For those potential home buyers who keep hearing about the short-sale negotiator, here is a copy of a contract that was required to be signed in order to make an offer on a short-sale listing:
short-sale negotiator contract
The contract attempts to justify why the buyer has to pay 1% of the sales price to the SS negotiator. These have become so common that they are like the booties – agents don’t think for a minute how this agreement might impact the sale, they just do it because everyone else is too. It is a way for the listing agents to sluff off some of the workload, and make the buyers pay for it.
Here are a couple of lowlights from the contract:
Because of Processor’s negotiation with Seller’s mortgage company(s), Buyer has opportunity to purchase Property at or below market value and the terms of the Buyer’s offer, including sales price, would not be possible without Processor’s administrative work and negotiation on behalf of Seller(s) and Buyer(s).
Buyer(s) involved agrees to hold Processor, Seller(s) and any and all real estate agent(s)in the purchase of the property harmless and keep them exonerated from all loss, damage, liability or expense occasioned or claimed by reason of acts or neglects of the Processor or mortgage, employees paid by Processor for the purpose of negotiating a short sale or discounted mortgage payoff on the subject Property.
Regardless how you might feel about such an agreement, if you want to make an offer, you gotta sign on the dotted line.
Short sales are considered below market? Does someone think “loan balance” equals market? When 125% LTV loans were allowed, those were above market. Is a short sale below market because the buyer pays a 1% fee for an As-is sale, including pest inspection? If short sales are below market, County Assessor’s may not set value based on purchase price under Prop 13. Some County’s do not consider Trustee Sales a 3rd party arms length tansaction and assess where they think value should be. Will short sale buyers have an unpleasant surprise when their assessment notice arrives?
Love the, “we’ll get you this ‘below market'” followed immediately by, “we can’t be held responsible for truth-telling or acting in anyone’s best interest”.
Below-market, huh? Guess the lender doesn’t read this part of the contract, otherwise having this negotiator on the team should be a huge red flag not to let the sale go through at that price.
Although opinions are like teeth–everyone has a set of them–here is one of mine–booties show that the seller(s) care about their house and have taken care on it, I respect that and personally, I don’t mind accomodating them.
I think there is a serious RESPA issue here when the services of a pre-selected “negotiater” is a required settlement charge imposed on the buyer.
And “processer”, may be code for unlicensed brokerage services. If the processer is licensed, where is the first contact information identifying license #?
A continuation of gangster contracts.
When buyers sign a contract like this, can they typically also reduce either the listing agent’s or selling agent’s (I think that is the correct term, I mean the agent who represents the buyer) commissions from 3% to 2% or lower?
The market value language looks carefully crafted to say “at or below market value”, so that the agent can emphasize the “at” part to the bank and the “below” part to the buyer.
Are these even legal?
These 1% ‘arrangements’ are everywhere now, probably on half of the short sales being offered.
Add an addendum, “If property does not close below market value, no negotiator fee shall be paid.”
There will not be a need for the SS Negotiator if and when the new bank short sale programs ever kick in to effect.
This is a legal battle brewing.
I love the smell of class action in the morning.
Some day this war’s gonna end.
Chuck
Is the 1% Negotiator fee standard? They wanted me to pay a 3% fee for this “negotiator” and I refused, settling with 1/3 of that (1% of purchase price instead). I had never heard of this, now looks like I’m footing the whole bill for this mystery negotiator. #shenanigans
Hey Jim,
I came across this ruling about MERS today:
http://foreclosuredefensenationwide.com/?p=264
I don’t know if it’s real or not, but I though I’d pass it along since I didn’t see any of your commentary about it as of yet.
We have used contracts similar to this except we have it built in to the purchase price. I.E. If a buyer offers $100k for a home, the fee is built in as a concession that is paid at closing. We’ve never had anybody complain or come out of pocket to pay our fee. If we’re not good enough to negotiate our fee into the purchase price, we don’t deserve the fee.
As if there weren’t already enough reasons not to make offers on short sales.
Benjamin,
So pushing your fee off on the short-sale lender makes it all well and good, as long as nobody complains? Despicable.
If the listing agent needs a separate negotiating service, then they should pay for it, not the buyer or lender.
I haven’t seen a SS negotiator yet who did anything more than package the file, ship it, and wait for the bank to call.
What if I give them 1% of my balls instead?
I’ll stay far away from any short sales. Thanks for the heads up.
Jim, I felt the same way until I met the receptionist at the negotiator’s office, The man had some hefty overhead..
why is it “despicable” to charge a fee? it’s all negotiation, and buyers, sellers, agents and the lenders all have the ability to negotiate anything they want. if you can’t get what you want then walk. and if you’re a poor negotiator and someone else is better, then tough. isn’t that the difference btwn one agent charging 5% and another 6%? what if i charge 7% and some seller pays it? is that despicable? they could have hired any 5% or 6% agent they wanted but they chose me because i convinced them i was better. heck they could hire one of those 1% discount firms – and in relation to them we’re all “despicable” aren’t we? the above mention contract may be hideous, but you don’t have to sign, and you don’t have to buy the property in question. next property
I think #18 is a bogus comment from one of the stalkers, though the selfish attitude that ignores the fiduciary duty to the client does exist with some agents.
I think this goes beyond just the fiduciary aspect. Any agent wanting extra compensation for a short sale really should read and get guidance in light of the fairly recent Busby v. JRHBW Realty case on RESPA.
http://www.ca11.uscourts.gov/opinions/ops/200615308.pdf
And in California, if you are outsourcing the “negotiation” of the short sale to an unlicensed “processer” for a fee, you are creating a situation where you won’t have any good answers if a legal inquiry starts.
Maybe we should all just low ball these short sale offers. Just overwhelm these people with paperwork and then constantly hound them and call them about if your offer has been accepted (snicker,snicker in the background).
Then if your low ball offer does truly get accepted maybe then it might be worth 1%. Or just cancel on them at that point.
Have any of you who have posted these comments actually negotiated a short sale for a Realtor? There are stats out there that show it takes about 12 man hours of paper shuffling just to close an ORDINARY real estate transaction. Now throw in the short sale factors and recalculate. As a negotiator, its not really the short sale approval that is a problem. Its getting all the parties in sync to close the escrow. So even though its called negotiating, the work is in the coordinating. After you have personally done it, then you can talk.
This is a joke and a scam. Why should ANYONE hold the real estate agents and the negotiator harmless from anything. I certainly wouldn’t sign this without revising it heavily.
And the comments by “the negotiator” are spurious as well. What is the negotiator really doing here besides sending the paperwork to the bank?