NOTHING IS NEGOTIABLE ANYMORE
Banks have developed the policy of non-negotiable terms, such as:
- Must use the banks title company
- Must sign multiple offer form in advance even if no other offers
- Must agree for buyer to turn on utilities if not on
- Must agree to close in 21 days, or pay $100 per diem
- Must not use electronic signatures
- Must be pre-qualified with their bank before submitting offer
Now, many agents are adopting those same onerous non-negotiable requirements on their short sales, and some traditional sales.
They have the seller sign instructions for the agent to "not submit incomplete offers". Therefore, if the "agents" amendment is not signed, then the offer is "incomplete" and will not be submitted. That means the seller may not see a perfectly acceptable offer.
In my opinion this is a policy by agents to reduce their workload at the expense of the buyer and their seller. Usually there is about 15 minutes of reading through their generic documents in the mls documents section in order to digest all their information and terms.
This onerous policy is detrimental to the Seller because Qualified Buyers will bypass their home with those non-negotiable onerous requirements.
RECENT REO EXPERIENCE:
My buyer is searching for rental properties to buy.
- He was pre-qualified by a reputable lender (pre-qual #1)
- To make an offer on an REO he was required to pre-qualify with BofA, which he did (pre-qual #2). We lost that offer.
- To make an offer on another REO he was required to pre-qualify with Chase, which he did (pre-qual #3). We lost that offer.
NON-NEGOTIABLE SHORT SALE:
Next he chose a short sale. Below is what I found on the Document section:
- Short Sale Offer Instructions (2 pages)
- Additional Short Sale Addendum (4 pages, must be signed by buyer and buyers agent)
- Quick Close Short Sale Guidelines (2 pages)
- Short Sale Addendum (Standard Ariz Short Sale Addendum with more non-negotiable terms inserted)
Below are some of the non-negotiable "dictated" terms:
- Items left on property by seller is considered a "gift" to the buyer
- Buyer must pay "upfront" HOA disclosure/transfer fee
- Buyer responsible to turn on utilities for inspection
- Earnest money to be non-refundable for 60 days
- Buyer must pay for termite treatment if required by lender
- Buyer to pay for septic inspection, repair and transfer
- No electronic signatures
- Buyer "and buyers agent" to be responsible for per diem fee if escrow does not close in 30 days.
- Buyer "must use" sellers (agents) favorite title company
- Buyer "must" be pre-qualified with Academy Mortgage.
Below is my position on each of these items:
Buyer responsible to turn on utilities
The seller is trying to short sale the home. The listing agent should instruct the seller that in order to attract a buyer, the seller needs to incur some expenses; and having utilities on for inspections is one of them. The tougher it's made on a buyer the more buyers will bypass the listing
Items left on property by seller is considered a "gift" to the buyer
This is license for the seller to leave all his trash. It's completely unreasonable and unacceptable.
Earnest money to be non-refundable for 60 days
This is a tough one. I understand they want the buyer to have "skin in the game". However:
- Seller can back out of the sale up until the moment before the deed is recorded
- There is no guarantee that the lender will approve the sale
- No guarantee that the listing side negotiator will do a good job of negotiating the sale.
Buyer must pay "upfront" HOA disclosure/transfer fee
The standard Ariz contract makes the seller responsible for providing the HOA disclosure and paying for that fee; although it can be negotiated. In this case the agent is not allowing any negotiation.
Here's the problem: Many HOA management companies (not the HOA themselves) are lumping the "disclosure" fee and the "transfer" fee together and requiring an upfront payment before providing the required disclosure.
One buyer recently paid a $395 upfront fee, and the disclosure statement showed that the seller owed around $9,000 in an accumulation of fines, which had not been disclosed by the seller. The buyer did not know if the listing side negotiator would be able to negotiate that amount down. The seller refused to pay so the buyer canceled; but it still cost the buyer $395, with no recourse.
