Hello I'm near the finish line to closing on a short sale, it's been rough but I'm almost there! One issue I'd like to discuss is this. In the beginning I was never aware of the terms that came with the sale not once was it disclosed to me that I would have to be paying the negotiator fee. So when my agent asked me to give a deposit to a certain guy, I said well wait what is this for? he had told me it went towards my final payment. Later down the months I come to realize that it wasn't he himself told me that the thousand dollars is a separate fee that "all short sale transaction have to pay" I've been doing my research and realized that this is not true and this fee can pretty much be thrown around anywhere. The agent is a friend of mine he had just got started out and coming to this forum I realized that was a HUGE mistake. So i guess my question is should I just eat the cost for the agents mistake? Or is there something I can fight this with because I was misinformed. I believe it is up to the agent to disclose all terms and fees about the property before I even step foot in the condo. This was never done. I'd really appreciate everyone's opinions on how to handle this situation, thank you.

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Something does not feel right.  First, I would insist all the money invoiced and paid in this transaction be shown on the HUD-1 settlement statement pursuant to the contracts.  The HUD-1 is prepared by the title company and required by Federal law to show all money disbursed.  Call them directly and ask for the document.  Since the escrow company is a neutral party, you can ask them to explain why (where in the contract) you are paying this fee.   If you feel you were mistreated, call the agents Broker and ask for them to fix the problem. In AZ it is uncommon for the buyer to pay the negotiating fee (that fee usually comes out of the Listing Agent's commission) but it does happen.  You can ask your agent "friend" to reduce their commission to cover your unexpected cost.   I am curious, is your agent representing both the buyer and the seller, or just your side of the  table--ask?  Were you advised of the dual agency?   If not talk to your agent's broker and see if they will fix the problem, if not get legal advice.

he was only working for the buyer (me). I did talk to the broker and it was left pretty much at I will not have to pay the rest.

Just my personal opinion but I think listing agents should negotiate their own short sales and not charge the buyer. They can adjust the commission split to cover costs, but ultimately they should be responsible. And even more important, do not hire a rookie for a short sale agent, either as a buyer or seller.

I agree, $1000 life lesson.

I manage a short sale negotiating firm and am sympathetic for what you have gone through in this transaction.  We provide a free short sale to the agent and seller by charging the buyer of the property the fee.  We use to put the buyer on notice that they may need to pay our fee if the bank will not.  However, we found that this was too vague and our agents did a poor job of explaining the program even with our written directions and notice.  We lost a lot of money due to agents not fully explaining the process as they did not want to "chill" the deal.

The best thing we did was to make the buyer sign a contract that they would pay our fee as fully disclosed in the contract.  As the contract is provided to Title, they would collect the fee as a Buyer Contribution on the HUD-1 and cut us the check.   The Buyer would most likely make their offer "accordingly" and with the knowledge of the additional fee. 

If our client accepts an offer without our "Buyers Agreement", the client is responsible for the fee.  I've only had this happen once.

Bottom line, you've had a lot of misinformation and the agent should make it right.  

Good luck!

Well put Todd. The only issue I see is when the seller's foreclosing lender asks for the Buyer side HUD and doesn't allow any buyer contribution on the buyer side HUD. I am very creative in wording but still had it stopped. That's why we use buyer broker agreements for the buyer and adjust the buyer broker co-op so the listing broker pays your fee and the buyer pays their own broker directly.

Everyone who thinks they are interpreters of RESPA, please help us out here with one of the following:

1. The court case establishing such interpretation,

2. The HUD opinion establishing such interpretation,

3. The section of RESPA that explicitly prohibits.

Under #3, a single phrase in RESPA that relies on your personal interpretation of meaning in the absence of court case or HUD opinion or consideration of the totality of the scope of RESPA, does not qualify.

If I could received $100 for every "RESPA violation on the fly" statement, I would not need to handle any more short sales.

