Cash to "owner" in Short Sale?

[rkp]

We have been making offers on short sales for the last year and noticed a new trend lately.  I am wondering what you guys think about this and what others are seeing.

First, we always go through the listing agent to make an offer on a short sale.  I hate not having an agent or anyone in my corner but my limited experience of making offers on short sales leaves me the impression that listing agents will push the offer they are dual representing, not necessarily the highest offer.  Basically the listing agent is the gatekeeper.

Anyway, the trend we noticed is the listing agent telling us that the current "owner" wants some under the table $$$ to make the short sale happen.  Basically they wont get anything at closing and have no incentive to sell other than walking away from being underwater and want some $$$ to start their new lives.  We have been told anywhere from $20-30K and the houses we are putting offers on at close to $1M.  I am yet to get through escrow so not sure how this payment would actually work and what legal binding there is but so far, I have seen it written as a short sale transaction fee paid to the listing agent in the purchase agreement addendum.

How do you feel about this?  My total outlay is about the right price for the house and frankly I dont care who gets what and how they divy it up.  Also, its seems like a good insurance policy like cash for keys so hopefully no damage as the "owner" moves out.  However from the banks view, they should get every dollar and their non-paying lendee should be kicked to the curb. 

 

[usctrojancpa]

We have been making offers on short sales for the last year and noticed a new trend lately.  I am wondering what you guys think about this and what others are seeing.

First, we always go through the listing agent to make an offer on a short sale.  I hate not having an agent or anyone in my corner but my limited experience of making offers on short sales leaves me the impression that listing agents will push the offer they are dual representing, not necessarily the highest offer.  Basically the listing agent is the gatekeeper.

Anyway, the trend we noticed is the listing agent telling us that the current "owner" wants some under the table $$$ to make the short sale happen.  Basically they wont get anything at closing and have no incentive to sell other than walking away from being underwater and want some $$$ to start their new lives.  We have been told anywhere from $20-30K and the houses we are putting offers on at close to $1M.  I am yet to get through escrow so not sure how this payment would actually work and what legal binding there is but so far, I have seen it written as a short sale transaction fee paid to the listing agent in the purchase agreement addendum.

How do you feel about this?  My total outlay is about the right price for the house and frankly I dont care who gets what and how they divy it up.  Also, its seems like a good insurance policy like cash for keys so hopefully no damage as the "owner" moves out.  However from the banks view, they should get every dollar and their non-paying lendee should be kicked to the curb. 

Honestly, I'd report the agent to the DRE for being a willing party in such an arrangement and report the owners for bank fraud.  Crap that like pisses me off because I've had many strong buyer offers pasted by the listing agents which makes me wonder if shady stuff like you describe is going on.  A part of me hopes that the lenders stop approving short sales and just get on with foreclosing these homes and kick the deadbeats out.

 

[rkp]

 
Honestly, I'd report the agent to the DRE for being a willing party in such an arrangement and report the owners for bank fraud.  Crap that like pisses me off because I've had many strong buyer offers pasted by the listing agents which makes me wonder if shady stuff like you describe is going on.  A part of me hopes that the lenders stop approving short sales and just get on with foreclosing these homes and kick the deadbeats out.

Even if its the only way to get the house? 

Many people buying houses for cash at foreclosure auctions dont seem to have a problem with the cash for keys strategy.  I dont think they enjoy giving up some $$$ but its seems to be the norm and provides you with some peace of mind that the former owners wont wreck the place.

 

[davenlei]

Ma

We have been making offers on short sales for the last year and noticed a new trend lately.  I am wondering what you guys think about this and what others are seeing.

First, we always go through the listing agent to make an offer on a short sale.  I hate not having an agent or anyone in my corner but my limited experience of making offers on short sales leaves me the impression that listing agents will push the offer they are dual representing, not necessarily the highest offer.  Basically the listing agent is the gatekeeper.

Anyway, the trend we noticed is the listing agent telling us that the current "owner" wants some under the table $$$ to make the short sale happen.  Basically they wont get anything at closing and have no incentive to sell other than walking away from being underwater and want some $$$ to start their new lives.  We have been told anywhere from $20-30K and the houses we are putting offers on at close to $1M.  I am yet to get through escrow so not sure how this payment would actually work and what legal binding there is but so far, I have seen it written as a short sale transaction fee paid to the listing agent in the purchase agreement addendum.

How do you feel about this?  My total outlay is about the right price for the house and frankly I dont care who gets what and how they divy it up.  Also, its seems like a good insurance policy like cash for keys so hopefully no damage as the "owner" moves out.  However from the banks view, they should get every dollar and their non-paying lendee should be kicked to the curb. 