Buyer must pay for termite treatment if required by lender
If termites are found, the buyers lender will require a treatment as a condition of financing. The minimum treatment fee is around $800 for a $1200 sq ft house. By accepting that term above, if termites are found, the buyer has already agreed to pay the treatment fee, and cannot cancel the contract on the basis of termites being found.
Buyer to pay for septic inspection, repair and transfer
Arizona law requires a seller to have an inspection within 6 months prior to date of sale, and provide the buyer with the completed ADEQ form along with any documents relating to premits, operation and maintenance of the system. It is the sellers property; they want to get it sold, and should be responsible for their cost of any "required by seller" inspections. Therefore, it is unfair to attempt to subject the buyer to paying for this inspection.
No electronic signatures
This is somewhat understandable in that some banks will not accept electronic signatures. However, in the initial offer to the seller the electronic signature should be acceptable as a means of expediting the initial process in the event the buyers are out of state or country. A wet signature can certainly follow. However, this is not a deal killer.
Buyer "and buyers agent" to be responsible for per diem fee if escrow does not close in 30 days.
As an agent, I cannot agree for my buyer to pay per diem fees. I am not a part of the contract, and will not agree to pay any fees myself. It is unfair for the listing agent to require any buyer to agree up front to pay a banks per diem fees. That gives license to the banks to hold tough to their 30 day close because the buyer has already agreed in advance to pay a $100 per diem fee.
Buyer "must use" sellers (agents) title company
This is a RESPA violation. The banks have been getting away with it because buyers haven't been pursuing it. Many buyers agents will agree to it mostly to avoid disagreements in the beginning. The argument listing agents use is that their "favorite" title company "knows shorts sales"; are more efficient; and have already opened escrow.
- Every title company and every escrow officer understands short sales today.
- They do not open escrow on a property without a contract and earnest money deposit.
- They just provide a preliminary title search and a HUD for the listing agent to submit to the bank.
- The title companies understand that the buyer has the right to choose their own title company, and that they may not be paid for providing the up front prelim and HUD.
Buyer "must" be pre-qualified with Academy Mortgage company
This is getting to the point of not just being onerous, but being ridiculous. My client already had 2 pre-quals and was asked to do a third; and if that offer isn't accepted, the next one would probably want a 4th pre-qual from "their favorite" lender.
The banks are requiring it so they can give a sales pitch to the buyers to use them for the mortgage.
The premise used by listing agents is that "their favorite" lender is better qualified to pre-qualify a buyer It is essentially saying that all the other lenders will fill out and sign a false pre-qualification form. That is all BS.
AZ has a standard pre-qual form where the lender must check off what they've done, and sign the form.
The listing agents are wanting to use their favorite lenders for their own personal reason; and part of that reason is that the lender will refer buyer clients to them in exchange for requiring the buyers to pre-qualify with them.
I must follow my clients instructions. So if my buyer after reading the requirements, and my explanation of each of them, wants to proceed with making an offer on that property, then we'll write an offer.
My buyer elected to pass on this property, and I suspect there will be many other buyers who will pass.
Consequently, while these onerous requirements may be saving the listing agents time, and getting return favors from their favorite lenders, it is also losing their sellers a lot of qualified buyers.
Sellers should be aware of what these terms mean, and the possible negative effect on their sale. My advice to sellers would be to have the listing agent "PRESENT ALL OFFERS", and you make the decision on what to accept. After all it is your home that you're trying to sell.
Buyers should be aware of the consequences of accepting these onerous terms, and the extra costs in terms of money and time that may be involved.
Captain Bill Travis does a great job of dissecting the arrogance and incompetence of the Lords of REO.
It is unfortunate that REALTORS® rush to line up to serve them. We chip away at the integrity of our MLSs when we allow imperious asset managers to tell us how they will work with us and with the public.
It is truly great to work in a market where resales and new construction still offer good competition to asset managers.