Hi Guys,

Our team has been working on some strategic planning and we were surprised to find a lot of the short sale listings in our area that demanded that the buyer would be responsible for a short sale negotiation fee , attorney fee for the seller's attorney, or some portion thereof.

We would be interested in hearing your thoughts on this model. 

Does it discourage offers?

Thanks in advance.

Chris

Views: 5266

Reply to This

Replies to This Discussion

You miss my point....if you are negotiating your own short sales...you should take 3.5% all day long.  Tons of extra work.  My point was for those agents using 3rd party negotiators.  You're extra work is minimal when using a 3rd party.  Thanks for making my point.  BTW: You wouldn't be added to my personal log since you are being fair.  Agents who take 3.5%, give 2.5%, and have the buyer pay the 3rd party negotiator fee.  As with all things....it boils down to what the market will accept as reasonable.  If my buyer is willing to pay for this, then I make sure they sign a document saying they acknowledge the fee and are willing to pay it at closing.

@Karen - my point exactly - you are an agent who hasn't done a transaction with a buyer paid fee.  The question was "does it discourage" an offer.  Simply put NO.  Unless you are an agent or negotiator that charges a buyer, how can you possibly be in a position to answer that question?  You aren't qualified to answer it.  Our firm has worked this way since 2010 and 90% of my sales are under contract.  If the fee DISCOURAGED the buyer I wouldn't be in business.  YOU are discouraging the buyer.  You just said "your presentation is not going to be rosy" but the buyers in my sales are not discouraged at all.  You are doing a disservice to a buyer if they want to see a house that has a negotiation fee attached. - And your title co must be getting fees on the HUD from title so don't think they arent getting paid from the buyer in some manner.  If they arent getting paid by the buyer, they are getting paid from the selling lender, but they aren't negotiating sales for free I can tell you that.

 

Not every 3rd party negotiator is the same either, whether its a realtor, lawyer title co, or debt co and if you want to do your homework, you ask questions, do research etc., before YOU discourage your buyer.  Essentially it's up to the buyer to make an informed decision.

Karen I'm just really curious - who pays the title company for all of this extra work? I have no problem with title companies negotiating but I would be cautious.... if they are charging the buyer then your own argument is confusing because the buyer IS essentially paying the fee.  If it's paid by the seller/lender, how are they coding this on the HUD?  Is it a settlement fee or transaction fee or kind of mingled in with the title fees?

Glad to see this sparked some good discussion.

I put some emailed responses up on our blog if you'd like to check them out as well.

@Smitty – You are right I have not done a transaction where the buyer pays a fee.  A few agents in my area tried charging the buyer and quit doing it.  You are also right, It is not my decision . . . it is the buyer’s decision.  I do have a duty to educate my buyer about the pros and cons and all the possible outcomes.  I also tell my buyers that a short sale price is a price the listing agent came up with and not the bank’s price. If my buyer gets the home at a super low price, he probably does not care about paying an extra 1%.  What happens to my relationship with my buyer if the bank comes back and wants fair market value? You better believe I am going to tell the buyer the good, the bad and the ugly before he signs an offer.

Actually, I would have a harder time explaining the buyer fee to a seller.  I would have to tell them that it does discourage offers.  Why go there if you don’t have to?

@Teresa Keeler – In my area there are title companies and attorneys that will work a short sale without charging the buyer.  They will put a negotiator fee on the HUD and sometimes a lender will pay it and sometimes not. In those cases the title company will still get paid their normal fees to close the transaction.    

Chris Black who started this conversation owns Winged Foot Title.  He did my son’s short sale and my son did not have to pay extra nor did the buyer.  Believe me, Chris worked very hard on that short sale and I am forever grateful.  I would do all my transactions with him if he were not located so far away. I had a difficult time getting a buyer to come up to the bank’s price in that transaction. I truly believe my son would have been foreclosed on if we tried to charge a 1% buyer fee.

Hey, no matter how you get there . . . it is all good when we get a short sale closed where the seller avoids a foreclosure and the buyer gets their dream home.

