Not a day goes by that I do not hear a story from a Realtor, loan originator or consumer about a questionable if downright bad experience with a third party short sale negotiator. We’ve reached a point in time where we ought to consider eliminating all third party short sale negotiators. At the end of this article I will provide suggestions for home sellers, home buyers, real estate brokers/Realtors, attorneys, and regulators in order to maximize good consequences and minimize bad consequences for all parties.

Yesterday I received a frantic call from a homebuyer we’ll call Maggie, who found me online via this blog post. Maggie fell in love with a short sale house but after her offer was accepted and moving toward the close of escrow, the third party short sale negotiator announced that since the lender would not pay his full fee (short sale negotiator was already being paid $3000), as the buyer, she would have to come up with an additional $7,000 at the close of escrow.  Maggie was in love with the house but didn’t have the extra 7K so the third party short sale negotiator suggested she get a loan and pay him after the close of escrow.

There are so many things wrong with the above scenario I don’t even know where to begin.  So let’s begin at the beginning. The growth of fee-based, third party short sale negotiators was fueled by a perfect storm:

1) Collapse of the real estate bubble and resulting growth of over-mortgaged homeowners.
2) Rapid growth in the need for real estate listing brokers who know how to negotiate a short sale.
3) Decimation of the subprime industry and resulting out-of-work loan originators and Realtors.
4) “Get rich quick