My dear freinds at Piggington are discussing the house in Leucadia listed for $1.3 million,
and people are probably wondering why it hasn’t sold.
Is it the reluctance of buyers and agents to buy a short sale (even though this one has approval), or the relatively-modest neighborhood you have to drive through to get there, or is it the lack of jumbo financing?
Or is it just another example that the higher-end market is in big trouble?
Might be all of the above, but let’s add another.
The first mortgage holder has approved the sale at $1.3 million, but there is also a second lender that isn’t included in that payoff.
All the buyer has to do to purchase this house is the following:
1. Pay $1.3 million for the house.
2. Pay $20,000 to the second lender.
3. Pay $13,000 to the short-sale negotiator.
4. Pay $2,000 in back HOA dues, and boom, just like that you’ll own the house!
This is the third time I’ve come across the maxi-fee for short sale negotiating, and because I like this agent a lot, I had to call earlier this week. My complaint is that they don’t have any of this in the remarks, it’s a big surprise to the buyers and agents.
On the others I’ve come across it’s not discussed until you have an acceptable offer. Once you have agreement on price, the listing agent springs it on you, and reduces the sales price to compensate to make you feel better. But you have to pay cash, and have a separate agreement with the negotiator, who happens to be in Detroit and supposedly has mystical powers over the lenders to justify his fee.
My buyers don’t like any of this, and should this type of real estate practice continue, don’t be surprised if there is more buyer reluctance.
The Short Sale Negotiator fee is, in my opinion, nothing more than a vig paid by the buyer for the listing agent to hire expertise to help them do their job. Next thing you know, listing agents will want buyers to pay their Technical Consultants who handle the electronic signatures for their sellers on DocuSign contracts. The SSN fee is a form of extortion extracted from a buyer for the privilege of buying a short sale property.
I am currently in the process of such a transaction, and frankly there’s no way for me to know whether the listing agent and their mythological SS negotiator (if the person even exists) are simply juicing me for extra dough. This is because the SS negotiator is seemingly not beholden to the person paying their bill (i.e. the buyer), since, in my case, they don’t return phone calls or respond to emails sent by my agent.
The other feeling that’s been creeping up on me is that without proof the SS negotiator exists, or verification of any of the “work” they’re doing for me, the listing agent could be spoofing me. For example, for all I know the lenders could have already approved the sale, and the listing agent is sitting on it in order to delay contract acceptance which starts the escrow clock. The listing agent has said the seller wants to prolong their stay in the house, and as a friend can help them accomplish this by sitting on the banks’ approval until they see fit to disclose it.
Meanwhile, I still have to pay the one-point SSN fee which gets listed on the settlement statement as a standard fee at the close of escrow. It’s a racket, plain and simple!
Buyers need to grow some stones and resist this shakedown. It smells like a RESPA violation. How can it not be?
Thanks for this info JTR. I used to live in the Centex development on the other side of the greenhouse and the issue of driving through a modest neighborhood never crossed my mind. It is a very convenient location right off the I-5. Much easier to get to then the Centex Ranch, Olivehain, etc which have a similar density (in fact Crestview has the same floorplans as the Ranch). One possible weakness is the elementary school although it is getting better.
The other reason the high-end is tanking is lack of move-up buyers.
If a buyer had a some equity (maybe 3rd or 4th house) they could put down 50% and easily be within the conforming limits on a place like that. I guess the pool of cash buyer’s in the over 1M range is drying up.
Who is the negotiator?? Louie the Lip from Detroit? Gee, I thought he was in New Joisey. I wonder how the FBI, IRS and Attorney General would feel about this tactic??
It ain’t just the thug tactics. $1.3 million is a lot of money in La Costa.
Supply is going to exceed demand in that price range until sellers really start dropping. There just aren’t that many $1m+ buyers out there.
RESPA Sec. 2607. Prohibition against kickbacks and unearned fees
(a) Business referrals
No person shall give and no person shall accept any fee, kickback,
or thing of value pursuant to any agreement or understanding, oral or
otherwise, that business incident to or a part of a real estate
settlement service involving a federally related mortgage loan shall be
referred to any person.
Househippie, you are right that this is a shakedown. Sounds similar to recently discovered short sale schemes (very convoluted) involving a tandem transaction with buyer No. 1 (invisible straw buyer) and buyer No. 2. Buyer No. 1 and the agent split the proceeds. The most recent perpertrators were caught, arrested, and are currently being held without bail – for federal and state crimes. They won’t see daylight for decades.
Why are there so many unethical people involved in real estate?
