The state of the real estate market over the past six or seven years has made terms like “short sale” as ubiquitous as “down payment” when it comes to home mortgage loans and how they are structured for today’s borrowers. New rules and regulations have given rise to fresh designations like “Certified Distressed Property Expert” (CDPE) as well as individuals or firms that act as “short sale negotiators.”
For FHA, VA and conventional financing, it is permissible for the property buyer to pay these short sale negotiator fees. While these are allowed to be paid by the buyer, there are still some limitations as far as how much is being charged. It seems that 1 – 1.5% of the purchase price tends to be the higher end of allowable limits.
But most importantly, when it comes to short sales and when a buyer (borrower) is required to pay the negotiator fee, that fact must be officially disclosed to all parties in the transaction from the buyer to the seller to the short sale lender, and must be evident in the underwriting documentation.
Additionally, (and interestingly!) the thinking is that if the buyer is willing to pay a few more thousand dollars toward this fee, (rather than pay some negotiator), the lender may want to grab a piece of the action — given the fact that they are already short on the deal.
At the end of the day, it is what it is. If you’re buying a distressed property just disclose what you need to and move on with your life. You’ll be operating in a world with a differently tinted sky and two moons anyway, but hopefully you’re getting a great deal and will find yourself seated at the closing table as quickly as possible.