There has been a wave of deceit being perpetrated by realtors around the county – listing agents who inflict short-sale negotiator fees upon the buyers of their listings.
If a listing agent needs help processing a short sale, they should pay for it, not the buyer.
What’s worse is that this fee is either camouflaged, or not disclosed at all until after the offer is accepted. I have been involved with transactions having short-sale negotiator fees as high as 2% of the sales price.
People have been complaining, so Sandicor, the company that runs our MLS, finally addressed it on the system’s home page:
“There are numerous questions that our industry is faced with based on the climate of today’s market. Sandicor is seeking to find answers for those issues that directly relate to the MLS. A very popular question pertains to the use of a short sale negotiator and the fees associated with negotiator services. After seeking legal counsel it was determined that it is only necessary to disclose the amount the buyer’s agent is being offered through the MLS and if necessary the formula the listing agent will be using to make that offer. If the listing agent cannot determine that amount by using the CBB field(e.g. X.96%), then the listing agent shall disclose the formula in the CFR (CFR = confidential remarks).
What IS allowed in the CFR:
“Any reduction in commission to be split xx/xx “minus X%”.
What is NOT allowed in the CFR:
“Any reduction in commission to be split xx/xx “minus X% for short sale negotiator fee”.
“Buyer to pay negotiator fee” **
**Seller and buyer negotiations are not permitted in the MLS. The contractual agreement enforceable in the MLS is between listing and cooperating broker.
My point? Sandicor and our governing body, the local board of realtors, are doing nothing to stop the fraud and deceit being inflicted upon consumers and fellow agents.
They both have the opportunity to help agents provide a better experience for clients. But instead of banning negotiator fees, or at least allowing them to be fully disclosed, they lay out guidelines on how to disguise them. They are hiding behind lawyers and mergers, either scared or oblivious to doing what’s right.
I’m embarassed to be a part of these organizations, and look forward to a complete overhaul, or elimination.
I am a new Realtor and I must say after seeing how slimy the industry can be, I share your embarrassment.
Kudos to Jim for having the stones to call out what is happening. Maybe Jim should run for the Sandicor board?
Do short sale negotiators typically get paid anything if the fail to close the deal?
As buyer I would be OK with paying for a short sale negotiator if:
1. I did not have to pay anything if they fail.
2. Their fee could be included in the mortgage amount financed. Can it?
When shopping for properties, I would simply add the cost of the required negotiator to the price of the property, which of course would make it less desirable and competitive.
As far as who should pay, that’s negotiating point, but it should be disclosed before the buyer makes an offer.
If this becomes common place, it will make agents who are willing and able (have proven experience) to do the short sale negotiating themselves a lot more valuable.
One of the features of changing the rules every day is the dishonest people can easily stay a step ahead exploiting the new rules. By the time people realize they’re being cheated step by step, they’ve already moved on.
I look forward to telling my kids how you could buy your house entirely with someone else’s money, be paid for it by skimming kickbacks and ATM withdrawls, and when people get wise about it years later you can just walk away. Then you find out they’re passing law after law to give you the gravy to live in that house for free instead of walking.
Basically, we live in a world where an adult’s temper tantrum can get them anything they want as long as they’re a “homeowner”. Everyone else is a second class citizen.
I have a friend who was in the process of selling his home in a short sale and had the same bs happen to him. At the 11th hour they slapped on a 4k fee for him to proceed. This killed the deal as the fee and the state taxes he would be hit with made it completely not worth it to have a slightly less dinged credit report.
They’re not scared or oblivious, Jim; they simply don’t give a damn.
tj – I’d suggest worse: they know and actively engage in similar practices. Or tacitly approve. Anything to make a buck and all that. *shakes head*
Please tell me there are more Realtors like you, Jim, than not…
sandicor is a sh&$ show… going in there to get anything done is just a nightmare… and the fees are highway robbery.
The NAR has been embarrassing decent and honest realtors for the last 8 years….
It’s been one fraud and screw session since the boom.
First, cheers to you Jim for speaking out. It’s important acknowledge that.
Second, Bah. The pope, NAR, Sandicor, apparently “job one” is covering your organizations’ butt. Sandicor (or the NAR) have no vested interest in policing more stringently. I’m not saying you’re wrong JTR, like you I think it is in the best, long term interest of the industry to police itself better. Without question, you’re correct. I’m saying that Sandicor is run like any number of organizations where moral and ethical issues are simply decided based exclusively on the short interests of the org and the people that run the org, not the industry as a whole.
Sad but true.
Agreed, it is a reflection of society at-large.
America has turned from everyone putting in a good honest day’s work and contributing something back, to:
Get rich, get out, and let someone else clean up the mess.
We’ll call it the Mozilo Effect.
RGB,
I wouldn’t mind paying the SS fee either if I thought it was worth it. It’s the sneak attack that I object to the most, where it gets launched on the buyer after the deal is made, and you are just stuck with it.
I have yet to meet a good effective short-sale negotiator who actually got something done.
All have been glorified assistants on salary, and the listing agent is making the real dough, or a separate company that also gouges the bank for a fee too.
On the one deal where my buyer was going to get stuck with the 2% fee, I went to work on that one. It turns out that the negotiator was the listing agent’s assistant who got paid $500. When I asked the agent where does the rest of the 2% go, she said that she always likes to have a slush fund on each deal for unexpected costs that come up. That’s a RESPA violation, ma’am. My buyer only paid the $500.
Susie,
I am sorry to say that the deceit and scum has risen to the top – long-time professional agents for whom I used to have the utmost respect, have joined in the greed.
I’m talking about people who sell so many houses that you’d think they wouldn’t have to resort to sleazeball tactics, but with the ripoffs so commonplace and no deterent other than your own morals and ethics, agents apparently can’t resist dipping their toe into the cesspool.
It is the wild west – with short sales, agents can do anything they want, and nobody is going to stop them.
At one point a few years ago I thought of becoming a realtor to satisfy my passion for the hunt of homes and personal sickness of following the market weekly if not daily though jims blog and sdlookup.com
Todays market is sad
Lets not even mention the “Contingent” offers. A way to defraud processors and the government that there was true market discovery on price.
Why would the buyer pay a nickel for the short sale fee? It should come out of the commission the bank has agreed to pay to sell the house and even then it’s up to the listing agent to see if the buyers agent will contribute to the fee. There is a significant amount of time and talent it takes to get a short sale done quickly before the buyer loses interest. Also hopefully without a deficiency balance to the seller.