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

The Expired Listing That Was Never Actually Priced — Why the Cuts Stopped at the Payoff

Posted on 31. Aug, 2026 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

I want you to try something this week. Pull up your expired listings from the last year — yours, or the expireds you’re prospecting — and look for one specific pattern: the house sat for months, took two or three price reductions, and then the reductions just stopped. Not at a round number. Not at a market number. At a very specific number. And if you go look up the mortgage balance on that property, you’ll find out exactly why the cutting stopped where it did.

I see this constantly, and most agents walk right past it.

Why do price reductions stall at a weird number?

Because that listing was never priced to the market in the first place. It was priced to the payoff.

Here’s how it happens, and no one in the transaction is being dishonest — it’s just incentives doing what incentives do. The seller owes what they owe. When the agent sits down at the listing appointment and suggests a price, the seller does the math in their head: list price, minus commission, minus conveyance tax, minus the payoff… and if that math goes negative, they can’t sign. They don’t have the money to bring to closing. So every pricing conversation on that listing quietly hits a floor, and that floor has nothing to do with what buyers will pay. The agent may not even realize it’s happening — the seller just keeps saying “I can’t go any lower than that,” and the agent hears a stubborn seller instead of an underwater one.

Then the market votes. Showings slow down, feedback comes back on price, the reductions start — and they stop cold the moment the next cut would put the seller underwater at the closing table. The listing rides out the rest of the agreement at a price the market already rejected, and it expires.

The market doesn’t care what the seller owes. And the seller can’t take what the market is offering. That gap has exactly one fix, and it is not another six months on the MLS at the same number: somebody has to negotiate with the lender.

So then you ask, “why would the bank ever take less than they’re owed?”

I get this question every single time, and the answer is the most important thing in this whole post: the banks don’t do short sales to help people. They do short sales to help themselves.

When a lender evaluates a short sale, they’re running a math problem. On one side: approve the sale today and take the net proceeds. On the other side: foreclose, pay the legal costs, wait out the process, take the property back, pay to secure and maintain and insure it, then sell it as a bank-owned property — usually in worse condition than it’s in right now, because vacant houses don’t age well. When they run those numbers, the approved short sale frequently nets them more. That’s the entire reason the process exists. Nobody at the bank is doing anyone a favor — they’re protecting their own recovery, and the homeowner and the agent happen to benefit from it. I’ve worked on thousands of these files and I can tell you the lender’s math is the engine of every single one.

What do you actually say to that expired seller?

This is where the expired listing becomes a referral trigger instead of a dead lead. The homeowner has usually concluded the house “can’t sell.” That’s not what happened. The house couldn’t sell at a price that clears the debt. Those are two different problems, and the second one has a process. A few things to keep straight when you have that conversation:

1. Be honest about the timeline. A short sale typically runs 4 to 6 months from start to close, and the lender’s approval alone commonly takes 60 to 120 days before you even get to the closing window in the approval letter. If someone tells you short sales wrap up in a couple of months, they’re working off a very old playbook. The seller who hears the real timeline up front stays in the deal; the one who was promised a fast close walks in month three.

2. Make no promises about approval. Nobody can guarantee a lender says yes — not me, not anyone, and you should be suspicious of anybody who talks like they can. What an experienced negotiator can do is look at the loan type, the lienholders, and the numbers, and tell you whether the file is worth opening. That’s an honest answer, and sellers respect it.

3. Keep the seller current on their obligations to their lender. Nothing in this process involves ignoring the servicer or the mail. Whether and how a seller pays anything is between the seller, their lender, and their own advisors — the short sale conversation is about resolving the debt through a sale, not avoiding it.

4. Know what you’re checking before the appointment. The payoff versus realistic value is the whole ballgame. If you can get even an approximate mortgage balance and compare it against what the price history already told you about value, you’ll know whether you’re walking into a normal relisting or a short sale before you ring the doorbell.

And one thing NOT to do: don’t relist it at the same price and hope. The market already voted. Hope is not a pricing strategy.

Why the agent who explains this usually gets the relisting

Think about what that homeowner has heard so far: months of silence, then an expired notice, then a stack of postcards from agents promising better marketing. You’d be the first person to walk in and correctly name the actual problem — the debt, not the marketing. In my experience the agent who says “your house didn’t fail, your payoff is bigger than your value, and there’s a process for that” is usually the one holding the new listing agreement when it’s over. Not because of a slicker presentation — because they told the truth about a problem everyone else misdiagnosed.

