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

Connecticut Foreclosures Are Down 31 Percent. Here’s Why That Isn’t the Good News It Sounds Like.

Posted on 14. Sep, 2026 by ctlms in Blog

Agents keep asking me some version of the same question: "Is the foreclosure wave here yet?" Everybody's been reading the national headlines, and the national headlines say foreclosures are climbing. So I pulled the numbers for Connecticut, and the answer is weirder than a yes or a no. It's "no, and that's not the good news it sounds like."

Let me walk you through what the current data actually says, because there's one number in it that changes how you should be handling every listing appointment with a payoff problem.

What do the numbers say?

ATTOM Data Solutions puts out the foreclosure report most of the industry works from. Their Mid-Year 2026 U.S. Foreclosure Market Report, released in July, counted 227,548 U.S. properties with a foreclosure filing in the first six months of 2026. That's a default notice, a scheduled auction, or a bank repossession. Nationally that figure is up 21 percent from a year ago and up 28 percent from two years ago. Foreclosure starts were up 18 percent. Bank repossessions were up 33 percent. So yes, nationally, the trend is up.

Connecticut went the other direction. 1,763 filings in the first half of 2026, which is DOWN 31 percent from the first half of 2025 and down 38 percent from 2024. That works out to 0.11 percent of housing units, or one in every 875. We rank 29th out of 50 states. The most recent monthly report, July 2026, had Connecticut at 323 filings for the month, one in every 4,773 housing units.

So if you've been waiting for a flood of distressed listings to show up on the public foreclosure lists, the data says you're going to be waiting a while. That's the part that sounds like good news.

What's the number that actually matters?

Same ATTOM report, different table. A Connecticut foreclosure that was completed in the second quarter of 2026 had been in the foreclosure process for an average of 1,626 days. That is about four and a half years. It's the fourth longest timeline in the country, behind Louisiana, Hawaii and New York. The national average is 563 days, and nationally that number has been dropping for seven quarters in a row. Ours hasn't really moved.

Why is Connecticut so slow? Connecticut is a judicial foreclosure state. The bank can't just post a notice and hold an auction the way they can in Texas, where the average is 155 days. They have to file a lawsuit, serve the homeowner, get through the court's Foreclosure Mediation Program if the homeowner is an owner-occupant and elects it, get a judgment, and then either a strict foreclosure with law days or a foreclosure by sale with a committee auction. Every one of those steps has a calendar attached to it, and every one of them can get continued. I'm not knocking the process. It gives homeowners real protection. But you need to understand what it does to the numbers on the file.

So what does a four-and-a-half-year timeline do to a file?

Here's the part nobody explains to agents, and it's the reason I wanted to write this one. During a foreclosure, the payoff does not sit still. It grows. Every single month.

1. Missed payments keep accruing. The homeowner isn't paying, but the loan is still amortizing on paper and every missed payment gets added to the balance owed.

2. Default interest and late charges pile on top. Most notes carry a higher interest rate once the loan is in default, and the late fees are monthly.

3. The servicer advances the taxes and insurance. The mortgage servicer is the company you send your payments to. When there's no payment coming in, they pay the town and the insurance company out of their own pocket to protect the collateral, and every dollar of that gets added to what the homeowner owes.

4. Attorney fees and foreclosure costs. The bank's foreclosure attorney bills the file for every filing, every appearance, every mediation session. Title work, appraisals, property inspections every month to make sure the house is still standing. All of it goes on the payoff.

So then you ask, "how much are we talking about?" It depends on the loan, but I'll give you a made-up round number to make the point. A seller who was $15,000 underwater on the day the lis pendens was recorded is not $15,000 underwater in year three. They may be $50,000 or $60,000 underwater, and the house has had three more years of deferred maintenance on top of it. The gap gets wider the longer it sits.

Why does the bank care about that?

This is the part that makes the whole business work, so pay attention. The banks don't do short sales to help people. They do short sales to help themselves. The investor who actually owns the loan, whether that's Fannie Mae, Freddie Mac, HUD, or a securitized trust, is running one calculation: what do we net if we approve a sale today, versus what do we recover if we carry this thing through four more years of Connecticut foreclosure, pay the attorney the whole way, take the house back, and then sell it as an REO in 2030?

When the answer favors the sale, the file gets approved. When it doesn't, it gets denied. That's it. That's the whole decision, and the 1,626-day timeline is a big thumb on the scale, because every year the bank has to carry a Connecticut file is another year of cost they'd rather not eat. I am not telling you that means your file will be approved. Nobody can tell you that before the valuation is ordered and the net is calculated, and I wrote a whole post last week on why. What I'm telling you is that the incentive exists, it's real, and it's bigger in Connecticut than almost anywhere in the country.

What does this mean for you at the listing appointment?

Put the two numbers together. Filings are down 31 percent, so the public lists are thin. Timelines are four and a half years, so the sellers who ARE in trouble have been in trouble for a long time, quietly, and their payoff has been growing the whole time.

Those sellers are not showing up on a foreclosure list you can buy. They're showing up in front of you. They're the expired listing that never got a price reduction because the price was already at the payoff. They're the relocation seller carrying two payments. They're the divorce where neither side can refinance. They're the estate where nobody has made a mortgage payment since the funeral. The lis pendens might be two years old, or it might not have been filed yet.

So here's the best practice. Ask about the payoff before you price it. Get the mortgage statement, and if there's a second mortgage or a home equity line, get that one too. Ask when the last payment was made. If the payoff plus closing costs is anywhere near the realistic list price, stop and call somebody before you sign the listing, because the standard playbook is going to fail and it's going to fail slowly.

