Red flag on short sale offer

Foreclosures
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Red flag on short sale offer

George Ramsay
Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes

Ive been working on a possible short sale and received the following from the listing agent

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**** and I work with a 3rd party company that negotiates
all our short sales...They have the relationships with the lenders and are able to make the process of getting each deal to closing that much smoother...Should you make an offer, please keep in mind there is a 1% buyers fee. The VALUE to you and your client is less headache and time on working this deal out with the lender. Not to be presumtuous, but you
would want to make an offer that considers this cost.
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I called BS and that fee has been now negotiated to the seller on the HUD statement

However any 3rd party that receives money at closing raises red flags that there is some sort of mortgage fraud involved. So im looking every where i can find for second thoughts and on this, and would appreciate any feedback.

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  • Harrison Painter
    Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
    17y

    Was this agreed to in the Purchase Agreement and/or Listing Agreement? (I am not clear what your position is on the deal) If not I would make a very strong stand on this issue.

    I would tell the Listing Agent to pay the fee out of his pocket since he has somebody else doing his job!

    This is not an uncommon situation, and there are many 3rd parties that are now negotiating on behalf of lazy listing agents. The fact is that most of these companies are not very good anyway.

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  • Nick J.
    Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    17y

    I don't have a problem with the listing agent farming out the short sale process. I don't think it's their job to do, they need to be showing houses and qualifying prospective home buyers.

    I do have a problem with anyone who says they have 'relationships' with the bank, unless your dating the banks and paying alimony on former 'relationships' with banks.
    All we can do is try to 'persuade' the bank, they still have their guidelines to follow so they don't get in trouble with bank auditors.

    It's good that you got the 'crap' charge on the sellers side, from my experience I've always been told what they want to 'NET' so anything outside of that they don't really care about as long as you disclose to them.

    Again I could be completely wrong, I'm only 1 guy who does a handful of these a month and I'm sure there is someone else here that does a lot more than I do.


    Good luck

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    hey guys thanks for the reply
    Im becoming more concerned regarding this deal and am on the verge of walking away, due to this issue.

    The listing agent provided this link for the company
    http://www.bgs3.com

    At the end of the day the links are dead, the youtube video is" no longer available"
    And i have no idea what service this company provides, or even how they will be paid at closing....

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  • Donte Mazyck
    Contractor · Charlotte, NC · Member since 2008 · 178 posts · 14 votes
    17y

    there is a solution, i will pm you.

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  • Nick J.
    Residential Real Estate Broker · Payson, AZ · Member since 2009 · 3k+ posts · 1k+ votes
    17y

    c'mon Donte

    share you solution, it might help more then just him.

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    eh, i was a bit irritable last night when i checked out this 3rd party.

    Although i'm grateful for all the responses, this doesn't sooth my concern that a 3rd party is getting cash at closing. But perhaps thats just the way it goes in theese economic times

    Seemo i replied to you PM, would appreciate your feedback

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  • Donte Mazyck
    Contractor · Charlotte, NC · Member since 2008 · 178 posts · 14 votes
    17y

    Nick,
    what i sent George was basically invoice the fee as a dollar amount and not as a percentage because it can be construed as a commission. So if your fee is 1.5% of $100k don't list your fee as 1.5% but as $1,500 fee.

    Contractors and different companies receive their payments at closing and the difference is how you get paid

    Also George you aren't responsible for anyone getting a fee at closing because you aren't an attorney so that doesn't lay in your hands. If a tite company releases the fee they are the ones that provide the insurance and risk so you are worried about something that has nothing to do with you. Trust the fact that if something is illegal a title company won't do it.

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    Thanks SeeMO,
    Now i understand!!

    We had told the selling agent that we were going to reduce our offer based on the dollar amount of the 1% fee. Thats when they said the bank would pay it and move it over to them on the HUD statement at closing.

    also appreciate the comments regarding closing. I know legally im not liable, but from a business perspective knowingly participating in a suspect deal isnt the way i want to run my business.

    Hence the point of my post.

    As always grateful for the feedback

    0Reply
  • Mitsu O'Riley
    Real Estate Consultant · Savannah, GA · Member since 2009 · 69 posts · 3 votes
    17y

    George,
    I am one of the 3rd parties coordinating the shortsale. As far as the fee, you want to ask what happens if the lender doesn't allow / approve that fee at closing. Meaning who is responsible.
    If it's a company that is successful with them, and you can reach them, do a quick interview. It might be worth it to have someone qualified to get the deal done vs. an agent fumbling through it. If you can buy at your price or close, then wasn't it worth the cost?

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  • William Alston
    Residential Real Estate Broker · Sacramento, CA · Member since 2009 · 69 posts · 1 vote
    17y

    And these negotiators deserve to be paid.
    it is an entirely separate skill set and a different job than marketing the property.
    As long as it comes from the lender then you aren't "paying " it anymore than you are paying the other costs of the transaction like title escrow etc.
    The hardest working person on my short sale team is the negotiator in the a short sale transactions.
    Stick together and demand the bank pay these fees. The reason the banks cut commissions etc is because they can. If more realtors would toughen up or get out of the negotiation business (which is brand new) and let people like Mitsu and my girl earn a living the job would be easier.
    Mitsu I like you already, want some more deals? PM me.