Why even bother with short sales? Lenders are not doing anyone a favor.They should foreclose and list their reos w/ jim the realtor.We would get through this mess a lot faster.
greenlander, You have a great question.The funny thing is they never get punished for the unethical or fraudulent behavior.It is business as usual.The lobby is incredible.
Dear drunk, someone will always find a way to commit a scam – r.e. agents, escrow companies, sellers, buyers, lenders, attorneys and the general public – all of them. However, many are being caught and prosecuted – it’s just not juicy or bloody enough for the local news media.
…and speaking of unethical, what’s up with she-who-shall-not-be-named these days?
Agents who put their faith in these “negotiators” are putting their license in jeopardy. You have no idea what is going on behind the scenes and your name is on the contract. You are still liable for your client and the entire process is out of your hands. Once again the lawyers will be doing the happy dance…
Irene, you are so right. Anyone approached for the short sale negotiator scheme needs to visit the local D.A., in person, asap. Not only a violation of DRE, but serious federal crime. 30 yrs behind bars is lot worse than a civil suit. I can’t believe the stupidity of licensees.
desert realtor,… Good idea. Does it not amaze you how these things get started and then just continue until someone realizes they are illegal? Then, all the finger pointing starts. Lazy or misinformed realtors who are afraid of the short sale process should not get involved. Pass it along to an actual realtor with experience in the filed and get your referral fee. You will still have a license when the dust settles.
Two of the agents told me that the Detroit Guy did a seminar at the local Keller Williams office, mentioned his mystical powers over lenders, and everybody jumped on board.
I asked the one listing agent that if she doesn’t process the short sale herself (like I do), then what does she do for her close-to $30,000 commission?
She said, “Move things along”.
We’re getting more demands in the confidential remarks like this too:
Buyer’s agent to pay $160 management fee
This on a tenant-occupied REO, which is a head scratcher too.
Jim… She will be “moving things” into the court room. Just another lazy realtor. Not like our fearless leader…. JTR
Thanks to Kingside, DESERT REALTOR, and Irene for the info. I’ll look into RESPA Sec. 2607.
The thing is, the selling agent never offered us a choice. Instead, it was an ultimatum: Either use her Short Sale Negotiator and pay him a 1-point fee, or she wouldn’t allow us to buy the house.
It would have been different if she had explained to us that as short sale buyers we had one of two choices: (A) Not using a SSN and taking our chances on a long, drawn-out bank approval process, and risk losing to competition from multiple offers; or (B) Hiring a SSN in order to shorten the process, and insure our offer is the only one the bank will see.
If this had been the case, and since we really want the house and are willing to pay the SSN fee, then it would be our nut. But, having the selling agent decree it as a mandate, otherwise she would reject our contract and go to the next one in line (we were #3 on the waiting list), is why we call it extortion.
I have personally spoken with Wizard from Detroit. He is not a wizard and knows what he is doing re: short sales. He is defintely one of the better negotiators out there. With that said, he is doing 2 things I dont like. First he is charging way too much (1% of the transaction). The other thing he is doing is passing the fee along to the buyer. The listing agent should bear all or most of the burden for that cost plain and simple. He is doing their job and should be compensated out of their commissons not the buyers pocket.
On the property I spoke with him about, its a good thing he’s involved as the agent could never get this done particularly with a recourse 2nd from one of the nastiest lenders out there to deal with. But he should be paid by the listing agent not the buyer and he should be getting less than 1% for it.
If that agent is saying that the bank is only going to see offers that agree to use that negotiator, there is an element of fraud involved. The bank has the right to see every offer on that property regardless of whether someone is doing the realtors work or not.
Househippie, you would be helping the cause of the greater good if you report this realtor. I hope you do it. The industry is in sore need of regulation.
Second – and I realize this is easy for me to say because it’s not me and I don’t know you – I’d walk. If your gut is telling you you’re being screwed, it’s difficult to feel good about any transaction.
Househippie, there is a possibility that there was another buyer (SSN – Buyer No. 1) ahead of you that received a larger discount. You may be Buyer No. 2 taking title from Buyer No. 1 (the SSN, not the actual homeowner) 2. Buyer No. 1 keeps cash difference of actual short sale price agreed upon by lender and what you paid – plus the SSN fee which pays off the agent. Hire a top notch, experienced, well respected pro like JtR, and find another house – there are plenty choices out there. Thanks for sharing your experience.
Thanks, DESERT REALTOR. We have continued looking for another house while this deal has been tied up in the short sale approval process, but so far haven’t found anything that meets all our requirements.
Interesting scam scenario; basically, an underhanded way of flipping a house on the sly. I don’t think this is going on in our case, because the seller is the original owner/occupant. I think the listing agent is inept and wants the SSN to improve the odds of closing the deal quicker, so she can scarf up her commission.