Honestly, I'd report the agent to the DRE for being a willing party in such an arrangement and report the owners for bank fraud.  Crap that like pisses me off because I've had many strong buyer offers pasted by the listing agents which makes me wonder if shady stuff like you describe is going on.  A part of me hopes that the lenders stop approving short sales and just get on with foreclosing these homes and kick the deadbeats out.

Makes me wonder if there are any tax laws being broken if the seller is not listing that 'income' on their returns.  Worse yet, if that payout is not calculated in the purchase price of the house, are you evading property taxes and violating the law?  It would suck to be charged with tax evasion and get hit with all kinds of penalties.  Not sure how it works so you should talk to a tax person.  It does seem like some rules are being broken to do that.

 

[usctrojancpa]

 
Honestly, I'd report the agent to the DRE for being a willing party in such an arrangement and report the owners for bank fraud.  Crap that like pisses me off because I've had many strong buyer offers pasted by the listing agents which makes me wonder if shady stuff like you describe is going on.  A part of me hopes that the lenders stop approving short sales and just get on with foreclosing these homes and kick the deadbeats out.

Even if its the only way to get the house? 

Many people buying houses for cash at foreclosure auctions dont seem to have a problem with the cash for keys strategy.  I dont think they enjoy giving up some $$$ but its seems to be the norm and provides you with some peace of mind that the former owners wont wreck the place.

Cash for keys is one thing (it's an insurance policy), but wanting $20k-$25k to move forward with a short sale is just stupid.  Normally cash for keys will be $2,500 to $5,000 depending on the size of the home from my experience (I actually did a cash for keys agree for one of my clients).  Unless a house is one of a kind, I'd tell those sellers to pound sand....chances are the home might get foreclosed on if you pulled your offer at the last minute and then you can either buy it from the bank or from a flipper.

 

[sgip]

I'm surprised this even has to be answered.  ???

If it's not disclosed to all parties - in this case even the SS bank - then it's not permitted. The chances of this being discovered are in the high 100% range either preclose or post closing.

Even if you get the property, do you want to have it foreclosed on? In this case both your current lender AND the selling bank could pursue you for participating in loan fraud. Is this really something worth risking? Like any conspiracy (which this is BTW) the more participants in the scheme the greater the chance of it being discovered.

The phrase "once a problem, always a problem" should be heeded. If these sellers and realtards are willing to suggest this, what else are they willing to do? Perhaps not disclose the slab leak in late 2010, or the rats in the attic that have been feasting on electrical wires?

Many SS sellers are not leaving their home wearing only the cloths on their backs. I've encountered many sellers who openly say they've got cash stashed out of view just to give the bank the impression they cannot make their house payment. The cash they want at closing then is simply trying to squeeze blood from a turnip, done more out of spite than need.

You can get the house by participating, but you most likely will inherit quite a few other problems along the way.

My .02c

Soylent Green Is People.

 

[IndieDev]

I think you should do it.

Not only will you get a new short sale home, but you will also get a nice new bed at the state prison. It's like two homes for the price of one.

 

[usctrojancpa]

I think you should do it.

Not only will you get a new short sale home, but you will also get a nice new bed at the state prison. It's like two homes for the price of one.

Yup, being able to sleep at night without the fear of something coming back around to bite you in the behind = PRICELESS!

 

[rkp]

I hear you all loud and clear - stay away from this arrangement.  This is our first home purchase and I dont want trouble later.  Plus great point on what else someone might be hiding if they are ready to do this.

I wanted to clarify on going with the listing agent part.  So far in all of our offers, the listing agent is representing us to get both commissions but the purchase agreement has another company as the sellers agent.  For example, the listing agent might be "Rainbow Realty" and the selling agent on the contract is "Rainbow Homes".  Basically, its 2 different brokerages but really the same person. 

Am I the only one seeing this stuff?  I am surprised as I am not trying to attract the odd ball realtors or slimey owners.  From talking with friends, they have had similar experiences.

 

[usctrojancpa]

I hear you all loud and clear - stay away from this arrangement.  This is our first home purchase and I dont want trouble later.  Plus great point on what else someone might be hiding if they are ready to do this.

I wanted to clarify on going with the listing agent part.  So far in all of our offers, the listing agent is representing us to get both commissions but the purchase agreement has another company as the sellers agent.  For example, the listing agent might be "Rainbow Realty" and the selling agent on the contract is "Rainbow Homes".  Basically, its 2 different brokerages but really the same person. 

Am I the only one seeing this stuff?  I am surprised as I am not trying to attract the odd ball realtors or slimey owners.  From talking with friends, they have had similar experiences.

Maybe they do that so they can get paid both sides the commission...there might be something with the short sale rules with lenders that state that a agent may not be able to get the entire amount of both sides of the commissions.  I really don't know as I haven't listed a short sale.