HUD-1 – Seller-paid items
1) Q:  What if at closing the seller is paying for a settlement service that was listed on the 
GFE, such as the Owner‘s title insurance policy?  How is this shown on the HUD-1?
A:  If the seller is paying for a service that was on the GFE, such as Owner‘s title 
insurance, the charge remains in the borrower‘s column on the HUD-1.  A credit from the seller to 
the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204-209 
and Lines 506-509 respectively.
2) Q:  If the seller has agreed to pay charges that were disclosed on the borrower‘s GFE, how 
are these charges listed on the HUD-1?
A:  The charge for any service which is disclosed on the borrower‘s GFE is listed in the 
borrower‘s column on the HUD-1.  The amount charged to the borrower is offset by a credit in 
that amount in Lines 204-209 and by a charge to the seller in that amount in Lines 506-509 on 
page 1 of the HUD-1.
Any Seller's attorney and/or short sale processing fee would also need to be a Seller side charge.  The Buyer could provide a credit to the Seller on page 1 of the HUD.  However, in a Short Sale scenario the Short Sale Lender may object to the amount charged to the Seller side.  Serious questions then arise thereafter in the event that such a fee is moved to the Buyer's side that place.  For example, most Short Sale lenders will authorize a Seller's attorney fee.  For example, the Seller's attorney fee is $3000.00.  The Short Sale lender authorizes $2000.00. Moving the $1000.00 difference to the Buyer's side would appear to make this fee duplicative and unearned from the Buyer's perspective. This could easily invoke a RESPA Section 8 violation of which their could be liability to the parties involved.  

§ 3500.14 Prohibition against kickbacks and unearned fees.


(a)  Section 8 violation. Any violation of this section is a violation of section 8 of RESPA (12 U.S.C. 2607) and is subject to enforcement as such under § 3500.19.

(b)  No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in § 3500.14(g)(1). A business entity (whether or not in an affiliate relationship) may not pay any other business entity or the employees of any other business entity for the referral of settlement service business.

(c)  No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement wherein the purchaser of services splits the fee.

Court case? There are lots of them.  In fact, there's one now pending before the USSC, Freeman vs. Quicken Loans, Inc.  Depending upon how the court rules (expected very shortly) may finally determine who can charge what to whom.

I cannot comment on how other third party negotiators do it, but what makes the way I do it correct is simple:

We have a written fee agreement between SSP and the buyer.  The buyer acknowledges that while SSP represents the seller and owes Fiduciary Duty to the seller only, by us negotioating the approval the buyer benefits in several ways.  These include but are not limited to:

* Higher approval chance 95% vs 23% (Campbell Surveys-23% of agent led short sales are successful)

*Discounted price

We allow qualified buyers to lower their offers (within reason compared to market data). The lower offer:

*Compensates for my fee

*Gives me negotiating room

*Gives buyer incentive to commit to deal, thereby benefiting my seller

So, real benefits are given to the buyer, they are disclosed and agree to this fee in writing prior to contract execution, all fees disclosed on HUD-1.  In many cases, the buyers receive a closing cost credit that can further offset costs.  This is done in compliance with Fannie/Freddie regulations, and it is no way, shape, or form a violation of RESPA.

The other thing most of you are missing is that the listing agent has no say, nor is a party to the negotiating agreement or company.  Many of you comment that "The agents should do their own short sale..."  That is not the correct observation.  At least in our case, we are retained by THE SELLER.  It is the SELLERS requirement that we are negotiating the short sale.  We of course work closely with the listing agent, because we have a three way system that leverages experience and expertise between Agent (Marketing) Negotiator (short Sale Approval) and Attorney (Seller legal protection) In the odd case that a listing agent objects, well, that's too bad because unless the seller releases us, we are negotiating the short sale.

Hi Joseph,

A few comments/observations:

1. It looks like you have a written agreement for the same services for two different parties. Seller and buyer are signing a contract with your company for the same service. Do you see any potential conflict of interests or liability by doing so?

