Although we use a different approach as we discussed at our initial group meeting, this is an "outside the box" solution that is working well. As long as it's legal, ethical and fully disclosed I don't know why anyone would have an issue with it.
What's Wrong With Asking A Buyer To Pay A Short Sale "Processing Fee"?
When I take on a Phoenix short sale listing, I explain to my clients that I use a "short sale processor". This "processor" DOES NOT negotiate on behalf of my Phoenix short sale clients. I NEGOTIATE ON BEHALF OF MY CLIENTS. My simply processor assembles all documents in the proper order, and follows up with the servicer/lender until we receive a response. Once we receive our response, I TAKE OVER all negotiating from that point forward. For this service, the buyer is charged $695 at COE.
The "processor fee" is not only disclosed on the Preliminary HUD that is given to the lender and buyer's agent with our short sale package, but, more importantly, is also disclosed to all parties on the original MLS listing, as well as the final HUD.
I also explain to them (in writing) that the buyer will be responsible for paying this $695 "processing fee" to an unrelated short sale processor at COE. PLEASE NOTE THAT THIS IS NOT A "NEGOTIATION FEE". IT IS A "SHORT SALE PROCESSING FEE". BIG DIFFERENCE. This declaration is made perfectly clear not only in the MLS, but also on a required addendum that that the buyer must sign and include with their offer. If a buyers agent has a problem with this, they can move on to the next home.
In addition (and more importantly), the Seller must sign an addendum, agreeing to allow for this language/requirement to be in the MLS listing. If a buyers agent submits an offer without agreeing to the $695 fee, it will not be presented to the seller. Period, end of story (as per our listing agreement). Again, if they don't like it, they can move on to a different home.
With an 85% closure rate on short sales since using my short sale processor, and the fact that most lenders will accept a 3% "seller contribution" (do the math before you bash this post), this is usually not a problem.
Now, before all of the buyers agents jump in and start pointing out everything that is wrong with how I choose to conduct my business, please consider the following....
I have two choices... I either lower your (buyers agent) commission (and raise mine) in order to pay my short sale processor, or I ask your buyer to pay a $695 fee to cover it, when they can ask my clients lender to cover 3% for seller concessions. Again, DO THE MATH BEFORE YOU GO BALLISTIC AND TELL ME HOW UNFAIR IT IS TO YOU AND YOUR CLIENT! Calm down, take a deep breath, and put your ego on the sideline before commenting. :)
Before you go crazy, think of this scenario...Your buyer writes an offer for $100,000 on a home and asks for 3% in seller concessions. Your client gets $3,000 towards his/her closing costs, and $695 goes towards a short sale processor that has a track record of closing 85% of their short sales with our company. The last time I checked, the average closing rate on short sales is around 20% for the listing agent. So, your client gets a net of $2,305 towards his/her closing costs, and pays the $695 closing fee, and you, as the buyers agent gets 2.5% of $100,000, or $2,500.00.
Or, my sellers lower the buyer commission down to 2% in order to increase our odds of closing the sale (after all, my only goal is to help my seller avoid foreclosure). 2.0% of $100,000=$2,000, and your client gets $0 towards closing costs.
Look, we're all here to "make the stars align" and close the deal for our clients. 80% of my business revolves around listing short sales, and the other 20% involves representing buyers. Personally, as a buyers agent, I don't have a problem with my buyer paying a fee at COE, IF I CAN DETERMINE THAT THE LISTING AGENT HAS AS TRACK RECORD OF CLOSING SHORT SALES. In addition, I absolutely do not have a problem making less than the short sale listing agent, as I know how much work is involved with listing a short sale.
So, what made me write this post?
Tonight, I received an email that went out to all AZ licensees from the AZ Dept of Real Estate. They are concerned about the amount of complaints they are receiving from buyer's agents in regards to Phoenix short sale listing agents requiring their clients to pay fees to what they call "short sale negotiators". All semantics aside (we use a short sale processor, not a short sale "negotiator"), buyer's agents need to read this post and "calm down" before crying to their brokers and/or the AZ Department of Real Estate.
I think we can all agree that Phoenix short sales are here to stay for quite some time, and buyer's agents need to understand the rule of "unintended consequences". Phoenix short sale listings require a much larger amount of resources/time/money than representing buyers for Phoenix short sale agents/brokers.
As a company that focuses primarily on Phoenix short sale listings, we have two choices...Either ask the buyer(s) to "help out" by asking for their commitment to the process, or lower the commission for the buyer's agents to cover our added expenses for helping our clients avoid foreclosure.
If the AZ Department of Real Estate institutes a policy of not allowing buyers to pay for this fee (with the help of lenders), ALL buyers and their respective agents (including those in our company) will ultimately pay for it.
Until Next Time...
Summit Home Consultants
Copyright © By Bob Hertzog 2010 *What's Wrong With Asking A Buyer To Pay A Short Sale "Processing Fee"?*
If you are considering a Traditional or Short Sale of your home in Phoenix, Scottsdale or any location in Maricopa County Arizona, you owe it to yourself to talk with the BVO Luxury Group @ Keller Williams Arizona Realty to determine whether Tony and Suzanne Marriott are the best real estate Brokers in the Phoenix and Scottsdale metropolitan area to help you with the Successful Sale of your home.
Tony and Suzanne have personally Listed, Sold and Closed more than a hundred Short Sales with the highest list to close rate in the Phoenix Metro Area!
Tony Marriott - Chief Operating Officer - BVO Luxury Group @ Keller Williams Arizona Realty
Suzanne Marriott - Chief Learning Officer - BVO Luxury Group @ Keller Williams Arizona Realty