Short sale negotiation is a complex service to provide. It is full of uncertainty and the negotiator is only paid if the deal closes. There are 3 variables in the equation that the negotiator does not control. The Seller who may decide to file BK, reinstate, or modify the mortgage. The buyer who could have difficulty closing the deal within the lenders time constraint. The lender who could decide not to accept the offer.
Therefore, the negotiator, DESERVES TO BE COMPENSATED, but is often a victim of providing services that are never paid for.
The average discount on short sales is above 20%. If the buyer refuses to pay 3% to get a 17% savings, perhaps the buyer needs to be reminded that this is all made possible through the short sale negotiator. This is a very normal cost for a buyer(investor). It is allowed on the HUD-1 but subject to approval from the lender.
Another point to consider is that the Lender typically cuts the fees on the HUD anyway to ensure that it receives the highest net. Starting at 3% maybe a negotiation strategy to eventually land at 1.5% or so.