How does the Negotiator Get Paid?

I know this questions is very general, but I would like to see opinions and discussions.  I have been partnering with another person for several years.  He's great at the negotiating, I'm great at the Real Estate side.  Lately the lien holders have completely taken the negotiating fees out of the HUD, although leaving the Commissions at 6%.  The negotiators, from several different approaches, seem to want at least 1%.  I don't mind pay this out of my commission, but I do mind seeing that the distressed homeowner is walking away with more incentives than I am commission.  I see where a lot of short sales are asking for Buyers to pay the 1%, but I also see a lot off feedback from Buyers agents that this is ridiculous.  Opinions? If a distressed homeowner is receiving $3000 from HAFA, how can I legally ask that they pay their own negotiating fees?

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  • Such an interesting thread let me add my 2 cents as a Title Company that is very active in third party negotiations. First thing we don't charge any kind of additonal fees to buyer or seller but require that we do the closing. Is that in the best interest of the buyer? Maybe, maybe not; they still get their policy of title insurance and clear title but when it comes down to it our client is the seller and the listing agent. That being said not all agents in fact most are not experienced like Jeff and some of the others on this site. If you don't know that when BoA asks for a promissory note it is a block check and most times all you have to do is  say no and they remove it you may be doing a great diservice to your client.

    Just like any industry and/or professsion there are people that are good at what they do and people that are definitely not. Avoiding files with third party negotiators may be doing the wrong thing for your client. You are better of doing as Jeff said and interviewing them to make sure they know what they are doing. If there is a fee involved and you know about it in advance so be it just reduce it from your purchase price and move forward. You may be saving yourself months of waiting because the listing agent who is using that company may not have the skillsets or organizational skills to be able to get you to the closing table alone.

  • Hi Richard,

    There are states where the Realtor cannot negotiate a short sale. There is not an answer that fits all short sale situations. I want you know that your comments are extremely helpful and appreciate that you took the time to give your opinion. :)

    As a former Negotiator (who worked at a bank), I can say first hand a certain skill set and education (investor requirements, srategy, etc.) is required to negotiate a successful and timely short sale. Remember, many times you will have multiple loans and liens on a property - different investors and requirements/programs. Successful and timely short sales require a specialized skill set. Understanding of the the bank's loss mitigation process is vital. New programs and regulations on the bank level are released almost daily. It is also important to understand short sales are voluntary by the bank; thus they are allowed to set their own requirements. 

    I guess the question really is....

    1) How much value placed on your Realtor services (i.e. access to marketing, advertising, knowledge of distressed homes, etc.)

    2) How much value you place on the Negotiator's education on newest programs and overall coordination of the short sale?  

  • Hi Richard,

    There are states where the Realtor cannot negotiate a short sale. There is not an answer that fits all short sale situations. I want you know that your comments are extremely helpful and appreciate that you took the time to give your opinion. :)

    As a former Negotiator (who worked at a bank), I can say first hand a certain skill set and education (investor requirements, srategy, etc.) is required to negotiate a successful and timely short sale. Remember, many times you will have multiple loans and liens on a property - different investors and requirements/programs. Successful and timely short sales require a specialized skill set. Understanding of the the bank's loss mitigation process is vital. New programs and regulations on the bank level are released almost daily. It is also important to understand short sales are voluntary by the bank; thus they are allowed to set their own requirements. 

    I guess the question really is....

    1) How much value placed on your Realtor services (i.e. access to marketing, advertising, knowledge of distressed homes, etc.)

    2) How much value you place on the Negotiator's education on newest programs and overall coordination of the short sale?  

    • Hi Elizabeth,

      Thank you for the great comments and personal insight into the inter-workings of the bank.  One of the areas of the short sale real estate transactions that perplexes me is the lack of consistency and standardization.  I know there are some that will just say, "get used to it".  Some will also say, blame it on the lenders.  However, when the rest of the country and professions work within given industry adapted guidelines and, are held accountable to industry regulators, I see no reason why banking and real estate can't do the same.  Furthermore, I believe this is a key reason why the housing industry is in the trouble it is in right now.  At some point, buyers have to say, "This is where we draw the line".  Additional fees for negotiating services outside of the original scope is one of those points for me, unless they are willing to lower the price.

      You know, when times were really good and people were bidding up the prices of homes, the buyers had to bite the bullet and give in because of fair competition.  They did so because there were very few choices in their favor.  The tables have turned and they have more choices and they are getting a little smarter with their dollars.  Mainly, because they see it as a double charge.  It's simple, you're already paying someone else for a service that are not really being performed by the original person that contracted to do it at the start. 

      Regarding the agent's and negotiator's education, most other professions require they members to keep up with the latest technology, education etc.  Its called continuing education.  Why can't real estate do the same?

