It’s funny because I usually let the naysayer’s comments roll right off me. I find people who freak out about a buyer having to pay a negotiation fee have NEVER CLOSED a deal where a buyer paid a negotiation fee. I can always tell an old school agent. They’ve been in the business a while, think they know everything about real estate, and are mostly close minded and unopen to “other” ways of doing things.
This is a true story. I won’t name the agent, but she’s pretty well known. One of my reps met this agent. They had a great conversation and our company was invited to speak at her brokerage on the North Shore. Whenever we are invited to speak about short sales it’s an honor. There are still a lot of agents in New Hampshire and Massachusetts who are not comfortable with short sales. So it’s a win win whenever we can speak at a brokerage. We went in, did our thing and later had her call us with her first referral. Now, she knew how our fees were collected and STILL gave us a referral. I reviewed the paperwork and saw the homeowner filed bankruptcy and “surrendered” the property. I kindly notified the agent we could not mitigate a short sale if the homeowner didn’t own it. She didn’t even seem embarrassed that she didn’t know this little tidbit of info, but it tipped me off as to why this home never sold. It was on the market well over a year at an outrageous price. ***SIDE NOTE**** [PEOPLE, YOUR SHORT SALES NEED TO BE PRICED AGRESSIVELY – NOT AT THE TOP OF THE MARKET] Anyways, the home didn’t sell, homeowner filed bankruptcy and the home was surrendered. I also got the distinct impression this agent didn’t even know what was going on with her own sales.
So, the following week she contacted me again with another homeowner referral. She asked me to explain all of the risks of the short sale to the homeowner with one of her top agents on the line. When I was through the agent stated how fully impressed she was with my knowledge and thanked me. Then the fun part began…the paperwork. I gave the homeowner the packets for each lien holder on the property. This house was listed so I logged on to see what she had done with the listing. This house was nothing more than a mobile home, or at least that’s what it looked like. She had it listed at $300,000. I almost fell off my chair. That was back at the beginning of March and I just looked at the listing. It’s down to $250,000 and this is just about the beginning of JULY. What a waste of time!!!! This is what KILLS me. Anyways, I’m off track. So I explained to the listing agent how we have to put our disclosures in the listing. The seller was all set to go forward and we explained that potential buyers need to know up front that there is a negotiation fee and it’s up to them if they want to go forward. Suddenly, after two referrals and speaking at her brokerage, the agent couldn’t wrap her mind around the negotiation fee. Remember my “old schoolers?” Well this was one of them. After going back and forth via email and explaining AGAIN how we do this, she was not comfortable, so I kindly stated we really shouldn’t go forward if she wasn’t comfortable. It will never work if the listing agent is uncomfortable. It was very cordial, however very confusing after the two referrals and invite to speak at her brokerage.
More and more 3rd party negotiation firms are popping up, from lawyer’s offices, brokers, agents, title companies, and others with seemingly different experience. Everyone charges a bit differently. I know MOST of those that charge the buyer like we do, because they have the same fee structure. Agents are SICK of short sales (or at least the agents that come to me) – So, I decided to research this a bit more.
In NNERENMLS, (neren) Nick (my partner and a broker) told me there is no way to do a search of files with a keyword. Maybe there is, but he couldn’t see it. However, in MLSPIN there is!! So I wanted to check to see about the horrible “negotiation fee” some agents seem to be very wary of. Here is what I found. Out of 28 Single and Multi Family Listings with a negotiation fee (primarily $5000 to the buyer) only FOUR were not under agreement. This is good news for 3rd party firms who negotiate and charge a fee to the buyer. I realize this is a progressive type of listing, but the proof is in the pudding. If buyers didn’t like the house, they likely won’t pay the fee, but only FOUR homes out of 28 were not under contract, which tells me buyers will 1) pay the fee if they want the house and 2) the house is priced right!! Remember my old school agent from above? Her $300,000 listing has been on the market for four months and is down $50,000 from where she started. It is still not under contract.
Most of our listings are under contract within 30 days. This gives the opportunity to attempt to get the homeowner out of debt quicker. I don’t understand why an agent would price a home at the top of the market. This home will sit for a longer time on the market than necessary.
Buyers will pay a negotiation fee for work performed. This fee should only be paid upon delivery of the deed. NO ONE should be charging a fee up front, unless you are a lawyer. I’ve had some question the fee which is why I wanted to blog about this. For the naysayers out there, currently on the market 86% of short sales in Massachusetts with a negotiation fee are under contract. So the buyer’s paying a fee is NOT an issue especially if the home was priced right. Imagine if the home above was priced at $225,000 out of the gate? I suspect that’s the price it needs to get to before it has some major activity.
Don’t be scared of buyer paid negotiating fees. It’s actually the best way to charge for a 3rd party negotiation service. We’ve been able to save agents a LOT more commission this way as other 3rd party services charge the buying and selling agent. Why give up MORE of your commission in a market where you’re working three times as hard for less pay. It doesn’t make sense.
Thank you to all the amazing agents in New Hampshire and Massachusetts. We wouldn’t be in business without you.
Maryann Little, VP Short Sale Mitigation
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