Short Sale Negotiator Fee?

Asked by Bill J Deligiannis, Naperville, IL Thu Jan 10, 2013

Recently submitted an offer on a condo and was told that in addition to standard closing costs that seller wants my buyer to pay a 3% Short Sale Negotiator fee.

My buyer does not want to pay it.

Is this a normal cost for a buyer?
Is it allowed on the HUD 1?

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Answers

21
Ivan Sagel, Agent, Chicago, IL
Sat Jan 12, 2013
BEST ANSWER
Bill,

I have seen this before, it is allowed on the HUD and 3% is common here in Chicago. For my short sale listings, I know have my attorney do the negotiating with the lender and there is no fee to the buyer. I have seen buyers walk over the 3% fee.

Best,
Ivan
0 votes
byrdwayne9, Home Buyer, Chicago, IL
Wed Jan 8, 2014
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.
1 vote
Jose Hernand…, Agent, Chicago, IL
Sat Jan 11, 2014
This happens when the seller and listing agent are working with a 3rd party negotiator to handle the short sale. It is allowed but definitely a bad way of handling the deal, especially when there's plenty of attorneys willing to handle the negotiations at no additional cost.
0 votes
Chris O'Conn…, Agent, Clearwater, FL
Fri Jan 10, 2014
Listing agents should know how to negotiate their own short sales. I'm always on guard when I have to do business with a listing agent that uses a 3rd party for short sales.
0 votes
Dori Marzuola, Agent, Houston, TX
Thu Jan 9, 2014
Bill,
I would ask the listing agent specifically who or what company will negotiate the short sale .Very often it's the listing agent's choice and It could be an attorney or third party negotiator in addition to an attorney overlooking the transaction. Usually this cost is being paid by the seller/bank and should be put on the initial HUD that's being send out to the bank all together with the first offer. Bank can come back and ask to alter this fee and other items on the HUD, transfer fees,sale price,etc. but usually it's approved just like commissions for agents. What I'm trying to say that you should try to negotiate this item up front.
0 votes
Christopher…, Agent, Camp Hill, PA
Thu Jan 9, 2014
The negotiator I use charges the buyer 1.5% loss mitigation fee in exchange they gurantee the buyer that the bank (seller) will pay for title insurance and the 25 Transfer tax. All negotiators charge different. There is another negotiator in my area that charges$4000.00 to the buyer no matter what the sale price. Just like when a buyer or seller interviews agents you should do the same with your short sale company. I have also never had a proble with the short sale fee being put on the HUD. This is PA law and may be different in Chicago. Hope this helps.
0 votes
Judi Monday,…, Agent, Green Valley, AZ
Thu Jan 9, 2014
I have never heard of us a fee before. Is the Seller the lender in this case?
0 votes
Susanne Stev…, Agent, Chambersburg, PA
Wed Jan 8, 2014
my only negative experience with one short sale - was that they Short Sale Specialist Company I teamed up with, was susposed to be paid by the bank. In the event the bank didn't pay them, the fee would fall to the realtor. (unfortunately, this bit of information was on page 20 of 50 docs. and in very small print) so I totally missed it. Not a good position to be in. $2500.00!! so read and be careful.
0 votes
J.D. "Dan" &…, Agent, Orange Park, FL
Thu Jun 6, 2013
I have seen this when the deal is being "flipped" or "wholesaled" by an investor. I won't get into the legality issues. I use the attorney where I close the deal and they get paid through the title work and the title insurance.

J.D."Dan" Weisenburger
Broker-Assoiciate
Realtor®
I On Real Estate & Investments
(904) 553-0079
danw@realestatebyion.com
0 votes
Jack Lewitz, Agent, Lincolnwood, IL
Thu Jun 6, 2013
No. Most short sale lenders will not allow such fees put on HUD so if you have someone other third party negotiating the short sale it will typically be paid by buyer but 3% is in heard of try 1%
0 votes
Airel Hermos…, Agent, WOOD DALE, IL
Thu Jun 6, 2013
Hello,

Information should have been disclosed on MLS and your agent should have caught it. Extra fees for short sales is common . But 3% for negotiator and the fact that the seller wants you to pay , is asking for a lot. In fact , they can decline a request to pay your closing cost , but request that you pay should not be made. I would also ask your attorney to check in to association fees unpaid. There are laws that may require you to pay them as the new owner.

