I've seen a trend with short sales over the last couple of years here in the greater Boston market.
Short sales are hard enough, but I'm seeing more and more phrases like this: "Buyer is responsible for $5,000.00 negotiation fee which can not be financed and must be paid at closing."
I've even seen a few that state that the $5,000 fee must be paid upfront - whether the sale goes through or not!
How about you? Are you seeing this kind of madness too?
@Charlie MacPherson Mercifully I haven’t seen this is my area but up here in the woods we’re usually the last to know about anything.
I’m curious - what’s the history on these short sale properties? I know we saw a ton of them after 2007/08 crash but how are these sellers ending up underwater in our current market?
@Ryan Murdock I don't know the history, but I'd suspect it's people using their homes as an ATM machine.
As values increase, keep taking more HELOCs - which they can do until something in their lives hits the fan and the owner can't keep up with the payments.
Paying a short sale negotiator fee upfront is likely illegal in most states and I would never recommend doing this. Paying a short sale processing fee at closing is how it should be done. Many agents push these fee's off to the buyer so they do not have to dip into their commission. Paying a proficient short sale negotiator is worth it's weight in gold to increase the chances of a short sale being completed efficiently and in keeping a strong line of communication with all parties. This also can increase the likelihood of a buyer getting a better deal on the property if all parties are working together to complete a common goal.
@Charlie MacPherson I see these $5,000 fees attached to short sale listings more and more frequently. As an investor, I refuse to play that game and click to the next listing.
Part of the problem with trying to complete a short sale in MA is the lack of transparency regarding foreclosures. I can't count the number of foreclosure sales I've attended that had short sales under agreement, short sale approved, just waiting to close and the bank slammed the door on it with a foreclosure.
Because MA is a non-judicial foreclosure state and the banks are not required to disclose anything about the pending foreclosure, other than the public notice, it's nearly impossible for a short sale agent to know the status of a foreclosure and how much time they've got to get the deal done. In addition, the agent and homeowner have no third party to appeal to to postpone a foreclosure when a short sale has been approved. Their only recourse is to sue the bank after the foreclosure is completed and claim an improper foreclosure. This arrangement puts a huge burden on the homeowner.
In states such as CT which practice judicial foreclosure, a judge oversees the entire foreclosure process. Court filings and decisions are readily available public information, and the short sale agent can see what needs to be done to hold off a foreclosure. When a short sale property goes under agreement and better yet has a bank approved short sale in hand, judges will postpone the foreclosure.
This kind of option is not available in MA. Maybe it should be.