I get a constant barrage from realtors who want to argue their position on short sales. Back in September, I was ranting about the short-sale negotiator’s fee here, saying the listing agent should pay it if they can’t do the work themselves. But Tim disagrees – he left this comment yesterday:
Tim: “Sorry Jim, you have it wrong. Who benefits? I earn a paycheck. The buyer gets a house. As a listing agent I charge 6%. The buyers agent takes half of that. I pay my assistant & my brokerage. Negotiating with illiterate morons on another continent is specialized work, and it is not easy or cheap. Without it, most short sales fail, and MY client loses a home.
Why do you believe I should pay $1500 – $2500 when I am not on title, nor am I buying a home? It is a charge that has to be paid by someone. Maybe you are so well paid that you are eager to absorb that fee, but not me. It is legal to insist a buyer pays that fee, no different than an appraisal. They will not get the home without paying for both. There are no clear cut guidelines to address this issue, and it is a rather large amount to absorb. Until I am told otherwise, buyer pays it.”
Jim: You pass the job onto a short-sale negotiator who charges separately – what do you do for 3%?
Hopefully Tim is still reading, and he or other short-sale realtors can chime in. I agree, negotiating with illiterate morons is a specialized work. But he’s not doing it – he has hired an independent contractor to process the file, and making the buyer pay for it.
You say that you “earn a paycheck”.
How do you earn your 3% commission on short sales, when you farm out the work? You have been hired to provide professional services, what are they exactly? Meet the appraiser?
Jim, you seem to want to inject common sense into a process that doesn’t have one! Agree with you completely. If you farm the work out, otherwise know as “outsource”, you don’t necessarily get that charge more. In fact, in other industries, outsourcing would mean someone charges less.
Maybe the short sale negotiator and the bank should outsource to India. They they can speak a common language?
Why should short-sales exist anyway? They seem to invite fraud, confusion and just a waste of time/money/energy on the part of everyone involved.
The original thinking behind passing these fees along to the buyer was the buyer was getting such a great deal that he or she would swallow them without complaint. I don’t bother with these listings, since short sale listings are a dime a dozen and there is no telling what the bank will come back with as a counter.
There’s one real estate agency in Phoenix that charges a potential buyer around $165 for processing the offer if the offer is accepted. Not CLOSED, but accepted by the seller. The brokerage now charges to do what they always have done, review the offer with the seller, have the seller sign it, and fax it out.
Let’s expose another dirty little secret.
The “teams” and “groups” you hear about?
You see it on most listings these days, in the confidential remarks:
“For questions, showings, and offers, call assistant Chumpy at (858) 123-4567.”
The work of selling your house is being sluffed off to team members.
Team Roles – the reality:
Listing agent – get more listings
Assistant – handle all current business
TC – make sure paperwork is compliant
Buyer’s Agent – convert buyer leads.
I don’t mind that you get help – it’s that you don’t disclose it. Sellers think that they are hiring the listing agent to handle the sale – but he’s not. He passes off all responsibilities to underlings.
Potential realtor disclosures:
1. My team – who does what.
2. What you get for the 6%.
3. Number of listings/sales this year.
My job is frontline sales – I answer the phone, help people find what they need, and make sure we have a solid agreement in writing.
My wife Donna handles the transaction coordinating (TC), but adds the aggressive babysitting of lender, title, and escrow people so they do their job and we close on time. She sits right next to me, and I monitor every move.
Another reason why we told our realtor not to show us any short sales or REOs when we bought our house. It was so much less headache to just look at conventional sales whose prices had been reduced by the falling market.
Do you guys think short-sales will come to an end someday?
Jim has numerous videos on short-sale fraud and just how they aren’t good in general.
I’m kind of confused as to why more is not done to 1) stop the fraud 2) reform short-sales/better standards or 3) why the whole thing just isn’t stopped all together.
And yes, altogether is one word…I typed that wrong.
I’ll add this too: I was reading that 70% of all homes in Las Vegas are underwater. So maybe you do need short-sales?
#6 Short sales won’t come to end. However the system wasn’t designed for amount of short sales that are happening and will continue to happen. And your typical RE agent isn’t trained to negotiate a short sale (with the bank employees who that hardworking Tim referred to by calling them names…no wonder he finds it hard to negotiate with them himself). Agents need to learn quick though . They have to learn whether they think that can charge the buyer a fee for it or not.
