Who Pays the Fees the Short Sale Bank Won't Pay?

By
Real Estate Agent with RE/MAX Gold DRE #00697006

An agent emailed yesterday to ask why a particular bank made an adjustment to the fees in its short sale approval letter. He reiterated what a good, good agent he had been. Why, he had done everything expected of him. He had sent a promise to not write any other offers, he had his buyer deposit funds into escrow -- he complied with each and every stipulation. Not to mention, he had waited all of some 33 days for approval -- which must have been like sheer torture to him. Why was he being punished now? Why was the bank doing this?

He did not want to hear that the "why" was unimportant. The fact that we have short sale approval is what is important. We can't change the "why" even if we knew why the "why." Buddy, it just doesn't matter. Tie your shoes so you don't trip flat on your face and get on with your journey.

Fact is there are often fees a short sale bank won't pay. Not only that, but the bank might not let the seller pay them, either. It's the way short sales work. End of story. Sometimes, the buyer comes to the table with additional closing costs that the buyer did not expect to pay. It's generally not a big deal if the bank is giving the buyer a 3% seller concession, because those fees can be rolled into that 3% credit. Just make sure the buyer's lender knows about it so the Good Faith Estimate can be fixed. You don't want to deal with this at closing. It could cause delays and delays can blow up a short sale.

Some investor guidelines such as those found in certain Bank of America short sales, for example, disallow payment of common fees such as doc preparation, notary, overnight and recording. In Sacramento, those fees add up to about $400. These are fees that typically cannot be waived. Moreover, sometimes the bank won't approve the escrow fee, even though it's customary for the seller to pay 100% of the escrow fee in Sacramento.

I felt empathy for buyers of a different Sacramento short sale that was approved last week. I shouldn't have felt sorry because it was their own fault -- they just didn't offer enough, regardless of what I suggested. Since there wasn't enough money in the transaction to meet minimum net guidelines, the bank cut the fees on the HUD. The seller's concession toward closing costs was greatly reduced. I drew an addendum reflecting those changes and the buyer and seller signed it.

However, I held back on the escrow fee to question it. Nope, the bank flatly refused. The bank cut that fee from, say, $1,500 to $500. That meant the buyer needed to absorb the difference. In an effort to soften the blow, I drew an addendum that said the fee would be reflected on the buyer's side of the closing statement and on the buyer's Good Faith Estimate. That sounded nicer than to blurt out, "Buyer pays $1,000 escrow fee." Words have impact, you know. When I asked the buyer's agent why I don't have the addendum back, the response was, "Because we don't who is paying the $1,000."

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Weintraub and Wallace Realtors

 

 

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Elizabeth Weintraub is co-partner of Weintraub & Wallace Team of Top Producing Realtors, an author, home buying expert at The Balance, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown, Carmichael and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Call Elizabeth Weintraub at 916.233.6759. Put our combined 80 years of real estate experience to work for you. Broker-Associate at RE/MAX Gold. DRE License # 00697006.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of RE/MAX Gold. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

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California Short Sales, REO's, and Foreclosures
Posts to Localism
Lyon Realtors
Diary of a Realtor
Bartender, Make it a Double
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closing costs
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short sale approval
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Ambassador
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Elizabeth, all your scenarios very much illustrate to me, whether the Buyer or Seller will admit it, who is in charge? At the end of the day it is: THE BANK. They just have to get over that, like it or lump it. If they weren't in a short sale category if this was a normal house for sale, not distressed, and say a cash buyer for example, they would think they were living on another planet without this THIRD party bureaucratic financial institution involved. Hey I didn't even say EVIL financial institution although on some days one party or the other both might insert that adjective in there or their agents as well.

Mar 29, 2011 03:53 AM #1
Rainmaker
287,577
Barb Van Stensel
Chicago, IL

Elizabeth, so glad you have this post as it backs up totally what I said yesterday in a short sale class that someone was teaching.  Agents were blurting out "that isn't fair", "how can the bank do this?", "I don't like it!".  My response to all of them (I was a student in the class, btw) that whether they like it or not, start getting educated, understand and know how to "Play the Game". 

Great Post!

Mar 29, 2011 05:09 AM #2
Rainmaker
656,917
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

Ahhh ... short sales! I think half the time I spend explaining what's going on has to do with the 'why' question. Why ask why? It is what it is. The trick is finding a solution. Good for you for keeping the perspective.

Mar 29, 2011 05:25 AM #3
Ambassador
3,084,645
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

I still have to wonder why agents representing buyers on short sales are shocked when banks refuse to pay certain fees and reduce others.  I had this scenario yesterday with closing cost assistance the buyer wants, but bank won't pay.  The agent wants to argue with me.  All I need to know is can the buyer close without the assistance.  End of story.

Mar 29, 2011 06:06 AM #4
Rainmaker
2,189,557
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Hi Gary: Yes, the bank is not required to grant the short sale. That's the part people sometimes forget about.

Hi Barb: It would be smart for buyer's agents to stop whining about what the banks do because whining doesn't do any good. Life's unfair. And then you die. Get over it.

Hi Joetta: Why ask why is right! It's a total waste of time because no matter what the answer is it doesn't matter.

Hi Chris Ann: Looks like your buyer will have to close without assistance or her agent can chip in, if the agents so desires, or the buyer can go buy something else and leave you to finding a buyer who can close under the bank's terms. There are only so many choices.

Mar 29, 2011 06:26 AM #5
Rainmaker
518,802
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Elizabeth ... I like your idea on short sale when lender/lienholder cut escrow fee from $1,500 to $500 and that buyer had to absorb the difference, to have contract addendum that fee would be reflected on the buyer's side of the closing statement and on buyer's GFE (not the seller side). 

Mar 29, 2011 07:08 AM #6
Rainmaker
2,518,614
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

When you are dealing with banks in short-sales, resistance is futile.  Crying about what banks do in a short-sale even more so.  Banks act without emotion, and that puts those that operate with emotion at a distinct disadvantage. . .Again it's futile:-)

Mar 29, 2011 01:25 PM #7
Rainmaker
2,782,770
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Elizabeth, Am I missing something? The buyer’s agent did not know who was paying the $1,000 even though the addendum stated that said the fee would be reflected on the buyer's side of the closing statement and on the buyer's Good Faith Estimate.

Mar 29, 2011 03:54 PM #8
Ambassador
1,229,631
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

I think that the fee stuff often confuses other agents. Even when you cover your bases at the beginning with counter offers and addenda, there are lots of folks that really don't get the complete picture until they actually experience it later on in the transaction.

Mar 30, 2011 03:16 AM #9
Rainmaker
672,370
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

For a long time I have held the belief that the short sale lenders, who are losing a ton of money on a short sale, want to spread the pain around. Their actions and attitudes illustrate why Realtors fought so hard to keep banks out of real estate a few years ago. We thought that we have won that battle. Guess again!

Apr 04, 2011 04:12 PM #10
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