Loss Mit Services

Commission on a Short Sale — What Lenders Allow, and How the Reduction Actually Gets Negotiated

Posted on 21. Sep, 2026 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

“Am I actually going to get paid on this?” I get that question from agents all the time, usually about two minutes into the first phone call about a short sale listing, and I’d much rather you ask me on day one than find out the answer on the settlement statement in month five. So this post is the honest version, the one you’d get if you called me.

Do lenders cut commissions on short sales?

Yes. Not always, and not nearly as often as the 2009-era horror stories would have you believe, but it happens, and anyone who tells you it never happens is selling you something. What I want to do here is explain WHY it happens, because once you understand the why, you know exactly when to worry and when not to.

Start with who’s paying you. On a normal sale the seller pays the commission out of their equity. On a short sale there is no equity. Every dollar on that settlement statement, your commission included, comes out of the net that goes back to the investor who owns the loan, and that investor is already taking a loss. The banks don’t do short sales to help people, they do short sales to help themselves, and “help themselves” means recovering more than they’d expect to recover by foreclosing. So they have rules for what they’ll allow to come off the top, and the rules depend on who owns the loan. Who owns the loan is the first thing you need to know on any short sale, and this is one more reason why.

What do the big investors actually allow?

Here’s where the real numbers live, and they’re better than most agents expect.

1. Fannie Mae. The Fannie Mae Servicing Guide (section D2-3.3-01, if you want to look it up) lists the transaction costs a servicer can deduct from the sale price on a Fannie Mae short sale. Real estate commission is on the list, described as “customary for the market,” capped at 6% of the sales price.

2. Freddie Mac. Freddie put out a bulletin back in August of 2009 telling its servicers they could no longer condition approval of a short sale on cutting the listing broker’s commission, as long as that commission was 6% or under. Above 6%, the servicer is required to renegotiate it down to 6%. That rule has been the practice on Freddie files ever since.

3. FHA. HUD’s pre-foreclosure sale program, which is what an FHA short sale is called, allows a real estate commission of up to 6% as well.

So on the three biggest buckets of loans in Connecticut, a market-rate commission is an allowable cost and, in my experience, it usually survives the approval intact. That’s the good news, and it’s the part the 2009 stories leave out.

Where do the cuts really happen?

Three places, and after more than 2,000 of these I can tell you they’re pretty predictable.

1. Portfolio lenders and private investors. A local bank or credit union that kept the loan on its own books, or a private investor who bought the note at a discount, doesn’t have to follow anybody’s guide. Their “guideline” is whatever the person reviewing the file thinks is reasonable that day. Some are perfectly fair. Some see the commission as the easiest number on the page to trim. You don’t know until you ask, and I ask early.

2. Second mortgages and other junior liens. This is the big one. The second mortgage holder is often being asked to release a five- or six-figure lien for a few thousand dollars, and they know it. They can’t do much about the first mortgage’s payoff. They can’t do much about the taxes. So when they go looking for a place to squeeze, they look at the commission. It’s not personal. It’s just the only line on the statement they think they can move.

3. Any file where the net comes back a little short. This is the one that catches agents off guard. The valuation comes in, the investor runs the numbers, and the offer nets them a few thousand dollars less than their minimum. Somebody has to give. The buyer might come up a little. The seller, by definition, has no money to bring. So the negotiator on the lender’s side looks down the settlement statement and lands on the commission. This is the moment I’m talking about when I say I’ll tell you it’s coming before it comes. A good negotiator sees the net gap when the valuation lands, not when the approval letter shows up.

What changed with the buyer-agent side?

Since the NAR settlement took effect in August of 2024, buyer-broker compensation isn’t offered through the MLS the way it used to be. A lot of agents ask me how that plays on a short sale. The honest answer is that from the lender’s chair, nothing changed. The lender approves what’s on the settlement statement. If the seller is paying a buyer-broker fee, it shows up as a seller-paid cost, and the lender is looking at the total that comes off the top, however it’s split between the two sides. Write it up cleanly, put it where it belongs, and the total is what gets measured against the ceiling.

So here is the question to ask any short sale negotiator, licensed or not, before you refer a client: how exactly do you get paid, and where on the settlement statement does it land? A straight answer to that question is worth more than any promise about approval rates.

One settlement statement

I’ll say this every time commission comes up, because it’s the whole reason a commission can turn into a surprise. Every lienholder on the file gets the same settlement statement with the same numbers. The first mortgage, the second, the HOA, the tax collector, the town. If the first sees one commission figure and the second sees another, you don’t have a short sale, you have a problem that will surface at the worst possible moment. Same numbers to everybody, one statement, is how we run every file, and it’s how your commission stays what it was approved to be.

The takeaway

Lenders do cut commissions on short sales, but not randomly. On Fannie Mae, Freddie Mac and FHA loans, a commission up to 6% is an allowable cost and usually survives. The cuts come from portfolio lenders, junior liens, and files where the net comes up short, and all three of those are visible early to someone who’s looking. Know who owns the loan. Ask your negotiator how they get paid. Insist on one settlement statement. Do those three things and commission stops being the thing you find out about last.

Send me the address, the approximate payoff, and who services the loan. I’ll tell you within a day whether it’s worth pursuing, and what the commission picture usually looks like on that kind of loan.

As always, feel free to reach out to me with any questions.

Sean Wilder
Loss Mit Services
860-265-3727
CT Debt Negotiator NMLS #828273
Loss Mit Services is a dba of Accredited Home Services, LLC · CT Debt Negotiation License DN-828273