Negotiation fee to be paid by buyer

Asked by Elaina, 92802 Wed Jun 30, 2010

I am purchasing a home in a area where the housing market is hit pretty hard. The sellers agent is asking for 1.5% of selling price as negotiationfee to be paid by buyer. Is that the norm these days? I have never heard of this before.

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Bob Phillips, Agent, Rancho Santa Margarita, CA
Sun Jul 11, 2010
Hi Elaina,

Wow! 1.5%! That's the highest I have heard. In my opinion this is quite a ripoff, either by the listing agent, themselves, or some company that the listing agent has aligned themselves with, to get the job done.

Some enterprising real estate agents, and even a couple of very large local companies, have set up a "Short sale negotiating department" which does all the negotiating work - which can be substantial - to guide a short sale through a lender's system, and who then charges a separate fee for this "extra" work. In addition, there are separate companies set up strictly for this purpose.

The problem is, this is an outdated process, which usually ends up costing the buyer more, with very little benefit.

More and more of us Realtors now engage the services of an attorney driven loss mitigation company which provides two extremely important services. First, they don't charge the buyers or the agents a fee to guide through a short sale successfully - INSTEAD, charging the lender - and usually getting away with it, due to the perceived threat of a potential lawsuit.

Secondly, the transaction is then made more "bullet-proof" because the legal aspects of the short sale - which can be numerous - are then dealt with by an attorney, rather than muddled through - probably exposing agents, or the seller - to serious legal ramifications, possibly years down the road.

While this is probably not an option in the case of THIS property, you might have your agent tell the listing agent that you prefer to use your own, legally based negotiating company. Unfortunately, the listing agent probably won't agree, because they might be getting either the entire added fee, themselves, or getting a kick-back from the company that is doing the work.

There are a LOT of scams out there right now - many of them being done by unscrupulous real estate agents. Be careful with what paperwork you sign.

If the property is a good deal, even including the fee, then go for it, but in my humble opinion, such a fee usually makes it less of a deal. Good luck to you, in finding solutions.
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Robert Suarez, Agent, Toms River, NJ
Mon Aug 2, 2010
I do not know if that is even legal or ethical .here is a paragraph from the legal and ethics page from the Realtor Mag on the web:
"Who Negotiates the Deal?
As you proceed with a transaction after a short-sale offer is submitted to the bank, do not contact the lender on the sellers' behalf. If you do, you can be viewed as negotiating the loan and modifying contract rights and remedies. The risk here is that you can potentially expose your clients to personal liability if the lender is unwilling to walk away from sizeable debt. Plus, a disgruntled seller may sue you if the lender pursues a deficiency judgment, and you can assume this isn't a claim your errors and omissions insurance will cover.
Instead of negotiating with the lender, respond to any offers using the necessary language that the acceptance is subject to the lender's approval, and then secure written authorization from the sellers allowing the closing officer to begin direct dealings with the lender.
Short sales are making up a growing share of business today for real estate practitioners. As you build your expertise in this area, don't forget about the legal liabilities you can face throughout the transaction."

The amount of short sales has created a environment were real estate agents can unknowingly act as the legal representative for their client.This is a bad situation for all. What that agent is doing sounds like he is asking a fee for something a lawyer is suppose to be doing.
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Dianne Hicks, Agent, Rancho Bernardo, CA
Sun Jul 11, 2010
I agree with Walter, It is not the norm but not uncommon.

However.... I do NOT agree with it. A Realtors usually takes the listing, then they hire someone else to do the negotiations with the bank and pass that fee to you. If they do not want to deal with the banks then perhaps they should take it from their commission or leave it for a Realtor that deals with short sales. That is just my opinion so it comes down to, do you want to pay it or move on to a house that does not have it.

The issue that arrises from that is at what price did you get the home. If you are paying comps then you are paying more for the house then what it worth so darn well better love it!!!

Good Luck!!!
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Alma Kee, Agent, Tampa, FL
Fri Jul 9, 2010
Hi Elaina,

You're certainly talking about a short sale.

It shouldn't be legal but I often see these type of garbage fees charged to buyers on short sales.

Although you get a contract on a short sale, make sure you do NOT deposit any earnest money until you get a written approval from all lenders and the seller's acceptance of all terms (i.e. promissory note) of the short sale. And... keep looking until you get your short sale approved or you will miss out on true bank-owned bargain properties.

Good luck!
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Walter 'Skip'…, Agent, Brea, CA
Wed Jun 30, 2010
Hi Elaina,
It is not the norm but it is not uncommon either. I am personally against asking the buyer to pay someone that is not representing them but rather the seller.
Good luck,
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