Entry by Melinda Hendershott

Short Sale negotiation and fee schedules

Is anyone actively doing short sale negotiations for clients? How are you making money? Are you negotiating a commission or a fee as part of the deal with the bank?? I had a call yesterday that prompts me to figure this out quickly in case she decides to go this route. The home owner doesn't have much money to pay for anything. Anyone know how attorneys who do this get paid?

Thanks, Melinda



The short sales I've done have all been commissioned based. I've written my listing agreements with a full commission to be paid by the lender. In a couple of cases I've had to negotiate with the lender over what they will pay but I do get paid. Many attorney's in my area that are involved in negotiating short sales take their fee from the listing agents commission.

The short sales I've done are all commission based. More and more attorneys in this area (Chicago) are specializing in short sales. For the most part, their fees are substantially higher than what they charge for a "normal" transaction (3-5 times higher), but if the deal doesn't close, they too get no fee. Higher risk = higher compensation (what a concept!). Their fee, like the broker's, gets "approved" or adjusted by the lender and comes out of the transaction.

Thanks for your comments I really appreciate them! I forgot to add that in this particular situation, the FSBO seller has identified a potential buyer. So this isn't just a listing situation. It is more like Mollie's FSBO transaction service but more complicated and more time consuming AND the seller doesn't have money thus she hasn't been making mortgage payments. I am assuming that my only way to get paid is to build it (fee or commission) into the negotiation with the bank, but again, I may not get paid anything unless the deal closes....
If anyone has any suggestions or thoughts, keep them coming! I love hearing from others!!

We had this question come up during Ron's webinar on Tuesday. I haven't done many short sales so I'm very interested in comments from ACREs also!

A couple of things come to mind when you mention a FSBO situation for a short sale. First and foremost is the buyer any relation to the seller? If so the deal won't pass the "arms length transaction" required by the seller. Second has the lender ordered a BPO? Does the seller have the home priced to pass the lenders sales price ie close to market value?

With a short sale I personally would never go anyway but commission. The seller can't pay and lenders scrutinize the HUD-1 for anything they think is out of the ordinary in regards to selling fees.

Finally some states have said a real estate broker can not charge upfront fees for service related to short sales. All food for thought.

If you are new to short sales you might want to consider getting your CDPE certification. Much like ACRE, they train you, have webinars, and there is a forum for questions like this.
In FL all fees are paid by the bank. Makes sense because seller has no money.
There are also rules about the banks not cutting your fees (although they can cut the atty fees)so make sure that you don't negotiate down your commission.
Unlike REO's who CAN cut your commissions, the banks have to pay 6% and although they can't cut your commission, they get around this by saying the money is not enough. There are ways to get around that too though.
Find out if your seller has a Fannie Mae loan, Freddie Mac loan etc, the rules are all different with short sales and most of the banks don't even know this either. They hire a lot of people who are new and have no training.
Perhaps we should have a short sale webinar!

I'd love to have a webinar on this topic. Paula, would you host it?

Thank you Cindy and Paula, all great thoughts! Yes to the webinar.
I have some short sale experience but not so much as a broker representing a client. I will look up CDPE, thanks!
This situation would pass as an "arms length transaction" but I don't know if they have ordered a BPO. She has been in contact with the lender for a couple of years (1.5 without any payments!!).
Another broker I just talked to on the phone here in WNC said I would have to watch out for the bank reducing my commission, maybe there aren't rules about that in NC. he said I should start at 7% to try to get 6% (that's been his experience). So, one question has been answered this morning, this is a commission based transaction.

I have been doing short sales for the last year and the bank always pays the commission. Sometimes they try to negotiate it down. I had one that would not pay over 4% and I had a referral fee of 25% to pay. Not much left after that in my commission. I took the CDPE course prior to doing my first short sale. It was a godsend in that they supply support after the class. I also subscribe to a couple of short sale websites that have a sharing of information regarding the banks and their experiences with each. One also has a HELP ME! blog where any question can be answered by others with more experience. Hope this helps.

Hey All !!

I found these comments really helpful, especially since short sales are becoming increasingly common in Connecticut. So thanks all, for the info!

Paula, a webinar would be so helpful and appreciated!

I'll be checking into the CDPE also, hoping it's available online.

To protect our futures, i am afraid that knowledge in Foreclosures, Short-sales, and suicide mitigation are in order. one in every 4 homes sold today in America are bank owned, think of the result of the rest of the neighborhoods values. Knowledge of how to work the ACRE model into this "Upon us" and "Upcoming onslaught" will be crucial. The market will continue to look for alternative methods when the tide rolls out and we discover who is not wearing any bating suits.