2. Maybe it's semantics or a local law, but unless you are a licensed broker or an agent of a broker or a licensed professional, such as a lawyer, you do not have a fiduciary obligation nor do you operate in such a capacity for an individual that uses your services. At least that's how it is in California. Even some states allow for transactional brokerages (which must be nice!). Furthermore, can you work in a fiduciary capacity when representing two different parties for the same service?

3. Although I agree with your sentiment that listing brokers can outsource the processing of the short sale to third parties, I do question your logic. The listing broker has an agreement with the seller to perform a real estate transaction. I do not see how a listing broker can enter into such an agreement without a resolution to the contingency of transferring clean title and payment for compensation to the brokerage. In other words, I do not see how it is logically possible for the seller to deny duties and obligations to the brokerage conducting the real estate transaction nor do I see how a listing brokerage can enter into a contract knowing that they cannot perform their duties or be compensated for it. To do so in the manner you describe, I would expect the seller to pay for the services performed by the listing broker and bring to the table the monies needed to satisfy all liens regardless of your company's ability to negotiate the short sale.

Satar, I will try to clearly answer your questions.  I believe that since there are no clear cut standards regarding short sales, especially for third parties, it is up to people like me who basically invented this industry to design and follow short sale "Best Practices."

1.  I have 2 agreements.

Agreement #1 is between SSP and the seller.  This is where I disclose who I am, what specifically I will do, how I get paid, the fact that I do not stop foreclosure or help sellers stay in their home, I do not charge seller money, and I have a cancellation option.  This contract establishes Fiduciary Duty to the seller.  I owe no duty to the buyer, the agents, or anyone else.

Agreement #2 is my Fee Agreement.  It states that I represent the seller only, but that we charge our fee to the buyer.  It also states that even though we owe no duty to the buyer, or actions will benefit the buyer as well as the seller.  Since there is a disclosure of "No Agency/Representation" to the buyer, there is no conflict of interest. I can charge whomever I want.

Lastly, I may get referred to a seller by a broker, but I do not represent a broker or agent.  I represent only the seller.

My system is simple. We allow all parties to leverage our expertise and experience, and cover our liabilities.  There is no question that 95% of agents should not be doing short sales.  Did you know that unless you can prove that you are an expert, that you are violating the NAR Code of Ethics?  Did you know that Your E&O doesn't cover you for negotiating a short sale?  Do you understand how much liability an agent actually has by taking on short sales.  Yes, there are very good experienced agents, many on this forum, who could prove that they are experts and be comfortable with the liability, but judging from the questions and comments I see here, the vast majority of agents have no business doing short sales.  So, what's the solution? Leverage your expertise!

Agents are market experts. They should be (but rarely are) experts at real estate contract and offers, dealing with buyers, performing market analysis,  Handling BPO's, and other agent duties. In other words, you do what you are good at!

A negotiator is (or should) be the expert at dealing with lenders, negotiating complex multi lien deals, reducing or eliminating deficiency, and structuring and coordinating the entire deal.  When a deal comes to me, I can tell within 5 minutes how to price it, how much the first will give the second, how much the second will want to settle deficiency, what kind of buyer we need...

An attorney is a requirement. Lenders pay reasonable attorney fees, so why not have an attorney at least review the documents and the approval letter language and counsel the sellers on the legal aspects? Did you know that discussing or negotiating deficiency terms is the practice of law?  Let the attorney do it.  In some states, attorneys perform the closings as well.

Our system is a model of what third party negotiators should be.  We are very successful and our business is referrals fro brokers and attorneys who understand the concept of leverage and at the end of the day, the seller has an entire expert team working for their benefit.  And the buyers?  They benefit because they close, and they get a good price approved.  We help our sellers by helping the buyers buy.

www.ssprocessors.com

Hi Joseph, thank you for your response. I know who you are and that you are one of the few short sale experts out there that truly understand them. Thanks for taking the time to respond. I always like picking the brain of like minded individuals.

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