Home Buying in 91710>Question Details

Alex5, Home Buyer in 91710

Short sale agreement

Asked by Alex5, 91710 Tue Jun 8, 2010

We are trying to buy a house through a short sale. However, the selling agent works with a brokerage firm, which she calls "processor". This broker handles the short sale process. According to the seller, because of this broker, the whole process runs smoothly and their success rate is high. Therefore, they sent us a short sale processing agreement that we have to sign so they can start working on our offer. By signing it, we agree to pay 3.5% of the purchase price as a processing fee, which will be paid to the processor as non-recurring closing cost. Also, if for any reason the short sale is not approved, we ar still responsible to pay the processor that amount. My real state agent is not familiar with this kind of procedure. She says that usually the selling agent is the one who process the short sale. She is advising me to have an attorney look at the agreement. My question is, Is this a legitimate procedur? thank you

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Emelia Sanchez’s answer
Alex I can't help but respond, you are at least being advised in advance. One of the realtors in my office just cancelled a transaction that seemed very shady. Negotiator was the same brokerage. The buyers requested closing costs which were approved. The selling agent asked the escrow office to apply all of it towards the negotiator who was never disclosed also in excess of 10K.

This home is in Rancho and back on the market. You state homebuying in Chino, so I hope it is not the same one.
2 votes Thank Flag Link Tue Jun 8, 2010
Hello Alex

I've heard and seen similar requests. I would not have any of my clients sign such an agreement as you mentioned. Some of these agents don't want to spend the time to work the "short sale" or may not have any experience in working short sales so they hire outside sources who want to get paid for their work so if the deal falls through guess what the outside source wants to get paid for the services they have provided. Often times the bank/seller will cover such costs if approved through the negotiator but make sure it is on the HUD1. The agent is supposed to be paid by the seller unless another agreement has been entered. If you want the property then it is a risk you may be taking. Talk with that attorney before moving forward on transactions like this.

"Give Me A Call.... It's Your Move!"

PRUDENTIAL CA. REALTY
John Santana
JohnSantana4Homes@yahoo.com
(909) 230-8300
Ontario Ca. 91762
Dre. Lic. # 01463515
1 vote Thank Flag Link Tue Jun 8, 2010
Hi Alex,

That is nuts! They have bumped their heads.
I have never seen that, lets say a house in Chino is going for $200,000. The short sale is unsuccessful, you have to pay the negotiator $7,000? That doesn't make sense.
Even if the short sale goes through, you still have to pay the negotiator out of pocket $7,000.

Good luck.

Best Regards,

Jes Sierra, B.Sc.
Realtor® 01772408
Century 21 Beachside
Chino Hills, CA
1 vote Thank Flag Link Tue Jun 8, 2010
You're walking into a scam. Do NOT agree to pay any 'negotiator or processor' 3.5% of the purchase price & certainly NOT if the short sale does not close. That's ridiculous & unethical on so many levels as a Realtor.

There ARE great deals to be had with short sales and most will not require you to pay any up front fee, especially not one that is non-refundable!

Run away from this agency & don't look back!

btw, the agent who handles negotiations for the short sale is not the buyers' agent, it is the listing agent & possibly a 3rd party negotiator. If they charge you something, it should be from closing funds and be no more than 1.5% of the purchase price, but 95% of the time it's something they would negotiate as a fee, that the BANK would pay for.

EmilyKnell1@yahoo.com
562-430-3053 cell
1 vote Thank Flag Link Tue Jun 8, 2010
Hi Alex,

The Selling Agent/ "processor" are sending a mixed message. On one hand, you are hearing "the whole process runs smoothly and their success rate is high"; however, you are also being told that "if for any reason the short sale is not approved" you have to cover the 3.5% cost.

Depending on how badly you want the property, if I were in your shoes I would move on to the next candidate property, and/or negotiate that NO payment will be made unless the Short Sale is accepted and escrow closes!

Sometimes "no deal" is the best deal you can make. In my mind, there’s no reason for you to take on the exposure of the 3.5% fee if results are not guaranteed.

Best, Steve
1 vote Thank Flag Link Tue Jun 8, 2010
Alex5,
This sounds terribly funny and I would never have a client of mine accept this sort of deal. 3.5% of the purchase price? You're responsible for the fee even if the sale is not approved? Perhaps the details were miscommunicated to either your or your agent...
If you're absolutely certain you MUST have this property - then have your attorney review the details of the agreement and proceed with caution, but that is merely my opinion... Good luck! I hope this deal works out for you.
1 vote Thank Flag Link Tue Jun 8, 2010
Thank you for your question Alex. Short sales are tough because of all of the variables involved.

