Thursday, September 22, 2011

Should You Hire a Short Sale Negotiator?

More and more, I believe the answer is NO.

If you are considering a short sale, you are likely already in financial stress.  You don't have to pay money to a title company or real estate attorney to handle your short sale for you.

The short sale negotiation industry grew out of the need for real estate title companies and attorneys to increase their income as a result of the real estate downturn.  Sharply reduced sales meant sharply reduced revenue.  To make up for this, title companies and real estate attorneys marketed their services to homeowners and real estate agents.

The services were marketed to include the mundane tasks most real estate agents can't or won't undertake, including collecting the seller's financial information, disclosures, and keeping constant contact (supposedly daily) with the seller's lender to push the transaction to the head of the line with the lender, who is likely overwhelmed with the volume of short sales and foreclosures.

The reality is that these tasks get relegated to a non-licensed, low level individual on the short sale negotiating team.  On top of that, the short sale negotiators usually ask to be paid in advance.  Like any other trade service, you lose a lot of leverage if there's a problem once they've been paid.

Here's an example.  It took 2 and a half months to get the seller's lender to schedule an appraisal after we had an executed contract.  What was the short sale negotiation team doing during this time to expedite this?  No one knows, despite several attempts to find out with assurances everything was proceeding on track.

After the 2 and half months, it then took two more weeks to tell me, as the buyer's representative, that we are waiting for the agent who did the appraisal to get the report to the lender.  Is the short sale negotiator representing the interests of the seller who hired them, on top of the lender to get the appraisal completed on deadline?  In my opinion, no. Unfortunately, the seller paid the short sale negotiator in advance, which in my opinion decreases their sense of urgency to meet contingency dates sooner than later.

There are too many moving parts in a short sale to have your real estate agent hand your transaction off to a third party.  If you do decide to hire a short sale negotiator, ask if they can be paid on retainer and the remainder paid at closing.   If you are in financial difficulties, speak to your agent about handling this for you instead.

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