Hi there. Today I’m going to write a little bit about short sales and commissions. Jack Lewitz wrote a post yesterday and in it he mentioned a Broker at one of his open houses who said “I don’t like showing short sale properties because I don’t know if I am going to get paid my commission!”
Well….OK then…..that’s not a good thing. Getting folks to look at short sales is difficult enough due to the time involved in getting them approved. You certainly don’t want to give your peers another reason to not show them.
If you have ever been involved in negotiating with lenders on a short sale, then you know, that they are notorious for wanting to cut the commission down. It’s almost a rule of thumb that they will approve 5% when two brokers are involved and 4% when there is only one.
By the way, this post is not about commission percentages beyond the statement of fact above. Commissions are always negotiable. Just thought I’d get that little “Sherman” disclosure out of the way.
Anyway, what’s happening, in quite a few markets, is that co-brokes are being offered in the MLS with a little added verbiage that reads something like this: “The sale and commission is subject to third party approval. The co-broke will be 50% of the approved commission.” I’ve seen listings where the co-broke was an outrageously high amount to “catch your attention” knowing full well that that is not what you would get paid. This causes problems.
My personal opinion is that the co-broke being offered is the co-broke that needs to be paid. Anything less than this harms the integrity of the MLS.
So, as a listing Broker, who is listing short sales, what can you do? I mean the reality is that you too want to be paid for your services. Especially on a short sale where it is a real pain in the arse.
Let me throw a few ideas at you.
You need to offer a high enough co-broke so the property will get shown AND you need to honor it.
When negotiating with lenders you need to be firm. Just because they want to reduce the commission doesn’t mean you have to. The lender only cares about the Net. You need to explain to them that the reason the Net is as high as it is, is because you offered a good co-broke to get buyer’s agents through the door.
Charge the Seller a nonrefundable fee, at time of listing, to help offset your expenses involved in selling and negotiating a short sale. The reality is short sales are very time consuming. You should be making more not less.
The listing agreement is between the Seller and the Broker. The bank is NOT a party to this contract. Just because the bank reduces the commission it doesn’t mean the Seller is off the hook. The Seller may not be able to receive money at closing but they can certainly bring money.
This whole commission reduction “thingie” is a mind set problem. Change the way you think. Helping Sellers avoid a foreclosure is NOT charity work. If Sellers fully understood the advantages of avoiding a foreclosure, by getting a successful short sale approved, they would be more than happy to pay your fee.
What do you think about that?