Do real estate agents get less commission for Short Sales? Or is there some other reason why they often avoid them?

Asked by Justkat, Aliso Viejo, CA Wed Aug 24, 2011

I imagine it's at least in part because Short Sales tend to be time consuming, a hassle, a lot of work, and priced lower than comparable properties? That certainly would make them less financially rewarding and less appealing. Is there more to it than that?

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Scott Mason, Agent, Lecanto, FL
Thu Aug 25, 2011
A good agent should show you any property that meets your requirements regardless of the commission offered. Short sales can be more difficult to get accepted and closed.
2 votes
Lance King, Agent, San Francisco, CA
Thu Aug 25, 2011
Sometimes we get less commission, sometimes we don't. Our standard procedure with short sales is to have an in-depth discussion about the process to see if they are willing to go through it, and then show them or not based upon that decision. It's often a long, arduous process that most buyers (most of ours anyway) do not want to deal with.

However, if you have an agent/broker who simply refuses to show them to you and you want to see them, it's probably time to find another agent.

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
1 vote
CJ Brasiel, Agent, San Jose, CA
Wed Aug 24, 2011
Justkat -

I can not imagine avoiding short sales as I feel that would be doing a disservice to my clients. Why? Because in the Silicon Valley area they represent nearly 30% of active listings and 60% of pending listings (which many times come back to market).

However, if I did want to avoid them here are some of reasons why:
1.) There are a lot of short sale listing agents that don't return phone calls, do not manage the seller properly to be able to show the home, do not change status when they have a signed offer, and in general do not demonstrate professional behavior during the marketing or contract period of the home. They hand the transaction over to a processor after the offer is accepted, do not keep up with the file in a timely manner, do not update the buyer's agent in consistent manner, do not properly check for liens, do not properly gather the complete package and well...I could go on and on. When you find a listing agent that is professional and on the ball, short sales go quite smoothly.

2.) Some short sale sellers, understandably, are not cooperative. Many have already ruined their credit and they have a misunderstanding that if they don't show their home, they will be able to stay in the home for longer time and not pay rent/mortgage. They feel like they have nothing to lose and believe that as long as their home is simply listed they can somehow get back at the bank with not paying the mortgage and living "free". Therefore, they make the showing- appointment only, don't have a lock box, only show between 1-2pm on Mondays etc. etc. etc. They also do not worry about the presentation and many times, almost seem to make it look worse so it won't sell. Which is simply not smart. The lower the offer is for their home, the less likely the short sale negotiator will accept the offer and on and on we go. Don't get me wrong. I know this is not true for all short sale sellers. I can only partially understand the stress, the shame, many feel during the process of losing their home. But the ones that make it difficult to show and sell, hurt the whole market.

3.) Short sale lenders employing entry level workers to screen, screen, screen, a file before it ever gets to someone who can make a decision. The only way to get through the line is to simply keep calling, keep being nice, keep responding to their request as fast as possible and eventually elevating it to someone who can make a decision. The process is getting better and short sale approval times in general are getting shorter and shorter ( no pun intended) but there is still a long way to go, especially when there is more than one lien on the home.

4.) Escrow officers who do not check and double check their work to make sure that all liens are identified in the title search, that the HOA delinquency demands are timely, that the HUD is as accurate as can be so that when the approval comes in the deal is not short. Equal responsibility to the listing and buying agent to double check the HUD, and know the liens, the fees, the back taxes, the cost of HOA documents, the garbage lien, and anything else that can surprise all involved. It takes a good negotiator on the listing agent side to go back to the short sale negotiator when an error has been made on a HUD to get it corrected and not let it simply fall into the "Who's gonna pay for this? " category. There is nothing more frustrating to be at the closing table with a client and find that "whoops" there is an $1000 more HOA fees than was calculated. Again, these task are not easy ones to keep up on and we generate many HUDs during the short sale process, but it is absolutely critical that "ALL EYES" be on board.

4.) Reduced commissions are common in short sales and the work load, stress, and number of times that an agent will contribute more commission to the deal to make it happen is more often the case than not. Every single short sale has its own oddities and they are not transactions that can be put on auto-pilot. There have been lots of courses out there for "certification" and many are good basic courses. However, what it takes to complete a short sale transaction and make it happen well in the least amount of time is attention to detail, organization, politeness, commitment, and a sincere dedication to the clients to stay on top of things for the clients' benefit.

