued to the point that the additional $5,000 would still make it a screaming deal. $5K is a lot of you are asked to pay at all. There are and will be better deals in that neighborhood. I know because my wife and I are looking in the same area, so I like to do my homework beforehand :-)

Good Luck!
0 votes Thank Flag Link Fri Sep 24, 2010
Hello We Love Tustin,
Thom is right! You as a buyer are not required and should not be asked to pay this fee. It is the listing agents responsibility. Many listing agents will ask the buyers agent to share the cost of the fee. Even that is a gray area. Yesterday I had a buyer call me and say he was being asked to pay a $20,000 Yes I spelled it right $20,000 fee. He had agreed up front to it; but fortunately the bank came back with a highter price than agreed on which gives him a choice now. I just can't believe that home buyers are being taken advantage of like this. My company has set up a short sale negotiation company for our agents and their clients. The fee comes out of the agents commission and works out to be $1,800 on a sale price of $400,000. Very reasonable for the Realtors.
I wish you the best of luck in your home purchace,
Connie Bramble
Prudential CA Realty
0 votes Thank Flag Link Fri Sep 24, 2010
We love Tustin -

When the Listing Agent took the Short Sale Listing, they also assumed the responsibility to negotiate the short sale for the Seller. If the Listing Agent is incapable of negotiating or just doesn't want to do it and hires a 3rd party negotiator, they need to pay the cost from their commission.

Additionally, there are SIGNIFICANT Disclosures that must be made to all parties - which require everyone's signatures and AGREEMENT.

On top of that, the Negotiator must be a Real Estate licensee in the State of California or an Attorney.

The DRE and the California Association of REALTORS are hard at work to stop this practice as soon as possible.

The Listing Agent / Broker cannot force upon a Buyer or Buyer's Agent the requirement to pay this fee - AND - they cannot use it as a tool to eliminate offers that are not willing to pay it.

It must be disclosed on the HUD per RESPA.

Best of luck,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
DRE# 01398570
0 votes Thank Flag Link Fri Sep 24, 2010
Hi Welovetustin;

There are a few Lenders that place this requirement into the approval letter to the seller on their short sales, and it's called a "Short Sale Administration Fee". One of the companies that I have worked with has the following verbiage in the approval letter. "If a short sale administration fee is applicable, then the lesser of $5,000.00 or 1% of the total sales price must be paid by the purchaser to (bank name here) at or prior to closing. This fee is over and above the amount of the Total Sales Price."

Please keep in mind that this aforementioned charge is directly from the lender or lien holder on the property.

We are also seeing agents and third party negotiators on behalf of the listing agent request and require a buyer to pay fees at the close of escrow. I'm not an advocate of that as I believe that it would be the listing agents responsibility and obligation to handle that part of the transaction... and there are changes in progress right now that address paying third party companies a fee to negotiate the short sale.

I have attached the DRE requirements for fees/fraud and other changes as a reference, and hope that you are able to work out a solution that works well for you and your family. Best wishes with your negotiations.

Jeffrey Simons
Prudential California Realty
CDPE (Certified Distressed Property Expert)
0 votes Thank Flag Link Fri Sep 24, 2010
Some listing agents ask for 1% for negotiation fee to be added on top of the price. The lender who is the seller's has to approve that though. In the closing statement that has to be presented to the seller's bank with the offer, this amount has to be on that statement, it is called HUD1. If the lender approves it then fine. Buyer does not have to pay any thing over the fair market value of the property and what ever is customary in that county or city, it is all negotiable.
0 votes Thank Flag Link Fri Sep 24, 2010
Never heard of such a thing!

Why would anyone want to pay to negotiate purchasing a distressed property?
Web Reference: http://www.golftobeach.com
0 votes Thank Flag Link Fri Sep 24, 2010
Example: My negotiator who kicks butt just got a home that the bank appraised at $440k to still accept a $425K purchase price & give the buyer 3% towards closing costs.

Every real estate licensee out there is not an expert on short sale negotiations, you need to interview them, even if you have your own buyer agent, you need to interview the listing agent to see what their abilities are so you can get through the short sale transaction smoothly.
0 votes Thank Flag Link Fri Sep 24, 2010
Yes, it can be worth it. What you should try to find out however is this: Is there specifically a separate 3rd party negotiator who will be dealing with the bank & to whom this $5k is going to?

And, if so, ask for their resume', is this negotiator REALLY closing a LOT of short sales in less time & with less problems than average?

I know from a buyer standpoint even receiving information like that is going to be tough for you to determine its' accuracy. Still ask for that.

If you'd like, I can verify if what they're saying is true by looking up their Sold MLS sales (all short sales are in the MLS to verifying is easy)

A good negotiator, yes, should get a negotiation fee, especially if they're able to negotiate you a killer discounted deal!

562-430-3053 cell

P.S. I've seen other negotiators charging $10k
0 votes Thank Flag Link Fri Sep 24, 2010
Is it normal? Not really. Is it being done more often than 6 months ago? Yes. Here is why. Many agents, who list short sales, are not short sale specialists. They either don't have the knowledge or the staff to keep the negotiations in house. So they hire a short sale negotiator. The banks, almost across the board, WILL NOT pay a negotiation fee and a commission. In the past, if a negotiator was used, the agents would carve this fee out of their commission. However, the banks keep cutting the commissions so the agents may not make enough $$$ to justify or potentially even afford to pay the negotiation fee. The latest incarnation is, the seller and listing agent are trying to pass this on to the buyer.

Just a warning - there may be a problem with passing this on the buyer. The banks are supposed to be given full disclosure of all costs of the sale. If the bank knows that you are willing to pay an extra $5000 to acquire the home, they may demand that extra money be paid to them. After all, they are already losing a ton of money. Some agents will tell you, "well just pay it outside of escrow, directly to the negotiation company." Check with an attorney before you agree to do this. Making payments that do not appear on the HUD-1 may be construed as fraud and I am sure you do not want to be a party to fraud.

If you love the home, then you might be willing to pay an extra $5000 for it. My advice in that situation is make sure the agreement to pay the fee is fully documented, flows through escrow and is approved by the short sale lender. Just be ready for the possibility that they will not approve it and you will have to make a tough decision. I highly advise that you check with an attorney if anything does not feel right to you. Feel free to call me if you have any additional questions. Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Fri Sep 24, 2010
Buyers should not pay for any negotiation fees in a short sale purchase. This seems to be the norm in short sale transactions in todays market. The seller/lender/and seller's agent are trying to make everyone pitch in for someone else misfortune. My suggestion....find another property.
0 votes Thank Flag Link Fri Sep 24, 2010
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