I do not recommend paying anyone a non-refundable fee for processing a short sale because there are so many factors that are outside of your control.

For example, the BPO or Appraisal could be too high or too low causing the sale to fall through. Furthermore, many short sale contracts allow the lender to accept higher offers.

Therefore, the processor that charges a non-refundable fee for doing a short sale sounds like a scam to me because there are so many things that can go wrong.
1 vote Thank Flag Link Tue Jun 8, 2010
If you are liable for payment regardless of lender approval or not, your agent is correct, do have the agreement reviewed by an attorney before any signing takes place.
1 vote Thank Flag Link Tue Jun 8, 2010
Hi Alex,

While 3.5% seems high it depends on the purchase price. It is not uncommon for the buyer to pay the short sale negotiator nor is it always the case. I have seen prices up to $750.00. The part that worries me is the clause that states you must pay this fee if your sale does not go through. This means that if they do a pour job and the sale falls through early in the process they do better than if it goes all the way to escrow.That is not something I would agree to myself.

Best Regards,

Eric Soderlund.
1 vote Thank Flag Link Tue Jun 8, 2010
The standard rate is usually 1% but I have seen a few at 1.5%. I would negotiate a better fee unless of course you absolutely love the home and want it at any cost.
0 votes Thank Flag Link Sun Nov 7, 2010
Hello Alex5,
I wouldn't recommend that my clients agree to more than 1% & I would make it contingent upon closing escrow (because you shouldn't have to pay unless you get the home).
Also depending on what type of loan you are using, you may not be allowed to pay any such fee (so ask your lender).
Best of luck on your new home,
Trevolyn
0 votes Thank Flag Link Wed Oct 6, 2010
The normal fee for a short sale coordinator is 1%. For you to have to pay whether of not the short sale is approved doesn't sound fair for you. You would end up paying thousands of dollars if the short sale is not approved. If you agree to the terms and sign the contract you would be liable to pay the fee they are requiring you to pay. Negotiate the fee to 1%, Good Luck!
0 votes Thank Flag Link Tue Sep 21, 2010
Hiring a 3rd party negotiation company is becoming more popular. I also use one however this fee sounds extremely high. Our Negotiator charges 1% and you only pay it if the short sale gets approved and is due at closing. I would try to negotiate the fee down but it all depends on how bad you want the house or if you are willing to walk away from it and find another one. Either way I would ask that the fee whatever you agree to should only be payable if approved and you are in agreement with the terms and decide to continue with the purchase. Good luck :)
0 votes Thank Flag Link Tue Aug 31, 2010
Hi Alex, I hope I'm not too late. Don't go through with it. Call me. I hope you didn't sign a buyer representation agreement with that agent. If you did, I cant speak with you but if you havent signed a contract saying they are the only ones that can represent you, then we're ok.
I can tell you that I am a licensed and certified Real Estate Appraiser as well as a Licensed Realtor. If banks won't buy or sell investing their hundreds of thousands of dollars without the professional advice of an appraiser and if the Federal Housing Administration will only accept a "Certified" appraisers stamp of approval on a property. Why would you do any less? Please feel free to call me at my cell: 909-917-6176. My clients receive the benefit of my expertise as a Realtor as well as a "Certified" Real Estate Appraiser.
I also have access to much more data than most real estate professionals do because I must pay for it and use it for appraising. This allows my buyers to find properties many don't even know are for sale. My sellers also know they will get top dollar for their properties because I can see the value as an appraiser and what improvements will benefit them most.
In the end however, Your transaction will be about you and what's best for you. I've actually advised people against buying or selling regardless of my loss of commission because of my knowledge of the market. I figure what goes around comes around. I help people that haven't owned a home in the last 3 years get first time home buyer down payment assistance even though the commission is less and there is more work to do. I know that if I do a good job for my clients and can show them I care, they will always send the blessing back to me.
Feel free to call and pick my brain. :)
In the meantime, God Bless,
Roland Corral
Web Reference: http://ivalue.biz
0 votes Thank Flag Link Tue Jun 22, 2010
The processing fee that they are trying to charge is 3.5%, which is $10,500.
0 votes Thank Flag Link Tue Jun 8, 2010
Smells like fish to me. I would never advise a client of mine to pay a processing fee for a purchase, especially if you are liable for the fee regardless of whether or not the sale is approved.
0 votes Thank Flag Link Tue Jun 8, 2010
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