Who’s Negotiating Your Short Sale?

Rick Sheppard
Published on December 1, 2021

Who’s Negotiating Your Short Sale?

Read this before you buy or sell a short sale home.

Whether you’re planning to buy a short sale home in PA or put your current short sale home on the market, you’d be wise to do some research on the real estate listing agent who is handling the transaction and negotiating the short sale in PA.

Who’s negotiating your short sale?

The homeowner, or debtor, can get the ball rolling by calling their creditor (bank) to begin this dialogue.  Most creditors will want to see that a buyer has been secured, a sale price has been established, and transaction figures have been calculated.  So unless you’ve sold your home yourself, it would be natural to turn to your real estate listing agent to handle the ongoing short sale communications with the creditors after the homeowner’s initial call.  You hired that agent to sell your home, right?  You and your agent signed a listing contract, your agent marketed your home, coordinated buyer appointments, worked with offers, and negotiated with a buyer’s agent on your behalf.  And now it’s time to go to settlement.  But wait, your home is being sold as a short sale, remember?  That means that along with you and the buyer, your creditors also need to be onboard with this transaction.  That said, it’s extremely important for the success of the transaction to know who’s negotiating the short sale.

Many agents today arrange for a 3rd party negotiating company to handle the negotiations.  This can cost upwards of $7500 and unless you or your agent have stumbled upon a non-profit short sale negotiating company, these folks naturally expect to get paid.  But the transaction is a short sale – there are insufficient dollars to cover all costs.  So who pays this new, extra cost?  To put it simply, the “transaction” pays the new cost and there are a few ways this could go…

1) The seller pays the fee for services rendered.  But if the seller doesn’t have enough money to pay all their real estate related debt, how can they pay this extra fee?  You may have to pay these fees from the relocation incentive monies you may be eligible for.  Ask your real estate agent – he or she should be able to answer this for you.

2) The buyer pays the fee.  But unless the buyer has money to burn and/or just really wants to be overly generous – saintly even – they will simply deduct the amount of the negotiating company fee from the sale price. Worse, many buyers won’t even consider these properties due to this extra expense.  This can easily result in more time needed to market the property.  It can also result in the property not selling at all.

3) The short sale creditors pay the fee, either via a buyer’s lower price (see  2 above) or as an additional charge at settlement.  But these folks are already being asked to absorb a loss on the transaction.  Now they’re being asked to pay thousands of dollars more for that pleasure?  Note: most banks will not pay this 3rd party negotiation fee.

There is another way, and it means your real estate agent will need to “duck back in”.   Remember, your listing agent is being paid a commission… if the transaction closes.  Make them earn that commission by either handling the negotiating with the creditors themselves or by paying the negotiating company fee themselves.  Think about it, if your agent has “subcontracted out” part of the work needed to get you to closing, shouldn’t that subcontractor fee be paid from the agent’s already agreed upon commission?  And here’s something else to think about: if your real estate agent is either unwilling or unable to handle your short sale without help from a subcontractor, do you really want that agent to be your agent?

So if a short sale is in your near future, be sure to find out who’s negotiating that short sale.

Why didn’t the short sale settle or close? What happens next?

It’s discouraging for all parties involved when a short sale transaction fails. As a seller it’s extremely important to not give up.  Most real estate listing agents accept a declination from the bank as final.  But rarely is it truly “final”.  It’s a listing agent’s job to show the bank why they should accept a submitted offer.  If a property has been priced right or has been on the market for some time and a fair offer was submitted, there is no reason the bank won’t accept the offer.  The agent needs to get to the right person at the bank who actually has the authority to make a financial decision. Getting to, and communicating with, the right person is the most important step in a short sale transaction!  This is how I’ve been able to personally close more short sales than most Philadelphia area real estate agents.

Generally it’s the seller in a failed short sale transaction who loses the most. Many sellers shut down and decide that their home “can’t be sold.”  Not true!  You just need to find the right short sale realtor – a realtor who has successfully closed short sales!  When interviewing an agent ask him or her “How many short sales have you closed?” and ask for the list of property addresses.  Sold homes are available in public records and is not proprietary information.  If your agent cannot or will not provide answers to these questions, find another agent specializing in short sales who will.

Over 100 short sale homeowners with successful settlements.

I’ve personally helped over 100 homeowners sell their homes via a short sale transaction and I can help you, too.  Let’s get together for a free, no-obligation meeting – tell me what you want to do and I’ll share with you what I’ve seen others in a similar situation do.  It’s that simple… and our meeting doesn’t need to take very long… you share some info and ask some questions and I’ll do my best to give you helpful answers.  The upside? – you gain some good info on how the real estate and financing worlds work… how they really work.  The downside? – I can’t think of one.  Just give me a call at (610)864-9872 or send an email to [email protected]

The author, Rick Sheppard, is a licensed real estate broker with RE/MAX Achievers, Inc in Collegeville, Pennsylvania and a 30+ year veteran of the real estate trenches.  He knows a lot because he’s seen a lot.  If you have any questions about this or any real estate related topic, feel free to contact Rick at [email protected] and he’ll do his best to answer your questions.

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