5.) Finally, buyers who think that writing offers on multiple houses is a smart way to beat the system and agents who write those offers for them. It is a waste of time. It pushes sellers closer to foreclosure by eating up the clock while the buyer continues shopping for the next best deal. I recognize that many buyers wait a long, long time and finally give up. Don't get lured into the multiple offers, under market priced short sale listings. Find a solid well cared for home and make a good offer. Short sale or not.

My $.02 short a $1.00
1 vote
Thom Colby, Agent, Irvine, CA
Wed Aug 24, 2011
Just Kat,

There are many challenges associated with Short Sales no matter whether the agent is on the Buyer's side or the Seller's side. I will tell you from extensive experience over the past 6 years with Short Sales making up about 99% of my entire business the biggest challenge is on the Listing Agent's side - and - the Listing agent is only as good as the Buyer's agent who brought the buyer and keeps them in the transaction.

I think one of the biggest challenges we all face is a Buyer who is not committed to the transaction and "walks" after a short time placing the seller without enough time to avoid foreclosure or to find another buyer.

I actually like Listing Short Sale Properties. I feel it's my way to give back to the community and to help the seller through a rough chapter in their life. If I can get the seller through and provide the ability to live a better life, that's terrific !!

And, yes, commissions are almost always reduced. Taking into consideration the number of hours spent on the transaction both working on the mechanics of the transaction itself, along with the psychological support we have to provide, it's NOT about the money.

Best of luck,

Thom Colby
Broker / Owner
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. IN MY OPINION, there is NO benefit to the Seller or Buyer and only benefits the Agent.
888-391-5245 Direct
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1 vote
Meredith Dre…, Agent, Aliso Viejo, CA
Thu Aug 25, 2011
Oh where to begin! First, the banks often determine the commission on short sales and sometimes it can be cut drastically...all for working on a transaction that takes forever and is way more complicated than a standard or REO sale.

But, I'd say by and large the reason we don't like them is on the selling side, they take so long you often "sell the house" at least more than once. By the time the bank approves everything, you've lost your buyer and have to start over.

On the buying side, you deal with selling agents that may or may not have the skills to negotiate with the bank well, you deal with buyers that lose interest in waiting and banks that come back with terms that just don't always work with your buyer even after you've waited all those months.

In a nutshell...for either side, just make sure you work with someone who knows what they are doing and perhaps has some official training in short sales.

Good luck!
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0 votes
Lauryn Eadie, Agent, Reston, VA
Thu Aug 25, 2011
This is a tricky question:

An agent's commission could be less on a short sale, but that is only if the agent has not discussed their fee with you, or has agreed to take whatever is offered in the MLS by the seller. If this is the case, this could be the reason they do not want to deal with short sales.

Another large reason agents do not like to deal with shortsales is because they have a low success rate, high annoyance factor, and often can waste months of your time, the buyer, without getting you into a house. Something to consider when waiting for a short sale is what is happening to the interest rate while you wait.

Now: if it is the house for you then it probably is worth waiting instead of thinking to yourself "what if".
0 votes
Lauree, , Orange County, CA
Thu Aug 25, 2011
Agents usually get a little less depending on what the banks policy is. A lot of agents avoid them because they are time consuming and buyers like to move faster than the banks processes take
0 votes
Amy Mosley, Agent, Mission Viejo, CA
Wed Aug 24, 2011
Hi Justkat,

A buyer agent that is working for you should be willing to show you all different types of property that are available. Commissions vary on regular sales as well as short sales. A knowledgeable buyer agent that you like and trust will provide you with all the pertinent information so YOU can decide whether you want to wait for a short sale. Each short sale situation is different. I always call the agent first to try to get as much information as possible ahead of time for my buyers so they can decide if they want to see the property. Short sales can be quite involved so it is really important you work with an agent that has the knowledge and skills to help you decide if you want to move forward.
0 votes
JoANN Guercio, Agent, Santa Clara, CA
Wed Aug 24, 2011
Agents usually get full commissions on short sales. Lack of knowledge or willingness to work hard would keep an agent from working on them. Secondarily, it can be a long process and buyers don't always wait it out. If you get involved in a short sale, make sure you stay in it no matter how long it takes.
0 votes
John Arendsen, Agent, Leucadia, CA
Wed Aug 24, 2011
Looks like you have all the answers you need on this thread. Bottom line short sales take a lot of unrewarding time and "They aint no qwarentees? Add to that that most RE pro's are starving to death and can't go the distance.
0 votes
Shanna Rogers, Agent, Murrieta, CA
Wed Aug 24, 2011
Hi Justkat,

