Home Buying in 92780>Question Details

Joeyjj, Home Buyer in California

What is the average percentage for a short sale negotiation fee?

Asked by Joeyjj, California Fri Sep 23, 2011

We agreed to pay for liens, fees, and negotiation fees not to exceed $18,000 with a promise from the listing agent that he would be able to reduce the amount of liens. During the escrow process we were encouraged by the seller that the liens had been reduced by $14,000. When we asked the realtor what our total was now he told us it was still $18,000. Instead of $18,000 in liens we now had $4,000 in liens and a $14,000 short sale negotiation fee. This cost of the property is only $400,000, so a $14,000 negotiation fee seems excessive.

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I think it is a huge disservice when agents pass the buck on to the buyer in regards to negotiator fees. I am seeing that more and more on the MLS under agents notes. In my opinion if an agent can't negotiate their shorts, then they shouldn't take them! I negotiate all my own Short Pays... that being said I know the standard fee is only 1% of the purchase price (as staed below). So the fee you are being charged sounds extremely excessive. I would also ask for proof of the liens. You should be able to do some investigating into the Preliminary Title Report (you were most likely given by escrow). Trust is paramount, this would make me questions the entire transaction. I am so sorry you are experiencing this!

Stephanie Hart
Forecast Realty
CA DRE 01338444
0 votes Thank Flag Link Wed May 23, 2012
Why would you pay any "negotiation fee"? You are the buyer - Get the Approval letters from the agent and read them thoroughly. They will state what the lien holder has agreed to pay.
0 votes Thank Flag Link Sat May 19, 2012
You are being ripped off. Many short sales are done with no negotiation fees by experienced Realtors. Short sale negotiation is not that complicated or difficult and cetainly doesn't warrant a $14,000 fee.

Professional Attention and Real Results
Atlas Group

Seven Gables Real Estate
Michael Rogers
(714) 412-9012


CA DRE Lic # 01354281
0 votes Thank Flag Link Mon Apr 23, 2012
This amount seems very high to me as well. You have some good responses here and I agree with Melissa the negotiation fee is typically paid by the bank.
0 votes Thank Flag Link Sun Sep 25, 2011
Hi again, Joeyjj. As other responders have indicated, 1% of the selling price is a typical negotiating fee.

Without being privy to any other information, it appears to me that you have some negotiating to do with the listing broker, to the tune of a $10,000 reduction in his negotiating fee. Charging $14,000, in addition to earning a sales commission, ( Which might be anywhere from 2.5% to 3.5%, unless he is the ONLY agent involved.) is OUTRAGEOUS!
Web Reference: http://bit.ly/mls-search
0 votes Thank Flag Link Sat Sep 24, 2011
Thank you for your answers. To make things clear, the listing agent is also the negotiator and a real estate broker. And the negotiating fees were actually listed on the HUD like this: "seller agrees to pay HOA liens, other liens, fees, and negotiating fees not to exceed $18,000.
0 votes Thank Flag Link Sat Sep 24, 2011
That seems a little steep. Additionally, homebuyers in California may offer to pay the fee but cannot be compelled to pay the fee (which is generally no more than 1% of the purchase price). There are DRE rulings from 2010 specifically about this issue. Our office processes hundreds of short sales each year and we cap the 1% fee at 8k--which is normally paid by the bank or by the agents--not the buyer.
0 votes Thank Flag Link Fri Sep 23, 2011
Joeyjj, This sounds like you are being truly misled, if not by your agent, then by the other - or both.

This sounds like a transaction with an attorney involved, which tends to blow expenses WAY out of whack.

I have personally witnessed such an attempted transaction of the $650k price range - I say "attempted", because the $25k in attorney fees, which they wanted to foist off on a prospective buyer, killed that potential sale, and the lender ended up foreclosing on the property - wiping out ALL the other liens, including the attorney, except that the attorney probably still had recourse against the poor seller, whose house got taken away from him.

Back to your situation, $14k is a RIDICULOUS fee to have to pay in order to buy a $400k house. In addition, it probably has to be out of pocket, over and above your down payment, making it even more ridiculous. As another poster suggested, the "going rate" for short sale negotiations is 1% of the purchase price, and THAT is usually shared between the two brokers. ( 6% listing, 1% to the negotiator, and 5% split between the agents.)

It sounds like YOU should probably get some legal advice, before you go any further in this transaction.

Good luck in sorting things out.
0 votes Thank Flag Link Fri Sep 23, 2011
Hi Joeyjj,
The most that should be paid is 1%. Something doesn't sound right. The 1% often comes out of the commission split but can be added if needed. Make sure all monies are disclosed to your lender and paid through escrow.
Good luck,
0 votes Thank Flag Link Fri Sep 23, 2011
I'm mostly curious as to why you're paying a short sale negotiation fee in the first place? Who is handling the negotiation? The listing agent? 3rd party facilitator? Typically the negotiation fee on every short sale that I've done is taken from the broker's commission....usually 20% of the gross. While in my area we typically charge 5% gross commission, we submit short sale offers asking for 6%. This gives us room to negotiate if necessary and to hire a short sale team, like SSA (Short Sale Advantage) and not break the bank. Agreeing to paying for fees prior to is a little dangerous, but perhaps it was just verbal like the listing agent's verbal promise to reduce your fees during the transaction?

At this point, you probably need to push back and hammer on the short sale lender and/or the agents involved to get the fees down to where you're satisfied. Stick with written negotiations from now on.
0 votes Thank Flag Link Fri Sep 23, 2011

Real estate fees are not set but something you have to work out with your listing agent. The short sale lender has to approve all the fees being charged. You can ask for an estimated buyers closing costs or HUD statement which itemizes all of the fees in the sale which is something the short sale lender will require. The title company can provide these documents.

You can go to http://www.CentralValleyHomes.com for more information on short sales.

Carol Perdew
Prudential California Realty
(209) 239-7979
DRE 985176
0 votes Thank Flag Link Fri Sep 23, 2011
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