The takeaway

Connecticut's foreclosure numbers are low, and they're going to stay low for a while, and that has nothing to do with whether your seller is in trouble. It has to do with how long the process takes. Fewer filings, longer timelines, bigger payoffs. The problem is still there. It's just quieter.

Send me the address and the approximate payoff. I'll tell you within a day whether it's worth pursuing.

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

“The Bank Will Never Approve It” — Why Nobody, Including Me, Can Promise You a Short Sale Approval

Posted on 08. Sep, 2026 by ctlms in Blog

I hear two sentences about short sales from agents, and on the surface they sound like opposites. The first one is "the bank will never approve it," usually from an agent who got burned once and swore off the whole category. The second one is "don't worry, we always get them approved," usually from somebody trying to win the referral. Here's the thing I want you to take away from this post: those are the same sentence. Both of them are a guess dressed up as a fact. Nobody can tell you in advance what a lender is going to do with a file, and after more than 2,000 of these I'm including myself in "nobody."

So then you ask, "Sean, if you can't promise an approval, what exactly am I referring my client to?" That's a fair question, and the answer is worth understanding, because once you know WHY the promise is impossible, you get very good at spotting the people who make it anyway.

Who is actually saying yes?

Start here, because it's the thing most agents have backwards. The company your seller mails the payment to is the mortgage servicer. In most cases the servicer does not own the loan. An investor does. That might be Fannie Mae, Freddie Mac, HUD on an FHA loan, the VA, or a securitized trust with a name nobody can pronounce. The servicer's job is to run the file against that investor's guidelines and, on a lot of files, send it up for the investor's sign-off. Who owns the loan is the first thing you need to know on any short sale, because it tells you whose rules you're playing by.

And those rules are not "does this seem reasonable." They're a box. The file either fits in the box or it doesn't, and a big part of what we do all day is try to make the homeowner's real circumstances fit into the box the best that we can.

What's in the box?

Strip away the paperwork and every short sale decision comes down to three questions.

1. Does the hardship fit? The investor wants to see a reason the borrower can't keep paying or can't bring money to closing. Job loss, divorce, a death, a medical event, a relocation, an unaffordable payment. Different investors accept different hardships and want them documented different ways, but there has to be one, and it has to be real.

2. Does the valuation support the offer? After the offer goes in, the servicer orders its own opinion of value, an appraisal or a broker price opinion depending on the loan type. The offer gets measured against that number, not against the list price and not against what the buyer thinks the house is worth. If the valuation comes back high, the offer gets countered or denied no matter how clean everything else is.

3. Does the net beat foreclosing? The investor compares what they'll clear from this sale against what they'd expect to recover if they foreclosed, took the house back, held it, and sold it themselves. The banks don't do short sales to help people. They do short sales to help themselves, and only when that comparison says so.

Now look at the order those things happen in. The valuation gets ordered AFTER the offer is in. The net gets calculated AFTER the valuation comes back. The investor's answer comes last. So anyone who tells you the result before the offer exists is promising something they have not seen yet. They don't have the valuation. They don't have the net. They don't have the investor's decision. What they have is a sales pitch.

Isn't "the bank will never approve it" the safer bet, then?

No. It's the same guess pointed the other direction, and in my experience it usually traces back to one bad experience with one servicer a long time ago. Times have changed. Files with a real hardship, a market-priced offer, and a complete package get approved every single day. We see it literally every day. What I cannot do is tell you which day, or whether your seller's file will be one of them, until the file is actually built and the valuation is back.

And there's a cost to the pessimistic guess that agents don't always see. When you tell a homeowner "the bank will never approve it," they hear "there's nothing to be done," and the next stop is a foreclosure that might not have been necessary. That's not you being cautious. That's you making a promise about the bank's decision that you're in no position to make, just a negative one.

So what CAN I tell you?

Plenty, and quickly. Before a file is ever opened, I can look at the loan type, the lienholders, and the rough numbers and give you a straight answer on three things:

1. Whether the loan type has a workable path. FHA, VA, conventional, and USDA all have their own short sale programs with their own requirements. Some are more predictable than others.

2. Whether the lien stack is survivable. A quiet second mortgage, a tax lien, an old judgment, an HOA balance. Junior lienholders have to be dealt with too, and some of them are a lot harder to deal with than the first mortgage.

3. Whether the numbers are in a range worth opening a file over. If the payoff is so far above realistic value that no investor's math will ever work, I'll tell you that, and I'd rather tell you now than in month four.

That's an honest answer. It's also a better one than a promise, because I've watched what happens to the seller who was promised an approval. They're the ones who walk in month three when the counter comes back, because nobody prepared them for the possibility. The seller who heard "here's the process, here's the real timeline, and here's what can go wrong" is the one who stays in the deal.

While I'm being honest about timelines: a short sale typically runs 4 to 6 months from start to close, and the lender's approval alone commonly takes 90 to 120 days before you even get to the closing window in the approval letter. If somebody quotes you two months, that's the same old playbook as "we always get them approved."

The takeaway

"The bank will never approve it" and "we always get them approved" are both guesses, because the three things that decide a short sale, the hardship, the valuation, and the net, don't exist until after the offer is in. Nobody can promise the result. What a good negotiator can do is tell you, up front and fast, whether the file is worth opening and what's likely to be the hard part.

So the next time someone tells you they always get them approved, ask them a simple question: how, exactly, do you know that before the valuation has been ordered? Then send me the address and the approximate payoff. I'll tell you within a day whether it's worth pursuing.

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

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