@Smitty - I agree that people should be paid for work performed.  If the realtor chooses to use a 3rd party short sale negotiator, then that's his or her decision, not the buyer's.  In 99% of short sales, the full commission is paid, not to exceed 6%.  I have a 3rd party negotiate my short sales and they get their 1%.  They get a half percent from the buyers agent and a half percent from me.  I don't think its fair to ask the buyer or anyone else to pay for the listing agent's decision.  Here in AZ, realtors are not allowed to charge a dime for negotiating the short sale.  They get paid their commission based on real estate sales and that's exactly what their license is for.  Their real estate license is not to negotiate short sales for profit.  If they choose to negotiate their own short sales without charging extra, then again, that's their decision.  I hate it when people suggest that if the buyer wants to buy a house, then they have to pay the 1%.  Why should anyone pay for someone else's benefit.  If the listing agent wasn't greedy, then all problems are solved with my suggested method and everyone is happy and within the letter of the law, at least in AZ.

Ok, I think I need to clear up some confusion as to how LEGITIMATE 3rd party negotiators work.  For sure, the field has been somewhat muddled by the "wild west" mentality that just about anyone can do a short sale these days with zero training.  A law or real estate license does not equal short sale knowledge-

1-The SELLER, not the agent hires the negotiator. The agent (or attorney) may refer one in, but the SELLER retains.  This means that it now becomes part of the deal, no matter what the agent thinks. This is important, because it establishes Fiduciary Duty with the seller.

2-The negotiators involvement and requirements SHOULD BE DISCLOSED, IN WRITING. The earlier the better. My agents use wording in MLS like "SHort Sale negotiated by professional Loss Mitigator, special addendums and agreements apply"

3-The buyer has to benefit. My philosophy is "I help my seller by helping the buyer buy."  This usually translates to a lower offer, better communication, ease of process etc.  At the end of the day, if the buyer isn't satisfied, they won't close, and then everyone loses. I have never, ever, had a buyer walk away from a done deal because of my work or moneys owed.  All parties are happy or I wouldn't be in business.

www.ssprocessors.com

I don't think anyone questions the ability or knowledge of the good negotiators.  I think the question boils down to how they get paid.  Since they have no fiduciary duty to the buyer, why is the buyer paying for their services.  The more recent short sales in AZ have been coming back at significantly above market value which blows the thought that a buyer gets a better deal and a lower price.  I was told directly by a Fannie Mae employee (off the record) that this was a matter of policy.  I doubt the buyers would ever consider paying for something extra and not being directly benefited if the inventory was normal, instead of in short supply.  BTW, that day is soon coming.  The buyer population is starting to shrink as confidence wains so listings will remain on the market longer.  Buyers will only select the cream of the crop and probably won't be too anxious to snap up short sales where they have to pay an extra couple thousand dollars to buy. 

Washington and Arizona law seem to be very similar from what I have read.  I would have to respectfully disagree with Mike regarding fee structure.  The reason the fees have come into play at all is because Brokers realize how much additional work and time these transactions take.  If you run your numbers and know what your hourly wage is by the time you finish a transaction, you need to evaluate if that is really a fair wage you are earning or not.  That is each individual's decision.

Lienholders have stepped in and been allowed to regulate our compensation and lawmakers have often supported these lobbyist organizations because they tout that this is best for the economy and the homeowner.  I strongly disagree. 

I agree that it is a matter of greed but not on the part of the real estate agent who is now asked to do 2 - 3 time the work for 1/2 as much money as what our position paid just 5 years ago. 

The lienholder does not sit in these living rooms at 7 pm when you'd rather be home with your own kids because that is the only time you can catch both parties between their first and second jobs.  They don't look into the eyes of a woman who has lost her husband and has 4 children to raise on her own now and is looking to you to guide her out of a mortgage mess. They don't have to deal with the hopelessness of the man who has caught his hand in machinery at work and is struggling just to get the disability wages paid to him that he is justly due while he is losing his home. They have never sat in a living room filling out a listing agreement with parents who are doing the best they can while their child lays in an oxygen tent just feet from you, because he has been sent home for the 'last time.'

The lienholder neither hears nor sees the true hardship in these people's lives beyond the extent of cursory glances at a hardship letter that they are only picking keywords out of like "cancer, divorce, death of a child, laid-off, disabled." Then they further refine it to "temporary or permanent."

