What does a short sale negotiator do to earn a fee?

Question

I'm looking at a couple of short sales. The listing agents have told me that both will involve the services of a short sale negotiator who charges a fee of $7,000 that is added into the offer price.

I understand that there is an art to convincing a seller and a bank to accept an offer that is below the outstanding debt on the property. I'm curious if there is anything more than just a whiz-bang set of negotiating skills that a short sale negotiator brings to the table.

For reference, one of the short sales I'm looking at an SFR that was originally listed at $96,000. The price is down to $87,000 after 2 successive price reductions over about 90 days. I believe that the outstanding debt on the property is roughly $65,000.  The property needs about $35K in renovations and repairs. Based on recent neighborhood comps, I believe that if it is repaired it would sell around $90K. I'm willing to offer $23,000. I understand that my offer is a ridiculous number, but the $7,000 short sale negotiator fee  brings my commitment up to at least $30,000 before I do the repairs. With repairs, I would be into the property for $65,000. After sales costs and contingencies, maybe I'd make $15,000 to $20,000 on the deal, which is a fair return for my risk.  If I can get rid of that short sale fee, I get more room to negotiate.

I think I can do the negotiations on my own. Do I need the negotiator?

Tony Morales · Answer

I know this was posted some time ago   I am a short sale negotiator  and  former loss mitigation employee having worked in a short sale department. That $7,000 is ridiculous. Also if a buyer is going to pay a negotiator  shouldn't they be able to choose their own negotiator and their related fees?  Why should they pay for the person that the listing agent wants to use.  If lenders see that a listing agent is working this "angle"  they will black list them

Jennifer Kinzle · Answer

@John Franczyk As an Illinois agent who has experienced negotiating short sale listings, I can safely say they are a lot of work!  Granted, it is mostly a ton of paperwork, including a full short sale application packet, with an authorization form, RMA, bank statements, pay stubs, 2 years of taxes, 4506-T, a hardship letter, listing agreement, listing history, etc.  The negotiator then needs to do continual follow up, on Equator or with a lot of calls to the lender, and re-send the documents.  And repeat this if it is an FHA loan, it has to go through a waterfall process of loan modification to decline first, before applying for the short sale.

After the appraisal is done,  if the bank's appraisal comes in too high, you'll need to pull comp's to get prove your offer is accurate.  The goal is to get the lender's approval letter.  A bank is expecting something around appraisal price, roughly, and they really aren't aware of local market conditions.  If the agent can pull recent comps at your price point, that might work.  If the appraisal and comps still run high, it might make more sense for it to go into foreclosure and perhaps pick it up later as an REO.

Matt K. · Answer

I'd guess your paying for their relationships more so then the negotiations.... but I have no experience in this.