Do Real Estate agents receive commission on foreclosure properties? The agent that we're talking with seems

Asked by Anthony, 94571 Thu May 8, 2008

to be trying to steer us clear of these properties and we're just curious.


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Grace Hanamo…, Agent, Cupertino, CA
Thu Aug 6, 2009
Hello Anthony:

Yes, agents receive commission on foreclosures, but I don't think that fear of being paid is the reason your agent may be steering you away from foreclosures.

Generally speaking, banks impose greater requirements on buyers of their properties. For example, here's some of the list of restrictions I've seen from California foreclosure homes:

1. No FHA loans
2. 10% Required Earnest Money Down Payment
3. Proof of Funds for Down Payment (in other words, money has to be "in the bank" at the time of the offer)
4. Letter from a direct lender (not a preapproval letter from a broker, but one from the lender)
5. Use of the bank's lending agent for prequalification
6. Copy of FICO scores
7. As is purchase
8. No reductions in price due to lower appraisal
9. All repairs to be done by buyer BEFORE close of escrow.

In addition, banks often "shove" costs normally paid by the seller directly into the checkbook of the prospective buyer. So it's not uncommon for buyers of foreclosure properties to have to pay for these expenses, all of which are normally paid for by the seller:

1. Natural hazard report, CLUE report, environmental report (approx $400)
2. Termite report, and section 1 repairs (approx $200)
3. County and City Transfer Taxes (varies depending on county and city, but can total several thousand dollars)
4. Title Costs and Title Insurance (varies according to price of home but $2000 is a safe number)
5. Escrow Fees (varies according to price of home; $1500 is a safe number)
6. Notary Fees (about $400)
7. Home Warranty fees (about $400)
8. Any repairs deemed necessary by lender (could be thousands)

For most first-time buyers with limited funds, buying a foreclosure property may be more cash intensive than the buyer can afford. Since your realtor is able to check the "submission requirements" for the foreclosure property, some or many of the restrictions I've stated above may be required of the buyers. However, your Realtor should be able to justify--when you ask her--why she does not feel a foreclosure property would be a good one for you!

Good luck!
Grace Morioka, SRES, e-Pro
Area Pro Realty
2 votes
Deborah Madey, Agent, Brick, NJ
Thu May 8, 2008
Hi Anthony,

Are the foreclosures for sale? Not all properties that are in the foreclosure process are for sale. Home owners may fall behind in their payments and work out arrangements to bring their loan current. Yet, their property may still appear on a foreclosure list.

Is your agent discouraging you from foreclosures because they are not for sale, or are these listed properties for sale that happen to be in foreclosure?

Some foreclosure properties are short sales, meaning the sales price of the property will not cover all the liens to clear title. If your situation does not allow you the flexibility to contend with the unknowns of short sales, your agent may be suggesting that a short sale might not be for you. It is difficult to know if, or when, a bank may approve a short sale. For a buyer, an extended period of time of limbo can prove unworkable.

It can take some time to get an answer from a lender, which is required on a short sale. A buyer must be able to work within the lender’s time frame. For a buyer who is also selling, the coordination of the transactions can be daunting. If these challenges would be too trying for your situation, your agent may discourage you from trying to purchase a short sale in foreclosure.

Be candid with your Realtor about your concerns. Find out if the hesitancy is Realtor lack of familiarity, or it stems from other concerns.

1 vote
Pamela Novak, , 30308
Thu May 8, 2008
Yes an agent does receive a commission on a sale of a foreclosure property. Some realtors that are not familiar with the procedures of making offers on foreclosures steer clear of showing those properties. If foreclosures are what you are after, make sure when you interview your agent ask them if they have experience in making offers on foreclosed properties. It's a little more detailed than dealing with a home seller and a lot more paperwork than what some realtors are used to.
1 vote
Kevin Keyser, Agent, West Hollywood, CA
Thu May 8, 2008
Agents usually do receive a commission on foreclosure sales. They might be steering you clear of short sales, which can be a a frustrating purchase for buyers because the banks can literally take MONTHS to reply to an offer and can sometimes change their minds if they get a stronger offer. If you look through these posts you will see a few regarding short sales that highlight these situations. But I would just ask your agent! Honesty is always the best policy.
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1 vote
Kawain Payne, Agent, Seal Beach, CA
Fri Jan 4, 2013
Agenst get a commission on ALL properties the list/sale.
0 votes
Victor Quiroz, Agent, Covina, CA
Wed Feb 23, 2011
In short, YES! Unless the property is being bought at the court house auction the agent should get some type of compensation from the listing broker.
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0 votes
Lydia Nolan, , 91789
Thu Aug 6, 2009
Your agent may not be comfortable with foreclosures, or--for that matter--anything unconventional. There could be a hundred reasons for this, but we can't speculate on them, since I don't know the agent. i can say, agents are paid on short sales, though it can be time-consuming. The situation with foreclosures is different, but they do receive payment as well.

If you are not hitting a homerun with your agent, find another one who can deal with foreclosures for you.

Good Luck!
Lydia Nolan, Broker
Nolan Real Estate
0 votes
Victor Kamin…, Agent, Edison, NJ
Sat Jun 20, 2009
With foreclosures also come much more liability than sales such as pre-foreclosure short sales.

Foreclosures may come with clouds on the title such as mechanics liens and other judgments if not careful or other issues depending on the foreclosure laws in your state. Many states allow past owners a redemption period where if they get caught up on any amounts they were behind they can reclaim their home, sometimes up to a year later. The point is there are many more issues and risks taken when buying a home by foreclosure, try buying a HUD home instead where you wont run into any of these issues, getting clear title and deed.
0 votes
Ray Chen & C…, Agent, City of Industry, CA
Sat Jul 12, 2008
commission for foreclosures and short sales are negotiable with the bank, so it maybe the commission an agent receives maybe a little less than a normal real estate listing. another reason the agent maybe steering you away from it is that these kind of properties are usually more time consuming to deal with because one may have to wait for 2 or 3 months for a counter offer.
0 votes
Ron Tardif, Agent, Gainesville, VA
Thu May 8, 2008
Yes, realtors do earn a commission on bank sales and however you don't always know what you will get. More and more listings are stating that the listing broker and the selling broker will split 50/50 the offered commission.

I would caution my buyers on short sales because there are too many entities involved in the sale. Seller, holder of the first trust and the holder of any second trust and all must agree.

Bank sales are cleaner because your dealing with the bank holding the first trust. I have seen a response in 24 hours and worst case 8 weeks and its not over till its over. Banks approved the offer not ratify a contract meaning that until settlement your offer can be thrown out for a better one.

Hope that helps.
0 votes
James Skakel, , Walden, NY
Thu May 8, 2008
Generally speaking an agent does receive a commission on a foreclosure or short sale. I would caution you however in pursuing one of these choices, as stated previously you are dealing with a bank making the final decision on your offer not the homeowner. Even if your offer gets accepted, it could later be rejected if a higher offer comes in, or the bank can simply change their mind on your offer if the appraisal comes in higher than your offer. The banks are not in the business to lose money and will do everything they can to make money if they can.
0 votes
Susan Wesely, , Saint Paul, MN
Thu May 8, 2008
Agents generally DO receive commission on foreclosed properties. However, the challenge with many foreclosed properties is that they have been neglected (necessary maintenance has not been done). Even worse, many have been vandalized - sometimes by the last occupant as they were forced to leave. Perhaps your agent is concerned about the livability of the properties you are considering. I recommend a frank discussion of your wishes and concerns with your agent. (S)he is the best one to explain the reasoning behiond the apparent steering.
0 votes
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