Dee, in a short sale the commissions become part of Sellers expense which in this case is your LENDER. However - if the difference between the Short pay off of the Loan and the Selling price is going to be passed onto you - as a 1099, then Seller will be paying the taxes on that portion as well. For example. You owe $300K. Lender authorizes sale at 200K . The NET to the bank is even lower once they add commissions, unpaid taxes, unpaid insurance and associations and other expenses. The amount that the bank did not receive - IF it is going to be passed onto you, it can be in the form of 1099 (as a gift). I suggest you visit http://www.irs.gov or consult an accountant on this matter. A short Sale may or may not produce a 1099, may or may not leave an "open judgment" - depends on the lender, the type of homeownership, hardship, property and even location of the property. If you have any additional questions, please feel free to contact me. Magda Robles,CRS,GRI,Broker Associate (954) 727-3915

Hi Dee,
Buyer 99% of the time pays the fee for service on every sale! In Florida, it is traditionally listed as a Seller expense on the HUD-1 most of the time. However with a short sale it is part of the listed expenses the Lender / Investor will absorb as part of the sellers closing costs.

I have just copmpleted 2 short sales for customers and they were both a bit different. But the bottom line is that in both cases, the lenders approving the offers dictated what costs they would accept in reaching their net acceptabe price. In one case they stipluated a 1% reduction in the total commission they would allow. In the most recent, the lender said they would not pay any one Broker more than 3% (this hurt me since I had both the seller and buyer). In this last case they also refused to pay some of the minor title closing fees. Since all of these cases stipulate that the "owner" of record receive nothing from the proceeds, the lender taking the "hit" on the short sale is ultimately the one calling the shots. You as an agent can argue for more commission all day long, but, in my opinion, at the risk of losing the deal because the lender will not accept the lower net proceeds. Short sale approvals are all about what the lender will accept as their net proceeds. Their alternative is foreclosure. Not pretty for them, but there is a botom line below which they won't go in accepting a short sale offer..

Good Morning Dee, Unfortanately you have received several answers all which are part correct and some incorrect. In a short sale the commission is deducted from the amount the bank will receive. Called "the net" . The broker may as for 5,6 or 7 percent but ultimately the bank will come back and state what they will pay. No matter what is on your listing agreement, the bank will try to renegotiate every cost. The listing broker will submit a net sheet which lists all the expenses of closing including commission,l unpaid property taxes and closing costs for the seller. The asset manager will review the costs and try to lower them therefore getting more money to the bank. The Real Estate broker may ask you to cover the difference between what the bank will pay and what is on your listing agreement. However most level headed brokers will acknowledge you have no more money to payt and getting a little commission is better than none. After the short sale you may be responsible for the difference between what you owe and what the banks net was. You must seek a CPA's advice on that as new laws are in affect regarding that. The bottom line is the bank will pay the commission through the proceeds of the sale.

Great point Carlos. Michael's answer is spot on. The bank approves or does not approve the short sale. That's it. The bank does not dictate the commission, the listing does. The bank can give approval with commission reduced however, the brokers must agree to the reduction in commission. Stop giving banks authority they do not inherently have. It costs them more to foreclose.

I think some of the agents are absolutely correct. Some of the other agents here need to read One Venture's Ultimate Handbook of Short Sales -For Real Estate Agents. Super simple book and it's got the nitty gritty, in my opinion.
Answer #5 from Michael is pretty much on the money...

GREAT QUESTION: All commissions are paid by the seller at closing, in regards to your question the bank.
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Correct, the bank pays by default out of the sellers side of the transaction. When you, as a seller of the short sale agree to this process, if done correctly, you will neither receive or give any monies towards the sale. You will have the tax to consider when you receive your 1099 from the bank at the end of the year, but that is a matter for a CPA. Good Luck

Dee... a correction. The Bank by default pays the commission even though the Seller is still the owner of the property. That's why the Bank can dictate how much commission is paid and not the current owner.
Hope that clears up any confusion.

Dee, the real estate commission is one part of the costs that are approved and paid for by your Lender on your behalf.

The Seller pays the commission. If it is a "short sale" that means it is pre-foreclosure, so the Owner not the Bank that pays the commission. The bank however can dictate how much is paid.
Hope that helps.

the bank pays the commission, any back taxes, and hoa fees.