Realtors usually get the same commission - however, the lender(s) do sometimes lower the commission (1/2 % on each side - buyer agent and listing agent). The main reason some Realtors avoid Short Sales is the time involved and a lot of Short Sales don't ever close. There are also Realtors that don't know how to navigate Short Sales to get them closed. However, Short Sales are not impossible to get closed as long as the Realtor is persistant and pays attention to details - and works closely with the negotiator.

Shanna Rogers
SR Realty
0 votes
Young Lee, , Orange County, CA
Wed Aug 24, 2011
Agents get about the same commissions. The reasons some agent often avoid short sale are 1. short sale
usually take longer transaction time to close. 2. Even short sale is approved by the lender, the buyer who did
submitted offer often walk away and agent is being left without any result and has to start all over again.
0 votes
Louri Groves…, Agent, Fountain Valley, CA
Wed Aug 24, 2011
Hi Justkat,

There are so many different variables to a short sale than a standard sale. It's not about the extra hassle or work, but the fact that the seller's agent needs to know how to handle the short sale file properly and the seller must be committed to doing a short sale.

One of the most common reasons why short sales fail is because the package is not complete, according to the National Association of Realtors-- and lenders may not call and ask for missing documents. Some will terminate the file without informing the listing agent. Sometimes the sellers are not willing to provide all the required information in a timely manner. Sometimes, the listing agent has not handled the file properly.

So unless a buyer's agent is fairly confident that the file is being handled properly (through various questions to the listing agent), a buyer's agent may want to avoid wasting a client's time and focus on properties that have a better chance of closing. For many agents, it's about protecting their client's interests as well as their own time and resources.

There are listing agents that get the job done and are providing excellent service to the sellers-- helping the sellers navigate through a difficult situation. So not every shortsale will fail and some shortsales can be really great deals. Some may take a little longer but if the buyer can wait and the property or deal is good enough, then great! The trick is to analyze the pros and cons.

Hope this has been helpful. (BTW, Tom's answer is on point, so I'm giving him a "thumbs up" which wouldn't be the first time.)

Louri Groves, SFR
Prudential California Realty
0 votes
Laura Coffey, Agent, Santa Clarita, CA
Wed Aug 24, 2011
When I am representing a buyer a don't totally avoid them but there can be risk factors involved and I want to protect my client. Yes it is more than likely you will get paid less on a short sale but I never feel I am going to get rich off any one client.

They do take a long time and if an agent is not a top producer they usually are looking for a pay check sooner than later. The average agent only closes 4-6 deals a year. Make sure you use a full time agent that closes at least 16 - 24 deals a year.

You would be surprised how many short sales in the MLS (multiple listing service) look like they are available and then you read the private remarks and it says "Drive By Only". Usually tenants not cooperating or sellers prolonging the ordeal.

If a seller is still living in the home, keep in mind they are loosing their home and don't have much to loose. I always advise if you are going to buy a short sale, buy a vacant one. That way the seller has already moved on and detached themselves and you don't have to worry about evicting them once you own it.

Make sure your agent has the knowledge to ask the right questions if you are interested in a property.

1. Did you just start the short sale process?
2. Do your clients qualify for a short sale?
3. How many liens are on the property?
4. Which lenders are involved? (they should know the ones that are headaches)
5. Are your clients cooperating?
6. How many short sales have you closed?
7. Do you have a negotiator assigned yet?
8. Has a BPO been done? (Broker Price Opinion)

