What is negotiator fund means in short sale contract?

Asked by Princewilliam, 30004 Sat Sep 10, 2011

I'm a buyer and the short sale seller chooses the title company. The settlement should take place in 5 days. The short sale negotiator has mentioned that the short sale bank had set aside 12K in fund for the appraisal contingency. The appraisal came 5K less than the contact price. My agent mentioned that the negotiator told her verbally that they will split with me 50% of the remained fund or $3500 at settlement. Can someone explain to me what the negotiator’s fund is and give me an advice on what I should do espacially I don't have a written document for the split?

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6
Irina Karan, Agent, Aventura, FL
Tue Mar 20, 2012
Great question! I suggest to get the preliminary HUD1 settlement statement that the negotiator is working with the bank on. Simply ask your agent to get it from the negotiator and have your agent/negotiator explain this HUD1 to you. Also, if your closing is in 5 days, you should have received the short sale approval letter a while ago.
In fact, you should have been asked to accept the approval letter terms.
In the short sale approval all costs are itemized (as to where they will appear on the final HUD1).
If something does not make sense, have a conference call with the negotiator and request an explanation of ALL COSTS. If you really love the property and you feel it is still a good deal, go ahead and buy. If you start re-negotiating now, the bank may reject your counter, or order a new bpo (broker price opinion)/appraisal which might come higher then before (prices are going up), so you'll end up pay same or more, but you'll wait for a while. Again. Plus, your escrow money could be at risk.
So, at this point, go ahead and ask what they (bank and negotiator) mean by "appraisal contingency fund" (each bank uses their own slang). Once you get the preliminary HUD1 and approval letter, talk to the title company, negotiator and your agent to clarify this issue. Math does not work here as 50% of 12K is not $3,500. Why are you not returned all 12K if the property appraised lower? Is it possible that the negotiator or the title company are getting paid a little more for their work from this "fund"...
If that's the case, you should have been asked if you are ok with that.

Hope this helps.
Irina Karan/Beachfront Realty, Inc. CDPE 305-904-2355 IrinaKaran@gmail.com
0 votes
Suzanne Hall, Agent, Laguna Niguel, CA
Tue Mar 20, 2012
A negotiator is hired to assist in communicating with ALL parties to the transaction- Buyer, Seller, Listing and Selling Agents, and ALL the lien holders (Lenders). The negotiator also sends ALL relating documents and performing tasks on time that the lender requires to complete a short sale. For the Negotiators never ending detailed work schedule required there is a flat fee or % of the total sale charged for the short sale transaction. This fee or % can be paid by the realtors and or the buyer.
0 votes
Alain Picard, Agent, Puyallup, WA
Thu Mar 15, 2012
Are they saying that because the bank had 12K in a fund for the appraisal contingency and they only needed 5k of that they are splitting the 7K left over and you are going to get half ($3500) of that for yourself? I wouldn't think that is what's happening?
0 votes
James Ryan, Mortgage Broker Or Lender, Leesburg, VA
Sun Sep 11, 2011
Hi PrinceWilliam....

Several items here sound a bit off. If the bank "set aside" 12 K for the "appraisal contingency", and the appraisal came in 5K less, why are you being asked for any money at all....
Then, if they offered to "split" the difference of 5K, why are they asking you for 3500 or 1500 (it is not clear from your wording who is paying 3500)?
Obviously, it is your right to pay more for a home than its appraised value. The question is: WHY?
Secondly, it sounds as if the bank expected the house to come in 12K light....hold to your guns, pay nothing above the appraisal price.
Best wishes, Jim American Bank 703 615 4675
0 votes
Lila Lopez, Agent, South Miami, FL
Sat Sep 10, 2011
Good Morning,

I am not sure I know what you are referencing as I have not encountered this type of situation before on a short sale. Normally when the bank agrees to a sales price on the short sale that is the sales price. If the appraisal comes in for less than the sales price, then the normal procedure is to go to the current lender to get a reduction in price to fall in line with the appraisal, because your loan is based on the sales price or the appraised value, the lower of the two. Your lender would not normally approve a credit of this nature, unless the seller is providing a credit for closing costs. As for getting something in writing, your agent should have been provided with a copy of the short sale approval letter which details the terms under which the current lender is approving the short sale, including but not limited to any right to pursue the current owner for any deficiency in the debt. I would start by asking your agent for a copy of the approval, and your lender would need to be notified of this credit, as you would not want to delay your closing. Good luck.

Lila Lopez
RE/MAX Advance Realty
0 votes
Joe Sauter, Agent, Lake Worth, FL
Sat Sep 10, 2011
From my understanding the $3500 contribution you are willing to make will be put on the Hud-1 as well as any contribution form the seller. The Hud-1 woulds than have to be approved by the negotiator prior to closing. Also if there is a second mortgage holder the revised Hud-1 would have to be approved by them as well.

The negotiator is the contact handling the file for the seller's lender/servicer.

A deal is funded when the transaction closes, all closing documents have been signed, and all money has been received

As always just my opinion, I could be wrong.
Joe Sauter-Florida Licensed Real Estate Agent
Prudential Florida Realty-Southeast, Florida
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