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What is a Short Sale Negotiator?

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Question: What is a Short Sale Negotiator?
A reader asks: "My husband says we need to hire a short sale negotiator, but he doesn't like real estate agents. Says they are all out to get you. A friend of ours referred us to an agent who seems to do a lot of short sales, but my husband does not like her. He thinks she is dishonest. But he thinks all agents are dishonest. She seems capable, smart and honest to me. She comes recommended to us from a friend who used her to negotiate his short sale. I want to get our short sale approved, but I am worried my husband's attitude is holding us back. How can we hire a short sale negotiator who will pass my husband's test?"
Answer: The sad answer is your husband is unlikely to approve of any short sale negotiator you hire, perhaps because your husband seems to have developed a built-in prejudice. Part of it is most likely based on ignorance, but part is probably bathed in truth.

Some agents are, as he puts it, out to get you. But you generally don't find these types of agents in the short sale business much less operating as a short sale negotiator. Surprisingly, not all short sale negotiators are equal. Moreover, not all short sale negotiators are real estate agents.

What is a Short Sale Negotiator?

The term short sale negotiator is sometimes a misnomer. That's because many so-called short sale negotiators do not negotiate. They don't fight for the seller. They present paperwork and accept paperwork back. They are not problem solvers. A short sale negotiator is a problem solver, a person who works on behalf of the seller to reach a short sale settlement with the bank.

A short sale negotiator represents the seller, not the bank. Part of the problem associated with short sale negotiators is often the individuals who hire the negotiator are not sure whether the negotiator represents them or represents the bank. At no time is the negotiator ever a representative of the bank unless the seller has no short sale negotiator.

Sometimes, sellers are under the impression that they do not need a short sale negotiator. They think they can negotiate the short sale directly with the bank because the bank will help them to negotiate it. That kind of thinking is like asking the fox to help one guard the hen house. The bank is not on the seller's side. In fact, quite the opposite.

The bank's objective is to maximize return at whomever's expense as long as it's not its own. It could be at the seller's expense or the buyer's expense, but the entity the bank is protecting is itself. A short sale negotiator should have the seller's best interests at heart at all times. An ethical short sale negotiator would never sell the seller down the river to make a fast buck.

It is the negotiator's job to persuade the bank to allow the short sale to happen, and to minimize the expense and headache to the seller. The best outcome is a total release of liability for the seller with no out-of-pocket expense for the seller.

Types of Short Sale Negotiators

The best short sale negotiator is the individual who directly represents the seller. This person may or may not be paid an upfront fee. In California, for example, a person cannot negotiate a short sale unless that person is a lawyer or licensed to sell real estate. But that doesn't stop crooks from representing themselves as a short sale negotiator.

  • Real estate agents who are short sale negotiators. You will find some agents who negotiate short sales but do not call themselves a short sale negotiator. They don't use the term because they are afraid they will get sued for practicing law. There is a fine line between practicing law and negotiating a short sale, so, we short sale agents tread carefully.

    A reputable short sale negotiator who is a licensed real estate agent will always advise the client to obtain legal and tax advice. The negotiator will keep the client apprised of the short sale process and never make decisions without consulting the client. For example, I routinely handle my own negotiations because I don't trust anybody else to do it exactly the same way I would do it. But that kind of thinking limits the numbers of clients I can help.

  • Short sale negotiators who are lawyers. The problem with some lawyers who handle short sale negotiations is in order to do a volume of business, sometimes lawyers must hand over the day-to-day processing to law clerks or paralegals. These people are paper pushers. Which is fine unless that person does not have a real estate background or is uncomfortable trying to explain real estate documents yet must negotiate with banks.

    Before hiring a lawyer to negotiate your short sale, ask the lawyer if he or she will personally negotiate the short sale or if the negotiation is handed primarily handed to an employee. Generally, a lawyer will charge an up-front fee for short sale negotiation.

  • Short sale negotiators who are third parties. What is a third party negotiator? It is a person who does not represent the seller. This third-party negotiator could be another agent at the agent's company or it could be a person who is not licensed. The first thing to find out is whether the third-party negotiator has a real estate license.

    Personally, I believe the more removed a person is from the transaction, the less likely that person will be successful. The reason is third-party negotiators generally do not know the seller, have never spoken to the seller and are not as capable as a negotiator who does know the seller. Some third-party negotiators will try to charge the buyer for negotiation. Buyers should not have to pay a third-party negotiation fee.

TIP: Every so often in my practice I run across a client who successfully hides prejudice. If I find out that a client does not trust me for some unjustified reason -- and there is no justifiable reason -- I drop representation. Without trust, there is no fiduciary relationship. Without a fiduciary relationship, I would have no basis for representation. Agents should not work for clients who do not trust them and, likewise, clients should not hire agents they do not trust.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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