There is many questions to ask and experienced agents know the right questions and continued right questions once the process has been started. Short sales can take weeks or years to get approval and it is strictly achieved by all parties knowing what they are doing and cooperating to get it done.
0 votes
Eric H. Wong , Agent, Albany, CA
Wed Aug 24, 2011
If my client wants the house, I will do all I can to advise my client and put my client in the best position to get that house, but, with a short sale, when I talk to the listing agent, if I get the feeling that they are not going to put the effort into closing the short sale, I may advise to find another house.
Only 1 out of 4 short sales actually close, even with both agents working hard to get it done. I want to work with a listing agent who knows how the system works, who to talk to, and who knows how to keep it moving forwards. Other wise, we can find another house.
0 votes
Tarheit, Home Owner, Ohio
Wed Aug 24, 2011
The commission may or may not be less than a normal sale depending on the banks policy. However, they are very time consuming and few agents have the patience for all the calls, paperwork and red tape assuming they have the experience and knowlege to handle the bank. Each bank tends to be different making matters more difficult and not all banks will negotiate. This also depends on the type of loan and if it is insured or not. If the property has a second mortgate it can more than double the complications.

Then, even if you have everything in line, and a buyer who is willing to wait, sometimes for months, to close the property, the chances it will actually close can be pretty slim.

So even at a normal comission, once you figure in the deals that will never close and the time spent, it is often not worth the effort for the agent.
0 votes
Corina Conne…, Agent, Aliso Viejo, CA
Wed Aug 24, 2011
Short sale sellers have to prove hardship to qualify. If is seller has a true hardship, he/she is not able to pay the property taxes or association dues, either. This results in liens on the property that the buyer will be asked to pay for before title is clear. When you add these liens to the price, is a short sale really a good value? The commission is always split with the listing agent and buyer agent so this does have any factor on why an agent will avoid showing short sales. If the buyer waits until the bank forecloses on the home, the bank will pay off the liens for unpaid property taxes or association dues. It is always better to buy a foreclosure instead of a short sale. The smartest decision a buyer can make is to work with a real estate agent that has a minimum of 10 years experience.
0 votes
Bonnie Hart, Agent, Mission Viejo, CA
Wed Aug 24, 2011
Well unfortunately we cannot avoid them because they make up about 40% of the market. They take a lot more work and can take months because by the time you get an approval from the bank you end up losing your buyer. So the process can be time consuming.

On the other hand you are helping a homeowner avoid a potential foreclosure. They commission is paid by the bank not the homeowner.

If you have someone needed short sale services please give them my number. 949-201-6887.
0 votes
Dot Chance, Agent, Burbank, CA
Wed Aug 24, 2011

There is more to it than that. Just the very nature of the short sale can be stressful. Buyers usually get tired of waiting for a response from the bank.

Short sales are "as is" sales. The buyer will be responsible for the repairs when they buy it. If the buyer needs an FHA loan many times the home will not qualify because of the deferred maintenance.

Experienced agents should not avoid short sales. They will be around for quite some time. Look for an agent who is a CDPE® (Certified Distressed Property Expert) and they will be happy to help you navigate the short sale market!

Dot Chance, Realtor®
Certified Distressed Property Expert – CDPE®
DRE License #01494182
Keller Williams Realty World Media Center

WHEN YOU THINK OF REAL ESTATE...Think! My business thrives from your referrals!
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0 votes
Linda Urbick, Agent, Blackhawk, SD
Wed Aug 24, 2011

It is not just he commission and yes sometimes the commission is lower. To me it is about my client and their criteria for purchasing a home. Just because you make an offer and that price is accepted by the Seller (not the bank) it doesn't mean the bank won't ask for more. Short Sales are typically priced at market value or if not the banks will want market value. The other thing is the buyer's become frustrated waiting to hear and feeling like they may be missing out on other potential opportunities. If I have a buyer that wants a home and it is a short sale and willing to hang in there - then I will pursue it as I am sure most Realtors will as well.
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0 votes
Margaret Has…, Agent, Tampa, FL
Wed Aug 24, 2011
Short sales are more work than a regular sale. They can take months and sometimes over a year, depending on the seller's situation. Some never close at all for one reason or another, so the work would have been done for nothing.

But, on the other hand, short sales can be very rewarding if it is a straight forward situation. The commission can be reduced sometimes, but I find tremendous satisfaction in helping a distressed homeowner avoid foreclosure.
0 votes
Ron Thomas, Agent, Fresno, CA
Wed Aug 24, 2011
By the time some of them CLOSE it probably comes out to about $6 an hour.

And that isn't considering the stress factor.
0 votes
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