Servicers wanting payment of a Short Sale fee
Lately, I've run into two servicers asking for Sellers or Buyers to pay them a Short Sale processing fee, management fee or whatever they choose to call it. A 1% fee seems to be the magical number. Is anyone else seeing an increase in this? It doesn't seem legal...do you know?
Replies to This Discussion
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Permalink Reply by Lynn Pineda on
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Emily,I recently had it with a 1st AHMSI and they wanted it paid by the Buyer.
Emily S. Knell said:Which banks have you been experiencing this with? And, who do they expect to pay this cost? And, is this fee being asked from a 1st or 2nd lien holder or both?
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Permalink Reply by Emily S. Knell on
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I just closed one with them on Nov. 23rd 2009, and they didn't ask for this. Fight back! Don't buckle to their every demand. Just constantly point out what a fabulous fair market value deal they're getting and how it's going to cost them $25K to take it back as an REO plus 2% of the value per month in carrying costs.
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This is for an upcoming February closing that was just approved in January and I did get them to waive the fee. However, my point is that they're asking for it now. What will Lenders ask for next?
Emily S. Knell said:I just closed one with them on Nov. 23rd 2009, and they didn't ask for this. Fight back! Don't buckle to their every demand. Just constantly point out what a fabulous fair market value deal they're getting and how it's going to cost them $25K to take it back as an REO plus 2% of the value per month in carrying costs.
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Permalink Reply by Darlene Krause on
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I would ask them to provide you with documentation that allows them to charge that type of fee.
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Permalink Reply by Charlotte Lloyd on
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I just had a servicer charge a 1% fee for processing the short sale. It was Home EQ. It was not the listing agents fee. I do know some agents are asking the selling agent to split the negotiators fee or putting it on the HUD I and trying to get the bank to pay. I find most banks will not pay that fee.
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Permalink Reply by Sheila Brown on
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I just received my first request for this 1% administration fee through American Home Mortgage Services. I have worked with them in the past on previous transactions and this is the first time I've seen it. I negotiate my own short sales at no additional charge but they specifically state in their negotiations that a 3rd party negotiation fee is not allowed. How are they getting away with charging this? My buyer is ready to walk.
Emily S. Knell said:Which banks have you been experiencing this with? And, who do they expect to pay this cost? And, is this fee being asked from a 1st or 2nd lien holder or both?
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Lynn,
I have been dealing with this a lot lately. I have 8 offices and 400 agents so I see alot of issues in a weeks time. Here are the issues with the "processing fee" charged by agents.
1. The fees are often being hidden and misrepresented to the short sale lender. I have seen them rolled into buyer closing cost and then presented to the short sale lender as if the buyer must have this concession to get their loan when in fact they are not a buyer closing cost as defined by law.
2. There are "outside agreements" being drawn up to collect the fees that the buyer, seller and brokers are asked to sign. This is probably the biggest issue of all. The HUD 1 clearly states that there are no outside agreements and in most short sale transactions the standard forms such as the "arms length transaction" form will have a paragraph that ALL parties attest to the fact that there are no outside agreements.
3. The listing agents are not being honest with the short sale lender as to who this fee is getting paid to in many cases. In the last 2 weeks, I have dug deep enough on contracts to find that it was being paid to the listing agent, another agent in the office or a relative. That is fraud. When asked why, the agent would say "well the short sale lender won't pay us".
It's quite clear if you have to hide a fee, change the name or make a side agreement, there is fraud involved and in today's lending environment to sign the typical short sale papers provided by the short sale lender that say NO side agreements exist is just wrong, not to mention the penalities that go with it including prison!
If an agent wants to charge it, then charge it to the short sale lender or the buyer IN the contract of sale- not in outside agreement. Call it what is really is a fee for processing the short sale. If the lender approves, then there are no issues with misrepresentation nor are there issues with side agreements.
I think we all need to look at what we are signing carefully as listing/selling agents and insure that those documents are true and correct.
On the outside agreements I have seen this week, the "processor" (who was also the listing agent) had the buyer and seller agree that the services were being provided to represent both clients interest. In Texas, that is a huge issue with agency and a blatant attempt to meet the RESPA standard for services rendered.
This week our state licensing agency said it was wrong, our company attorney said it was wrong and the state licensing company said we need to report to the Texas Attorney General.
Lori
Lynn Pineda said:No, in my experience this 1% fee is being requested by servicers and has nothing to do with who is negotiating the Short Sale for the Seller
Emily S. Knell said:This is not bank servicers asking for this 1% fee. This is the listing agent who's hiring a short sale negotiator who tries to get a 1% fee included in their HUD as a "negotiation fee", because most banks will not agree to this, that cost gets lopped off onto the buyer. Unfortunately if there is a demand for a particular neighborhood, some buyer will pay for it, otherwise, I would just tell the listing agent to pay for their own short sale negotiator from their own commission.
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