How Much Commission Should a Short Sale Listing Agent Earn?

Short Sale Negotiations Are Hard Work

A topic that I have not really written too much about with regard to short sales is the commission. Negotiating a short sale of one of the toughest parts of the short sale transaction. There is so much more involved in the role of the listing agent in a short sale. In a traditional listing, the listing agent takes the listing and is responsible for securing the property, marketing the property, and receiving offers on the property. Add to this mix hours and hours of phone calls to the banks, short sale package preparation, and stress management of all the parties involved (who have probably had to wait far too long for a short sale approval letter).

While there are many companies who provide third party short sale negotiation services (Short Sale Expeditor® being one of them), the bottom line is this: it does not matter what qualified individual or group is doing the short sale processing, short sale negotiation is a heck of a lot of work for the money.

When the real estate market went bust a few years back, the major lending institutions would attempt to hack almost every real estate commission to nothing. Dual agents or two agents from the same brokerage would be asked to share three percent instead of six. Second lien holders would ask you to reduce the six percent commission allocated by the first lien holder to four percent and then give the second lien holder the other two percent to release their lien. Are you following me here? Not nice!

Whether it is a third party negotiator, a listing agent, or an individual working on the listing agent’s team who is attempting to make the stars align and get this deal to close, this individual is working extremely hard—and probably for a lot less money than they would make in a traditional transaction. Who cares that most of the real estate agents of the United States took a pay cut a few years back when housing prices dropped by fifty percent? Who cares if Junior needs braces or a new pair of shoes? (read: sarcasm)

While the commission problems I described above are still going on, they appear to be a lot less prevalent due to all of the government programs. A while back Fannie Mae stated that they would always pay six percent commission on a short sale. The HAFA programs also assure the six percent commission. So, that’s all good news.

Would you reduce your commission?

Everyone knows that I love short sales. But, I propose the following food for thought: If the banks ask for a commission reduction, does that not perpetuate the notion that our service is not worth its standard price? How will these commission reductions reflect on future generations of agents?

Each and every time that the bank requests a commission reduction, the agent is between a rock and a hard place. One the one hand, the agent wants what’s best for your client (at all costs and/or losses) and on the other hand, there is the obvious need to earn a living. So every time I find myself in this position, I cannot help but think that I am allowing others to undervalue my service, a service that on its worst day is excellent.