    What we have been doing out here on the left coast is having the buyer ask for a credit of 1-2% in the contract.
    It is one more bargaining chip is all when the short sale negotiator makes a deal, says you have a deal, just waiting for the final investor approval, and then the investor comes back after everybody hears the deal is done and they cut the commissions or other closing costs from the seller's side.
    They are playing you like a harp from hell but as long as people get taken by it they will keep doing it.

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    Mitsu brings up good points, an interview might educate me a bit.
    However i like to think that ive failed at enough short sales, and have analyzed and had others look at my presentations, that i now present very professional offers. Hence why i partnered with a very experienced buyers agent. Thus i see no need for me to reduce my price by 1% to accommodate this.

    If i had a dollar for ever REI who told me i needed their services to do deals id be retired...Show me your going to bring some skills to the table and id consider it.

    Good conversation, im very much enjoying everyone's response.

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  • William Alston
    Residential Real Estate Broker · Sacramento, CA · Member since 2009 · 69 posts · 1 vote
    17y

    George,
    There's enough people taxing every deal as it is. Title and escrow will never go away, commissions are only there if somebody is in the deal before you and adds them, but the Loss Mitigation piece is a brand new thing and most people see it as a new expense with little or no added value thye just don't understand it maybe. I've met BS artists in every arena and they all have to pass the same smell test before getting my money or getting my recommend
    As with real estate people, gurus or attorneys I use them if they add value in excess of their expense. Otherwise I am used to doing things myself. I like it that way and I only delegate when someone proves their ability to add value.

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  • Steve Hallman
    Atlanta Metro, GA · Member since 2008 · 13 posts · 5 votes
    17y

    Typically a good mitigation service can add value. They allow the investor to seek out more preforeclosure prospects and the realtor to concentrate on marketing.

    Mitigation firms (or individuals) have different pricing models. Some want to know a maximum strike price, see comps and decide if it is possible. If they feel your offer/strike price is not feasible, they will not negotiate. Some charge a fee upfront, some do not.

    I prefer that they do not get paid until, I do. I prefer they have a stake in the margin.

    However you work it, the mitigation fee is listed on the HUD-1 after line 1300 for Additional Settlement Charges. Always start at 2% and allow it to be negotiated down to 1-1.5%

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    Well for whatever its worth
    I made my offer in February, we received no reply from the listing agent & this property is still listed is still listed in the FMLS as active

    So much for that 3rd party mitigator

    0Reply
  • Eliott G.
    Real Estate Investor · Elgin, IL · Member since 2009 · 135 posts · 9 votes
    17y

    I just closed on one of these last week...

    IT TAKES FOREVER!!!

    A business acquantence of mine tried to buy it last fall (maybe September) and gave up after 4 months. When he told me I said I would go for it. The process additionally took about 4 months for me to get to closing. I don't know what kind of "genius" it takes to hire a "negotiator" on a $15,000 property, but it was really a waste of time. If the property wasn't such a good deal, I would have walked too. The negotiator's fee was almost $2000. (stated minimum or 1.5%) It p!ssed me off, but it was a good deal on a nice property in great shape!

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  • Mitsu O'Riley
    Real Estate Consultant · Savannah, GA · Member since 2009 · 69 posts · 3 votes
    17y
    Originally posted by George Ramsay:
    Well for whatever its worth
    I made my offer in February, we received no reply from the listing agent & this property is still listed is still listed in the FMLS as active

    So much for that 3rd party mitigator

    Hey George,

    You need to ask your agent why the house is still active in the MLS. That has nothing to do with the mitigator. Your agent should still be looking out for your interest in the contract.
    The mitigation company gets the short sale package together, gets it through the process (the hardest part), and then gets an approval or counter offer to you. They have nothing to do with the MLS, writing of the contract, or any of the real estate stuff the agents get paid a commission for.

    Does your contract allow the home to stay active on the MLS?

    Also, I am not sure why you are not hearing status on the short sale. I usually send a weekly update on my files. It is up to the agent to pass that info to you, if they don't give me your email address for updates.
    There are a lot of bad companies out there, like in any other business. It also depends on the bank on how quickly the file is reviewed, 2 weeks, 30 days, 120 days +. However you and your agent should be getting status.
    Good Luck
    Mitsu

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  • George Ramsay
    OP
    Investor · Marietta, GA · Member since 2008 · 54 posts · 7 votes
    17y

    Thanks Mitsu,

    The selling agent never returned our phone calls.
    When we submitted the offer, we were told by the listing agent that our offer was in the middle of 2 other offers, and that he would let us know one way or the other
    We kept asking for an update but the agent never returned calls. After 2 weeks and over 5 unreturned voice mails we moved on

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