Househippie, whatever is going on is suspiciously fraudulent and reeks of extortion. Double escrows are not always transparent to the homebuying public. Sometimes Sellers are involved as well. Keep extensive notes. Close the sale, then file complaint with DRE. First it was the loan modification scams, now the SSN scams. Its just a matter time until the hammer comes down.
Though I’m ready to go gangbusters in pursuing it, don’t get your hopes up about bringing justice to the real estate world.
The reason the fraud is so rampant is because there is virtually no enforcement of existing laws or rules.
The Lopez brother who admitted to bilking homebuyers for $1M in commissions was out of jail in seven months.
I sent in to the local FBI office the complete case history of she-who-shall-not-be-named, a realtor who cost lenders (taxpayers) over $4 million, yet not only is she walking around free, she is still an active realtor who has an elected position on the board!
Send in a complaint to the California Department of Real Estate? They’re 18 months behind.
JtR, you are so right. Sometimes justice is slow, however there was some good news – the DA filed charges against the homeowner that stripped the house of expensive fixtures. The FBI, IRS, and Atty Gen task forces are working overtime. The DA may be a better first contact -especially in househippies case. If she has the facts, extortion is definitely an egregious crime.
Relying on government to enforce the rules has always been a bit like watching paint dry. Many times, however, private action can more effectively accomplish the goal in the right situation, especially where consumer statutes exist to incentivize private rights of action. The remedies for individual plaintiffs in RESPA’s anti-kickback provisions and unearned fees is one of those statutes. For instance, the Busby v. JRHBW Realty case in April that resulted in establishing that Realtor “Administrative Brokerage Commissions” (ABC Fees) were illegal under RESPA was brought to court and ultimate judgment by a private litigant.
It takes more than just attorneys who are willing to take these cases though; it also takes committed private parties who are willing to get involved and actively pursue the issues.
I have another one where the buyer’s lender wouldn’t allow for the escrow company to be owned by the listing broker. We found out about 10 days into the deal, so not a whole lot of work was done yet by the escrow company.
The listing agent was a rank amateur (though long-time agent) who seized the opportunity to conspire with the escrow officer to charge the full escrow fee to cancel and move to an independent escrow company. The mortgage broker felt bad and paid for it, but an blatant RESPA violation for charging fees that were unearned.
It’s this type of small thinking that agents dwell on – they are insistent on choosing their own preferred title and escrow favorites, and when they don’t get what they want, they’ll risk blowing a deal over it.
Banks have already gamed the new AB 957, the new law (generated by bozos like the agent mentioned above) to give buyers the power to choose the title and escrow service providers, which are really the buyers’ agent’s favorites.
B of A and Union Bank said fine, but if the buyers choose, then they have to pay both buyer and seller sides (it’s negotiable).
True Greed Story: While assisting and training new agents, a branch manager of a big box company routinely took kick-backs from manager-recommended mortgage brokers processing loans for the new agent’s buyers. However, one new very sharp agent found out and the hammer came down. Bye, bye highroller manager.
If you live in the San Diego area and you read this blog, you already know that Jim is knowledgable and honest… not to mention hilarious. Why would you even think of getting into a transaction without this kind of representation? It makes sense to protect your interests with someone who is also looking out for you.Unfortunately ,I live in Northern Ca, otherwise I would be applying for a job with a brokerage that has some ethics and integrity. Not an easy thing to find in this industry
I walked partially in response to a 1 point short sale negotiation fee. Seems like a way for the agent to get you to pay someone to do their job.
Seriously, there’s a lot of people here who really need to get a grip. First of all, there are no “unearned fees” happening here. If you have tried to negotiate short sales, and also provide meaningful real estate services at the same time, you’ll find it’s 2 jobs, deserving 2 paychecks. There are hacks, but there are very good, and not so mystical negotiators out there who secure a near impossible deal for the buyer, and save the seller from foreclosure. There’s value. Pay the man.
Next, because of the way banks look at their short sale process and their guidelines they will NOT pay a short sale negotiation fee – BUT they WILL pay 3% to the buyer for closing costs. Very simple. It doesn’t have to be a hit for the buyer – and btw – creative thinking, in unusual times where there is nothing “fair” about the way consumers are being foreclosed on so that banks can prosper does not constitute any type of licensee fraud – it’s a service. Come on folks – get your head out of the sand and smell the customer service.
Just wanted to point out that you are falling into a common mis-conception.
The Bank does NOT own the property in a short sale situation, and they are NOT the client.
They must merely give final approval.
The Seller (homeowner) is the one that selects the best offer, and is under no obligation to show all offers to the bank. It can help their situation to do so, but the bank does not own the home, and therefore, are not the Sellers.