Don't Let Lenders Dictate Your Commission!

Hi folks. Recently one of our members over at www.ShortSaleSuperStars.com posted the comment below about a Short Sale she is working.
  • "I am outraged that we spend twice the time and work, sometimes working 12 months on a short sale deal and AUTOMATICALLY the lenders reduce our commission because they know we are hungry to make
    any commission. They have us by the short hairs and they know it. WE
    NEED TO STAND UP AND FIGHT BACK. We didn't create this mess, they
    did!!! What can we do?"

It seems like the lender is wanting to reduce her commission. While I can understand her frustration I am more inclined to solve the problem than get frustrated over it. And since she asked "What can we do?" I'm going to tell her. The most important thing we have to understand is...Lenders do NOT reduce commissions.

They can however refuse to accept a Short Sale unless the commission you are asking them to pay is reduced. This does not prohibit you from getting the rest of your
commission directly from the Seller as per your listing agreement.

The commission agreement is always between you (the broker) and your Seller.
Just because the lender won't allow a certain percentage does not
null and void your listing agreement. Just have the Seller make up the
difference. No biggie.


And, if it's a Fannie or HAFA Short Sale then the lender has to allow up to 6% towards commission. If you work Short sales for a living then you need to factor in the fact that on occasion you may not get a
full commission. You should already be aware of this and it should be
figured in to the way you charge for your services. As a businessman I
do not rely on others to get me paid. I also do not allow them to
dictate how much I make. So what can we do? Simple. Learn how to get
paid.


Here are a few things I do:
  1. Charge a flat fee at time of listing. The fee is for listing the property and the commission is for selling it. Get legal advice on how to handle this***.

  2. I guarantee the co-broke amount I offer BUT I take a larger piece of the pie if it's a full commission. If I get less than full commission then I may actually make less than the selling
    agent. Their percentage remains the same regardless of how much I get.
    So on the average it works out to about the same. Make sense?

  3. Always separate the Broker's commission and the agent's commission on the preliminary HUD. Let the lender know that the commission is being split. Lenders want to allow less if the same
    agent is on both sides of the transaction. Make sure they know that
    even though this may be the case there are still 2 parties or more
    getting paid. Show them where the money goes.

  4. NEGOTIATE!!! That's right. Just say NO!! Lenders ask for reductions because they know in most cases the agent will just roll over and accept it. Don't be that agent. You will be
    surprised how easy it is to get them to give if you don't.

  5. Have the Seller sign a note. Why not? We can get paid a portion of our commission over time. The lenders do it. Why can't we?
What are some of the things that you do to get paid?

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Comment by kathleen shaffer on August 9, 2010 at 4:17pm
I like the sign a note idea. Yep, the sellers are getting out of $100,000 of debt, so, a small fee agreement with them over time should be no big deal. Great thinking.
Comment by kathleen shaffer on August 9, 2010 at 4:16pm
Start the deal out with 7 or 8% commission. Then when the lender tries to cut it, don't split it with the coop agent.
Nothing says you need to break it evenly. I have found that I as the listing agent is doing alot more work than the buyer. I am on the line to get things uploaded, negotiated, resent, renegotiated, resent.....you get my drift.
If the coop agent does not like it, they can go bid on another short sale. There are plenty out there. I know what my time is worth, they should know what they are worth too. I also let my seller know, that I will not accept them crying "poor mouth" to me when it comes to them needing to repair, replace, or contribute cash to close the deal. This is their credit on the line, they are usually not paying any mortgage, so they are living rent free. They should be able to contribute to the deal if necessary and not expect us the agents to do that for them.

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