Investor · Cypress, TX · Member since 2013 · 118 posts · 15 votes
I am dealing with a listing agent locally that handles mostly short sales, one of her fees that is paid by the buyer is a $4k loss mitigation fee. I am still new to investing and even newer to dealing with short sales; and I am dealing directly with the listing agent. My question is, is this normal and acceptable or is the agent "passing the buck" by having someone else negotiate with the lender and passing the fee onto the buyer and still taking their 3%, or in my case 6%? I can understand the advantages of having someone negotiate on your behalf, but is $4k about right, and should the buyer be paying for this? Also, is there anyway to roll this fee into the financing; as of yet the agent is telling me it is paid out of pocket outside the financing?
Chinese's people will pay asking price and still make money because they are willing to make $10K on a deal where everyone else wants to make $50K plus each deal.
In some states, agents aren't allowed to negotiate short sales; even if they are legally allowed to, many listing agent don't have the knowledge or the time. In those cases, they either need to put the work on the seller (not optimal) or they need to have a professional do it. If they hire a professional, the professional needs to get paid. In some cases, they'll get paid directly by the lender (lenders will often factor this cost into the short sale numbers) and in some cases, they'll need to get paid by someone involved in the transaction. The seller will almost never pay, which leaves the buyer or the listing agent. The listing agent can legally pass this fee on, and many of them do.
It's up to you if you want to move forward on this deal. If so, just deduct the $4K from your offer, so you're essentially paying the same amount. The other key here is to ensure that the listing agent isn't pocketing that money. Make sure the fee is disclosed in the contract (so the lender sees it) and make sure it's disclosed on the HUD and going to the appropriate entity.
Thanks J Scott. I still have two questions, does $4k sound like an appropriate amount and can it be rolled into the financing, say like part of the closing costs?
Paul, it all depends on your lender if it can be rolled in, I'm guessing most would not. The fees I see around here range from $400 flat fees up to $1500 flat fees or a percentage like .05% or 1%. What's the price f the home? I never see the agents pay those unless it is the only way to get the deal done.
$1,500 tops. I work as a short sale listing agent, and as that third party negotiator. If this is the seller's attorney, they are usually less competent at the SS negotiation process than anyone else. You won't be able to roll this into your financing. You need to find your own agent and forget the "give it to the listing agent so they'll want your offer more". You also need to know what other liens, judgments, mtg.s, etc. there are on the property, and the history of the SS process on this property. Is this the first time a package is going to the bank? Has the Seller been approved for the short sale yet..hardships accepted? If this is not the first submital, was there a bank counter, when and how much? Realize that a previous counter, especially over 90 days old, is irrelevant as they'll probably do another BPO. Look at all the factors before you commit yourself to wait for 3-4 months for an answer.
I see loss mitigation fees in our area in the $2500-3500 range on $65,000-ish properties. People are paying them and not blinking an eye. I deduct them from the price I need to make the property a deal, but I have yet to close on one of these (I get outbid b/c others are willing to pay over asking plus the fee - which I also feel is high). These same properties need $20,000-$30,000 in repairs. The fee amount may be regional. Thoughts? Makes sense with different state laws and attorney fees.
You will get a feel for what is fair after looking at many s.s. and seeing how many have this fee and what the fee is in your area.
Chinese's people will pay asking price and still make money because they are willing to make $10K on a deal where everyone else wants to make $50K plus each deal.
Chinese's people will pay asking price and still make money because they are willing to make $10K on a deal where everyone else wants to make $50K plus each deal.
I know a few Chinese in Los Angeles that will pay FMV and never think twice about it. I guess it is how much money you want to make.
Oh, got it...I thought you were saying that this was true of all 1.3 billion Chinese people. But, you were just talking about the few you know in Los Angeles.
They are trying to slip in extra profit without the bank knowing it by reducing the offer price and putting it on the buyer side. I wouldn't pay it, and the agent can't force you to pay it.
They are trying to slip in extra profit without the bank knowing it by reducing the offer price and putting it on the buyer side. I wouldn't pay it, and the agent can't force you to pay it.
If the fee is disclosed in the contract and on the HUD, and if the escrow company directs the funds to whomever is negotiating the sale (as indicated on the HUD), then it's not possible for the money to go to the agent or the seller. This is part of the due diligence the OP needs to do.
J. Scott,
I know a few Chinese in Los Angeles that will pay FMV and never think twice about it. I guess it is how much money you want to make.
Joe Gore
Wow. @Account Closed I would be careful what you say especially in the real estate and fair housing world. As a realtor if I said that I would loose my license. Grouping an entire country of people into a buying class because of a few you know in Cali? So there aren't Americans, Russians or anyone else who will pay FMV?
I never group an entire country of people into a buying class, I said the few I know, not whole country.
I assume Mark was referring to your earlier comment, which did make a generalized statement:
"Chinese's people will pay asking price and still make money because they are willing to make $10K on a deal where everyone else wants to make $50K plus each deal."
It goes on the HUD, but is still out of pocket since it is in addition to the sales price, just like if you we're paying off some other lien/debt for the seller. Since you're financing, you can ask for closing costs credit from the seller/shorted bank. It may, or may not, be approved as different investors have different guidelines for what they will pay in closing fees. if the $4k is an issue, it is too high, move on to another property now.
They are trying to slip in extra profit without the bank knowing it by reducing the offer price and putting it on the buyer side. I wouldn't pay it, and the agent can't force you to pay it.
If the fee is disclosed in the contract and on the HUD, and if the escrow company directs the funds to whomever is negotiating the sale (as indicated on the HUD), then it's not possible for the money to go to the agent or the seller. This is part of the due diligence the OP needs to do.
The reason it's going on the buyer side is because the lender will not allow the expense. If the buyer is willing to pay their 'highest and best', then their offer will be reduced by the fee and the lender will in fact be paying for it one way or another. These 'loss mitigation' companies should be paid for by the Agent, assuming they are licensed in that state.
They are trying to slip in extra profit without the bank knowing it by reducing the offer price and putting it on the buyer side. I wouldn't pay it, and the agent can't force you to pay it.
If the fee is disclosed in the contract and on the HUD, and if the escrow company directs the funds to whomever is negotiating the sale (as indicated on the HUD), then it's not possible for the money to go to the agent or the seller. This is part of the due diligence the OP needs to do.
The reason it's going on the buyer side is because the lender will not allow the expense.
I've seen the lender pay the negotiator in probably 20% of the short sales I've been involved with. It's not uncommon at all...