The short sales requires extra work….sometimes in capitalism (and in life) extra work is rewarded with a fee…but sometimes (like in this case) it is NOT.
If you take on a listing and you know it will be a short sale, you eat the costs of negotiating with the bank or note holder. This might even put a little incentive in actually getting the deal done. If you require the help of a third party, then pay for your inability to structure the deal you willingly entered into.
There are two common threads among the realtors who comment here about their short sale strategies.
1. They all believe that as long as they aren’t being arrested, everything they do is alright.
2. They all take their shots at me.
A very arrogant bunch.
“1. They all believe that as long as they aren’t being arrested, everything they do is alright.”
Lol, that sums up 75% of the real estate “professionals”. They don’t really understand transparency, disclosure, conflict of interest, agency or fiduciary duty.
They also need to realize that w/o the bank allowing for a ‘short sale’ in lieu of traditional foreclosure there would not be a home to list/sell and thus zero commission to be made from that specific house.
thus, Realtors should be excessively thankful that they have the opportunity to list these homes and make any money on them whatsoever. So what if we eat a % point here or there.
If the banks simply foreclosed, then there would be hundreds of millions of $$ less in commissions being paid and thus fewer Realtors…hmmm think I found another reason to be anti short-sale and pro foreclosure.
Just got back from looking at homes. One was a short sale we could only drive by. The “sellers” have recently leased the property. They want any offers submitted for bank approval subject to the lease agreement. In essence, they want to continue collecting the rent for a year. I can bet they aren’t paying the mortgage. Just pocketing the rent. Why aren’t people like this being prosecuted?
Daniel – because loan documents are not written tight enough to address non-payment. Lenders should rewrite these documents to allow them to auto-debit payroll/bank funds as a condition of a loan.
I’d also mandate rent is paid to the bank and credited towards the mortgage/taxes/ins. If it is found to be leased and rent is not being sent to the bank, then they’d be in default of the loan covenants.
However, I bet that would be labeled as illegal by our wise State/Fed leaders.
From the U-T:
Investigating mortgage fraud is a Top 10 priority for the FBI in San Diego County and among the Top 25 nationwide, said supervisory special agent Johanna Hladun, at the Town and Country Resort & Convention Center on Friday.
Hladun was among a panel of experts from the government and lending institutions at the San Diego Association of Realtor’s annual expo who shared tips and insights on how to avoid mortgage fraud.
For this week’s Five on Friday, we offer five pieces of advice from those officials:
1) Never pay advance fees to companies that promise to lower your mortgage payments. That’s illegal by state law. Such schemes were once called foreclosure resolutions, then were known as loan modifications and now they’re being called forensic audits, Hladun said.
2) Don’t be fooled by people who tell you to declare bankruptcy as a means to avoid imminent foreclosure. Though doing that does stay the foreclosure process, consumers end up losing their homes in the end.
3) Think and ask questions before hiring so-called short sale negotiators who say they can work with your lender in the transaction, in exchange for fees. Everyone involved in the transaction should know how the negotiator is paid and by whom. “Their interest may not so much be to help you as it may be to try to be the vehicle through which they could “flip” the short sale for a profit,” according to a recent Department of Real Estate bulletin.
4) Make sure you sign forms that are normally used during real estate transactions, such as the Truth in Lending Act form and Good Faith Estimate form. Also, always read documents before you sign them.
5) If you suspect any wrongdoing, do not hesitate to contact authorities. The FBI’s mortgage-fraud hotline is 858-565-1255. The San Diego District Attorney’s Office also has one: 619-531-3552.
“However, I bet that would be labeled as illegal by our wise State/Fed leaders.”
I’m inclined to think it should be, along with anything else that encourages banks to not get on with the foreclosure process. I think I may even lean toward thinking that way about the entire idea of short sales.
Gene – how does a bank being able to attached the borrowers bank account for payment each month (or get lease payments paid directly to them) discourage them from foreclosing???
doesn’t it mean they have a better shot at getting paid and thus the loan not being in foreclosure? it also means a GREATER ability to foreclose if they borrower violates these loan covenants and puts them in default.