What Is a Short Sale Negotiator?

How to Determine Whether Short Sale Negotiation is Necessary

man negotiating with woman and man at table
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Question: My husband says we need to hire a short sale negotiator, but he doesn't like real estate agents and believes 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 doesn't like her. He thinks all agents are dishonest, including her.

She seems capable, smart and honest to me. A friend who used her for his short sale recommended her. I want to get our short sale approved, but I'm worried my negative 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?

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. Part of the problem associated with short sale negotiators is often the individuals who hire the negotiator aren't 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 don't need a short sale negotiator. They think they can negotiate the short sale directly with the bank. That kind of thinking is like asking the fox to help you guard the hen house. The bank isn't on the seller's side; the institution's objective is to maximize return at whomever's expense as long as it's not its own. A short sale negotiator should have the seller's best interests at heart at all times. An ethical short sale negotiator would never dupe the seller to make a fast buck.

The negotiator's job is 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 can't 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 short sale negotiators.

  • Real estate agents who are short sale negotiators. You'll find some agents who negotiate short sales but don't refer to themselves as such. 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 them the way I would. 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. However, if they don't have a real estate background or are uncomfortable trying to explain real estate documents yet must negotiate with banks, that could cause problems. Before hiring a lawyer to negotiate your short sale, ask 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 upfront fee for short sale negotiation.
  • Short sale negotiators who are third parties. A third-party negotiator doesn't represent the seller. This person could be another agent at the negotiator's company or a person who isn't licensed. The first thing to find out is whether the third-party negotiator has a real estate license. 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 don't know the seller, have never spoken to the seller and aren't as capable as a negotiator who does know the seller. Some third-party negotiators will try to charge the buyer for negotiation. Buyers shouldn't 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 doesn't 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 shouldn't work for clients who don't trust them and, likewise, clients shouldn't hire agents they don't trust.

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