      • Hi Richard,

        As a rough estimate with the numbers you gave in your original email, you still are saving $49,500 because you are pursuing a short sale.

        You are assuming these classes are taught by people Loss Mitigation Vice President’s?????

        No doubt, there are many Realtors that are knowledgeable of short sales. However, the vast majority are not taught information/details that interrupt a successful and timely short sale process.

        It is totally up to the buyer to walk away over $5K; however, short sales are already discounted up to 15% (of the current market value).

        Let’s take a step back and look at the economic of the situation you have….

        Also, it appears that you are viewing the purchase of the property as a "normal loan origination". It is not….

        In my opinion, having a good team on your side helping you WATCH and HELP you save money makes economic sense.

        The real question is a cash contribution of $5K worth saving $47,500?  ABSOLUTELY!

        Paying a good team to assist you is worth it because the bank absorbs most of the costs/fees.

        If you pay another $2K to a Negotiator, you are still saving A GREAT DEAL OF MONEY OTHER BUYERS WILL NOT RECEIVE IF NOT BUYING A SHORT SALE.

         

        • Can you explain this more to us because I am not following your logic.  Where is the $49,500 savings come from?  A short sale is going to sell for what a buyer will pay for it, thus selling for market value.  The market value of a short sale can and usually is much different than the market value of a normal sale that does not need a lender to approve. 

          The problem is that most banks and bank negotiators seem to think that a buyer will just hand over $5000 because of your logic on short sale discounts.  The banks then cut of their nose to spite their face and lose a deal over $5000.

          Is a 5K cash contribution worth saving $47,500, it would be if that was actually the case.  it would be if the buyer was not cash poor or short on funds to pay the $5000 cash contribution.  It would not be if the buyer did not have an extra $5000 to contribute.

          Would it be worth it to the bank to NOT ask for a $5000 cash contribution to get the toxic loan off of their books and move on to what banks do, loan money?  Banks need to stop acting like they are in the business of real estate and leave that to the real estate professionals.

          • Hi Jeff,

             

            The numbers above aren't mine.............not sure where they come from.  That's the question I asked above.

        • Hi Elizabeth,

          I believe that you may have me confused with someone else in another thread. 

          "As a rough estimate with the numbers you gave in your original email, you still are saving $49,500 because you are pursuing a short sale."

          I don't see where I mentioned these numbers in my post here. Maybe someone else did.  But anyway, I'll take your bait. 

          I'll say that regardless of whose numbers they are, here's a fact, "a listing price does not necessarily constitute a cost savings.  However, a price anywhere below the fair market value is a true cost saving." 

          Regarding your statement, "In my opinion, having a good team on your side helping you WATCH and HELP you save money makes economic sense."

          I say true, 110%!!  But remember, the buyer doesn't get to choose the team.  Only the seller and lender have that choice.  The buyer only get to choose their agent.  So I ask you the question.  Whose interest do you think the negotiator is looking out for?  It an easy answer for me.  It's the seller, lender, and themselves.  For the most part, the buyer don't have a voice.  The buyer can fold, flee, or fight.

  • Short sales require significantly more work than a regular sale.We shouldn't equate the extra work to Transaction Coordination which is part of every deal including Short Sales.We should be compensated for the additional work.I pay my plumber,doctor,car mechanic etc for their extra work.Realtors are insecure about the value of their services and don't charge what they are worth.It is time for Realtors to stand up for themselves, quit being apologetic and charge for your time,skill, knowlege and expertise.

    Many agents in my office bring me their shorts and we co-list.We list at 6% with 2.5% going to the selling agent.Additionally we charge the buyer 1%.At the close we earn 3.5% plus 1%, 4.5% total which we split 50/50.We each end up with 2.25%.I've closed 51 deals this way and no lender has denied the 1%.Sometimes I get the 6% cut to 5% and we absorb the reduction,not the buyers agent.The 1% fee is disclosed in the listing agreement,purchase agreement,final HUD and disclosure I have buyers sign.This is legal according to Calif.Assoc.of Realtors.HUD says it is OK.I hope our industry as a whole gets the courage to charge what they are worth.

    • Hi Eric,

      I agree that you should get paid for extra work!  No doubt about!  If you read some of my other post, you'll see where I mention NAR should take a bigger stance on these issues, particularly with the lenders.

      I don't want to sound unsymphathetic about the issue. The real estate industry should consider charging the people responsible for making it a short sale, the sellers and lenders.  In most cases the agent suspect that the seller doesn't have the resources and they don't want to fight the lender.  So it defaults to the buyer as an easy target?  In reality, the buyer only see another mortgage that they will ultimately be responsible for.  Additionally, the buyer is not getting anything extra out of the deal.

      Some people argue that the buyer is getting a great deal in the purchase price of the home, however that home value is already falling because of the market.  And, it was more than likely over-inflated to begin with.

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