The takeaway

An expired listing where the payoff exceeds any realistic list price is not a failed listing. It’s a short sale that never got started. The tell is sitting right in the price history: reductions that stall at a suspiciously specific number. Find those files, check the balance, and have the honest conversation — real timeline, no promises, a process instead of a diagnosis of failure.

If you’ve got one of these — expired, price cuts that stopped cold, a payoff that doesn’t fit the value — 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

Only Three Companies in Connecticut Are Licensed to Negotiate Short Sales — Is Your Negotiator One of Them?

Posted on 23. Aug, 2026 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

I get this question from agents all the time: “Sean, does it really matter who negotiates the short sale? My seller found a company online.” The answer is... it matters more than almost anything else on the file, and here’s a number that should tell you why.

There are three companies in Connecticut licensed to negotiate a short sale on a homeowner’s behalf. Three. In the entire state.

And no, I’m not saying that from memory. I pulled the Department of Banking’s licensee list before writing this. One of the three is a national nonprofit housing counseling agency. Mine is one of the other two.

So what does the law actually say?

Simply put: in Connecticut, negotiating a short sale for a homeowner is “debt negotiation,” and debt negotiation requires a license.

That’s not my interpretation — it’s the plain text. Conn. Gen. Stat. Section 36a-671 defines “debt negotiation” to include “the negotiation of short sales of residential property.” Subsection (b) prohibits engaging in that business — or even offering to engage in it — without a license from the Department of Banking.

So then you ask, “if that’s true, how are there ‘short sale specialists’ advertising all over the place?” That is exactly the right question. The exemption list is short, and the Department of Banking publishes it right on its debt negotiator licensee page:

1. Attorneys practicing law in Connecticut. An attorney handling the negotiation as part of their law practice is exempt. Plenty of good short sales get done this way.

2. Banks and credit unions. They’re regulated separately.

3. Licensed debt adjusters. A different license, separately issued.

4. Nonprofits. Housing counseling agencies and the like.

Read that list again. Real estate brokers are not on it. A real estate license does not cover short sale negotiation in Connecticut. I hold broker licenses in three states, and none of them is the reason I’m allowed to negotiate your seller’s file — the debt negotiation license is.

“Okay, but it’s not my license on the line. Why do I care?”

Because the federal government thought of you too.

The MARS Rule — the FTC’s Mortgage Assistance Relief Services rule, now 12 CFR Part 1015 — has an assisting-and-facilitating provision at Section 1015.6. It reaches anyone who provides substantial assistance to a provider when they know, or consciously avoid knowing, that the provider is violating the rule. And the FTC’s own compliance guidance names supplying leads and referrals as an example of substantial assistance.

In plain English: the referral is the exposure. The agent who hands a homeowner to an unlicensed negotiator isn’t a bystander — they’re the one who made the introduction.

I’m not telling you who to work with, and I’m not going to name names. I’m telling you the list is public and the check takes ninety seconds on NMLS Consumer Access. If the negotiator isn’t licensed and doesn’t fit one of those four exemptions, ask them why not — then ask your broker or a real estate attorney what it means for you.

Why does the license exist in the first place?

Follow the incentives, because that’s what this law is really about. A homeowner in default is about the easiest person in the world to take advantage of. So the state wants somebody on the hook. The license comes with:

1. A surety bond. There’s money behind the license if something goes wrong.

2. An application and fitness review. The state looked at who’s running the company before saying yes.

3. A hard cap on fees charged to the homeowner — collectible only after all the contracted work is finished. Nobody licensed is taking an upfront fee from your seller.

What it buys you, the agent, is simpler: one settlement statement, with the same numbers going to every lienholder on the file. That’s how these files are supposed to run, and it’s the difference between a negotiation and the kind of two-sets-of-numbers arrangement that ends careers.

The takeaway

Before your seller signs anything with any short sale negotiator — me included — look them up. NMLS Consumer Access, ninety seconds. On the state’s list I appear as Accredited Home Services, LLC, which is the entity behind Loss Mit Services, license DN-828273 — the first debt negotiation license Connecticut issued after the requirement took effect in 2009.

And one more thing, so you hear it from me instead of at the closing table: lenders on these files sometimes require a commission reduction. That negotiation is part of the deal, not a surprise at the end.

If you’re sitting on a listing that smells like a short sale, 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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