Our industry has been hit hard and so have our communities.  I know what I provide for my clients, for the neighborhoods and communities that I serve and also for the lienholder.  I think we absolutely should get paid more to do what we do and I think we should have the right to be paid for the FULL effort we put in and the service we provide here on the ground in our own hometowns.

We have to place negotiator fees on the 'buyer's side' because we have been regulated into a corner on this issue.  If you look at 'any' transaction, all fees are always paid by the buyer in the end anyhow. Separating them out on the HUD is just a formality. 

My issue is with agents that use 3rd party negotiators and then take 3.5% for themselves and justify it by saying there's so much extra work.  If you are negotiating your own short sales then I'm all for you taking 3.5%, if you're using a negotiator and having the buyer pay the fee, you're greedy.  I wish we could charge extra for short sales, but the bank won't pay it.  I used to charge the seller and had no problem charging it because they had stopped making their payment.  If they went to a lawyer for legal advice, they wouldn't get the service for fee.  If they went to a doctor, they wouldn't get the service for fee.  We negotiate short sales and our Real Estate Commissioner says you can't charge for it.  I suppose we shouldn't complain since we voted these clowns into office (national level) and everything they try gets screwed up.  I wish they'd go on vacation and leave all the markets alone and it'll take care of itself.

Ah, I think that is the key difference.  There is certainly going to be a frustration level when the inventory is skewed.  It sounds like laws between Washington and Arizona are similar but market condtions are not.  We have fortunately come out the other side of that market for the time being here in Seattle.

If the buyer is still getting a deal with paying the fee, then I have no problem putting the fee on their side of the HUD for work that is outside of the 3% I and the other agent should earn for our expertise, care and service.  That would be in a perfect world.

However, if it is not a 'deal' and the property is at the same value/price as a 'normal sale,' then the seller or lienholder should pay it - not the agent. 

I also don't really see the value to a buyer in purchasing a shortsale at the same price as a normal sale if there are other comparable homes on the market.  I feel that the lesser price is owed to the buyer for the waiting period, risk in regard to mortgage rates and all of the uncertainty that comes from the lienholders inability to agree to put together an organized, consistent and competent model for shortsales in 4 years. 

I do have seller clients who pay this fee and I have the same thought as you seem to, 'if you are not making a mortgage payment, you do have the funds available and it is your default.' 

I also agree that that needs to be a contract that is signed between negotiator and homeowner without me in the middle so long as it does not circumvent my listing contract.  (I had one attorney here try to do that and it just put me off using the 3rd party negotiators)

I also agree that when the market changes, agents will have a bad taste in their mouth and will go out of their way not to deal with shortsales/lienholders. 

I compare it to new construction.  When the builders know they have the market, they slash selling office commissions to 2.5 and 3/1.5% and then even have caveats that that is only on 'base' price and charge extra for little things like, I don't know, a fireplace and a front door - lol. 

These same builders get desperate over their standing inventory and a stop in their lot release cash and suddenly -  they want to pay me 4%  for that same buyer that was only worth 2 yesterday.  It's just the tug and pull of the game. There are strategies to win at any game.

I am very clear that I do not give anything away for free.  On the rare occasion I will even do a BPO, I charge $150.00 and have a stiff 20% late fee in bold on the invoice if not paid within 7 days.  If someone wants a market analysis, the price is several hundred dollars - my time to non-clients is charged at a premium and my negotiation only goes one direction - up.

The banking industry has been trying to take our jobs, automate them and discredit the value we bring to our communities and clients for years.  I am not going to give them an inch to play fast and loose with my profession.

I think every broker/agent should have an LLC/S-Corp to run their business through. There are a lot of things we can do to earn a living and provide valuable services in our community; especially if we keep our professionalism high, our standards uncompromising and our loyalty to our customers and each other foremost.

@Rob: I do not think you can ensure anybody of that.  In my area there have been lobbying efforts to 'standardize' real estate positions for the last 4 years.  Thank you for the compliment, and yes, I do know that I do my job very well and with dedication.

RSS

Members

© 2024   Created by Brett Goldsmith.   Powered by

Badges  |  Report an Issue  |  Terms of Service

********************************** like buttons ************************