 

[irvinehomeowner]

Sounds like you should be avoiding this one... the burglar alarm, the smoke alarm, the CO2 alarm, and the pool gate alarm are all going off at the same time.

 

[rkp]

I hear you all loud and clear - stay away from this arrangement.  This is our first home purchase and I dont want trouble later.  Plus great point on what else someone might be hiding if they are ready to do this.

I wanted to clarify on going with the listing agent part.  So far in all of our offers, the listing agent is representing us to get both commissions but the purchase agreement has another company as the sellers agent.  For example, the listing agent might be "Rainbow Realty" and the selling agent on the contract is "Rainbow Homes".  Basically, its 2 different brokerages but really the same person. 

Am I the only one seeing this stuff?  I am surprised as I am not trying to attract the odd ball realtors or slimey owners.  From talking with friends, they have had similar experiences.

Maybe they do that so they can get paid both sides the commission...there might be something with the short sale rules with lenders that state that a agent may not be able to get the entire amount of both sides of the commissions.  I really don't know as I haven't listed a short sale.

thats exactly the reason. 

 

[IndieDev]

I think you should do it.

Not only will you get a new short sale home, but you will also get a nice new bed at the state prison. It's like two homes for the price of one.

Yup, being able to sleep at night without the fear of something coming back around to bite you in the behind = PRICELESS!

I know I shouldn't be, but I am still slightly taken aback by the overall corruption present within the real estate industry. I wonder if the people who participate in the fraud would normally do the "right thing" in any other industry, or maybe real estate just exposes the true nature of all who participate.

 

[usctrojancpa]

I think you should do it.

Not only will you get a new short sale home, but you will also get a nice new bed at the state prison. It's like two homes for the price of one.

Yup, being able to sleep at night without the fear of something coming back around to bite you in the behind = PRICELESS!

I know I shouldn't be, but I am still slightly taken aback by the overall corruption present within the real estate industry. I wonder if the people who participate in the fraud would normally do the "right thing" in any other industry, or maybe real estate just exposes the true nature of all who participate.

The huge problem with the residential real estate world is that there are a lot of idiots, low lifes, uneducated folks, and greedy people that are licensed agents/brokers.  Add to that the incentives are not aligned with thier clients and you have a recipe for disaster (especially with the commission dollars being as high as they are here in Southern California).  I would hope one day that the NAR changes its rules to make the process more difficult and thorough to become a realtor...kind of like it is to get a CPA or CFA license.  Are there crooks and fraudesters that are licensed CPAs and CFAs, of course...but I would bet that percentage is lower than it is with licensed agents.  I've mentioned it to several of my clients, but the difference between your average residential real estate agent and your average commercial real estate agent is night and day.  For the most part, commercial real estate agents have been a pleasure to work with from my experience. 

 

[sgip]

When an industry is self regulated... and I use that term as loosely as it implies... with a mal informed customer base, and ancillary service providers who are for the most part predators, it's a fertile combination, ripe for this kind of behavior to flourish. Add to this poisonous cocktail 3,500 or so monthly transactions, while 5,000 or so licensed Real Estate practitioners fight for every deal. There are 10,000+ "loan officers" as well scrambling for the purchase business.

It's a bit like Barter Town out there. Two realtors enter, one realtor leaves. Unfortunately it's the seller/buyer that is left lying on the Thunderdome's floor once the process is through.

My .02c

Soylent Green Is People.

 

[usctrojancpa]

When an industry is self regulated... and I use that term as loosely as it implies... with a mal informed customer base, and ancillary service providers who are for the most part predators, it's a fertile combination, ripe for this kind of behavior to flourish. Add to this poisonous cocktail 3,500 or so monthly transactions, while 5,000 or so licensed Real Estate practitioners fight for every deal. There are 10,000+ "loan officers" as well scrambling for the purchase business.

It's a bit like Barter Town out there. Two realtors enter, one realtor leaves. Unfortunately it's the seller/buyer that is left lying on the Thunderdome's floor once the process is through.

My .02c

Soylent Green Is People.

What a great analogy from one of my favorite all-time Mel Gibson movies...Mad Max Beyond Thunderdome.  Unlike the main Tina Turner soundtrack song, the real estate industry would use some more heros. 

 

[Irvinecommuter]

Does not seem right to me since the "owners" have no say in who the house gets sold to in a short sale.  The bank is the hurdle for sale since they are the one who signs off on the sale.

The money (if anything) is probably going to the listing agent who controls the bids that go to the bank.

 

[usctrojancpa]

What you should do is get the listing agent to say this to you in an email and then you can turn them in to the DRE for being a part of such fraud.