I would walk very careful on this deal . And keep in contact with your attorney as soon as new information is presented to you.

Thank you
Airel
0 votes
Scott Miller, Agent, Boca Raton, FL
Thu Jun 6, 2013
Wow, 3%? Are you kidding? So I guess I have a good deal when my title insurance company/attorney's office does this negotiating gratis as long as title is done by them? Am I missing something here?
0 votes
Yeah. You're title costs are probably inflated. Especially in FL with the more expensive taxes and "miscellaneous fees". Very easy to hide a profit margin within title costs.
Flag Wed Jan 8, 2014
Tracy Heinz, Agent, Glastonbury, CT
Thu Jun 6, 2013
Hi I just had this come up... I called the department of banking here in CT. This is what they said- The consumer (being the seller)can legally only be charged $500 from a debt negotiator. Any additional fee's can be paid but CANNOT go on the HUD. Any fee's that are on the HUD are legally considered as being paid by the consumer unless it's paid by the Realtors. I'm not sure if this applies only to CT laws but I was told the 3% that most debt negotiators are trying to charge is NOT legal.
0 votes
Yanoska Diaz, Agent, Miami, FL
Sat Jan 12, 2013
Is this 3% going to the Listing Broker or a 3rd party? In either case it should have been disclosed on MLS or added to contract prior to acceptance, your Buyer should not have to pay for it. Negotiating a short sale its as simple as gathering documentation from the Borrower, submitting package to the Lender and following up with emails and phone calls, the difficulty of the matter is getting the short sale approved in many cases. If the Lender will not approve no magic (3%) is going to accomplish that. If a listing agent cannot afford to that on his own or through a personal assistant it should not be involved in the business of doing short sales in the first place, we all know short sales require that "little extra work".
0 votes
Alain Picard, Agent, Puyallup, WA
Sat Jan 12, 2013
Out in my area it is very common for the seller to ask the buyer to pay the Short Sale Negotiator fee. This is allowed on the HUD as well. I would have to say that 3% is a little high though.
0 votes
Barbara Klare, Agent, Fort Myers, FL
Thu Jan 10, 2013
Could have been worse. They could have asked the agents to pay! But 3% is way out of line. 1% is about normal. The banks don't like paying the negotiator fee. However, I find if the negotiator is an attorney they are willing pay the fee. It appears on the HUD as legal costs. Bankers understand that!
0 votes
Kara Keller, Agent, Oak Park, IL
Thu Jan 10, 2013
I have encountered the same and my real estate attorney said that the 3% is not on the HUD and not a legal way to do the transaction. He suggested I avoid dealing with such deals. There are many other negotiators out there who provide this service in a legally conforming way. Furthermore, the negotiator who was walking with more than the listing agent, wanted the listing agent to "sell" their services. None of which I was comfortable with. I would be happy to share another recommendation with you if you are interested, karakeller@mskrealty.net
0 votes
Jack Lewitz, Agent, Lincolnwood, IL
Thu Jan 10, 2013
Negotiator fees are issue on HUD most time these fees are paid by buyer because of nature being short sale. Lenders typically do not pay fee . 3% is too high. Try 1%
0 votes
Matt Laricy, Agent, Chicago, IL
Thu Jan 10, 2013
No its not normal. Not sure if it can be on the HUD but this should be a sellers cost for them hiring this person.
0 votes
Joe Schiller, Agent, Chicago, IL
Thu Jan 10, 2013
bottom line number can be met by supplementation fees anywhere.. the seller does not want to meet bank BPO
0 votes
Akil Walker, Agent, Upper Marlboro, MD
Thu Jan 10, 2013
Hi Bill,

Was this a 3rd party i.e. an attorney or the bank? I never heard of the bank asking for one.
0 votes
Listing Agent hired 3rd Party negotiator w/ a 3% fee.
Flag Wed Jan 30, 2013
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