Short Sale Tip 11-12-09

Posted on 12. Nov, 2009 by ctlms in Short Sale, foreclosure

Some lenders just LOVE to cut commission.

Yes, unfortunately there are some lenders that have policies about how much is an acceptable commission on a short sale.  Many will approve whatever is normal in the area.  FHA, Fannie Mae and Freddie Mac all allow a maximum of 6% if it was in the listing agreement.  Don't forget to ALWAYS get at least a 6% commission when it is a short sale.

Now some lender such as Ocwen Loan Servicing have less favorable policies.  Ocwen's policy when they have to take a discount is no more than 4% commission no matter what.  Kinda.  They will sometimes allow 5% if they consider the offer to them to be "good".  They are also more firm on this policy when they are in the 1st mortgage position.

Now I am of the mind that "some rules are made to be broken".  And I think this is one of those.  Thus, whenever possible we go to bat HARD to higher commissions.

Obviously if every lender did this, agents would flock away from short sales in droves which is one of the many reasons why cutting commissions is just STUPID in the first place.  But the lenders are in control, unfortunately.

Anyway, with all that said...I just got an approval letter on a short sale where Ocwen was the second mortgage.  They approved an offer to them of 10% of their principal balance, just over $2,400, and with 6% commissions.

This took me calling every day for 5 days until I finally got a rep that would listen to why it made sense to Ocwen to accept the offer.  I'm not going to get into the specifics, but the point is, without that persistence, and knowing that not all rules are written in stone, this deal would have been capped at 5%.

Another thing to note about commissions and short sales has to do with the number of agents and brokerages involved with the offer.  If there is only one agent involved it is highly likely the bank will cut the commission.  Some lenders will cut it as low as 3% others will allow 4-5% when they would have allowed 6% with 2 agents.

Now it gets worse when there is only one brokerage involved.  Many lenders will, regardless of how many agents are involved, cut the commission when there is only one broker.  If there are two agents at the same brokerage we can sometimes get the lender to agree to the full commission, but not always.

The point here is if you are thinking of working a short sale as a dual agent, you may be better off referring the buyer to another agent, and preferably one in a different brokerage to assure the maximum commission.  No point in working both sides if you will only be paid for one.  And a referral fee for the other side is better than working it for free.  Having one brokerage has the highest likelihood of a cut in commissions.

So the point of the this Short Sale Tip is to know going in what likelihood is of a cut in commission.  You want to be informed of the chance of a commission cut and you definitely want to inform the buyers agent of it.  The buyers side will be very upset if they had no idea of the possibility of a commission cut and then after months of waiting for an approval, find out they are getting paid less.  And as with all short sales, always disclose in the MLS that commissions are subject to lender approval.

Check out our Website at for more information about our services.

Subscribe to this blog via RSS for instant updates.

As always Visit the Ask The Expert Page to leave your questions or contact me directly if you need immediate assistance at or visit