I have just had the most puzzling email exchange with a listing agent regarding her short sale property. Her instructions to buyer agents making offers is to submit a cashiers check/money order ONLY for due diligence, made out to the sellers' attorney. I'm already thinking, due diligence fee? On a short sale? Anyway, she then tells me that MY firm, who I know for a fact does not hold earnest money, will be holding the EM. It's her firm, too. So I ask her to clarify these things. She tells me she had an attorney draw up his own due diligence agreement "years ago" - and this is the attorney who she identifies as the sellers' attorney. And that if my buyer backs out, the due diligence fee will be released to the seller! Huh? When I point out that her instructions also indicate Keller Williams will hold the EM (they won't), she replies by telling me that actually the Short Sale Instructions uploaded to our MLS with her listing is years old and outdated and if I have any questions to contact the attorney who drafted the DD agreement. Does this make sense to anyone? I was under the distinct impression that in NO way, unless HAFA involved and lender agrees, will seller walk away from short sale with ANY profit whatsoever. I have NEVER offered a due diligence fee or accepted one on a short sale - since 2010. Thoughts?

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Never heard of such a fee or thing. Sellers aren't supposed to receive proceeds from the sale. It likely could be argued that this is not proceeds from the sale as it's only released if the transaction does not close? What happens if the transaction does close? It's obviously a non traditional thing to ask though and I have no idea about the legalities of it.

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I've seen something similar, but not called due diligence fee.  Basically is a release of deposit.  If negotiator gets short sale approval and all contingencies have been met and buyer backs out for any reason after approval, deposit is automatically released to seller.

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