The CDPE class is now offered online. The website is www.cdpe.com you can sign up there.

Thanks, Jeanette! Glad to hear that the CDPE class is offered online, I'll sign up for it asap. Which websites do you subscribe to?

The website that I use when I have issues with a particular bank, or an issue that I am unsure of how to handle, I login to Short Sale Superstars website. This was started by Florida Realtors that have a lot of experience in short sales and many others from all over the country who have dealt with the many banks. The web address http://shortsalesuperstars.com/

The second site that I use to find information regarding handling of issues of short sales is http://www.theshortsaleguide.com/

Hope this helps!

I specialize in short sales, and the home owner's lender always pays the commission. Usually it is a percentage of the sales price.

Of course the overwhelming theories that you here are that commissions are the answer. Its time to band, be remarkable, what is the marketing plan that Acres can use. Brainstorm.

As much as I'd like to say with short sales there is a "better" way we have enough trouble with the lenders as it is. I for one will stick with a commission for short sales. Lenders understand what it is and a seller doesn't have the funds to pay us on a fee schedule. Anyone who has worked them successfully knows the issues.

As far as the comments about a bank must pay you 6% that is not true unless it is a Fannie or Freddie loan. Then they are bound by 6% otherwise commission is one of the first things they try to cut.

Glenn have you done any short sales where you have been paid differently than a commission?

No, I don't sell real estate we help real estate sell. We challenged and worked with Wharton and Harvard to figure out the buyer side of the transaction. I am saying thaat the think tanks are the great unlocker. If it were easy than the commissions wouldn't reign for 125 years. I want to discuss it, I'd love to be part of the out of the box thinkerss trhat are part od this group.

In case you have not read the new rules regarding MARS and short sales you may want to. One of the things specifically mentioned as violation of the FTC rules.

Per FTC:

"Therefore, brokers whose business model involves upfront fees need to be aware that if they take an upfront fee from a client and then later help the client negotiate
a short sale, they will be in violation of MARS."

If you are a member of NAR you can read all the FTC rules here:


This is one of the few conversations on the Exchange that I don't have much to add because my experience with short sales is limited. However, I want to applaud all of you for the spirited discussion.

One thing that gives me hope about the model of consulting in that by providing choices in how you practice, you don't have to adhere to one thing or another. It sounds to me that short sales are an area that is very dependent on contingent commissions as it now sits. And if you're doing well working with short sales and getting paid regularly, you may not want to rock the apple cart.

However, I applaud Glenn's initiative to also explore if there are better ways. I know that many of you put in long hours on all kinds of real estate work and DON'T get paid. So, whether you are talking about short sales, or any other kind of real estate work, do what pays you in the present, but please look to how it can be done better.

Remember that buyer agency, when first introduced as a concept, was met with a lot of resistance from the powers that be. Many said that buyers could not have their own representation. However, the industry was forced to come around. My one regret (which I know is shared by many) is that the industry might have changed the representation model but did nothing to reform the co-broke system. Frankly, it was probably just too hard to change entrenched minds on how to do things.

Let's not do that now. Do what works now but don't forget to keep your eye on how it can be done better.

Being in business to make a profit, I charge all my fees to each client. Retainer fee, Commission and Closing fee.

I have worked successful short sales for a few years now. When I became an ACRE, I wondered how to apply this to the short sale, I have yet figured how to consult to short sale clients and be compensated on a fee based pay plan as opposed to commission.  Since the seller/borrower doesn't have money to pay the mortgage, it is unlikely they will have any money to pay upfront fees. The banks pay commission at closing, if it closes. From my perspective it seems as if the only way to be compensated is through a commission.  

I am with Glenn and feel that it will be up to the ACRE's to educate the industry and the banks on a better way to do things. 


I am glad to see the recent clarificaiton on MARS that we can go back to accepting up front fees again for our short sale listings.  We have also been successful in the past at having the Buyers pay 2k - 4k in fees to a negotiator if the file is approved.  The Buyer agents have been a little difficult to get this fee agreed to since they want to try to have their buyer get the purchase with little out of pocket expese to their clients.  Still a lot of work and only about 85-90% are getting approved by the slow moving banks who can't seem to understand what it means to get urgent on a file.

This page contains a single entry by Melinda Hendershott published on March 4, 2011 8:05 AM.

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