Who pays real estate broker commissions for foreclosed property transactions?

Asked by Les Hazelrigg, 37604 Sat Jan 3, 2009

Do bank owned (or other foreclosure type ownership) property offers follow the same practice with regard to real estate broker commissions as normal residential property transactions?

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Broker Dave, Agent, Orlando, FL
Sun Jan 4, 2009
Les,

I have not had a problem with REO's as the banks want the property to sell and they are stepping up to the plate as it relates to commissions.

As to short sales (pre-foreclosure) it can get a little dicey but haven't lost so far with the bank approving the deals.

Dave Lowe broker
GRI / e-PRO / GREEN designations
Web Reference:  http://two4oneoforlando.com
0 votes
Judy, , Northbrook, IL
Sat Jan 3, 2009
Les,
It used to be, of course, that buyers almost never had to worry about paying for the services of their real estate agents because the homeowners, who put their houses up for sale, always agreed to pay the commission for both the listing and selling agents.

Now that home prices are no longer appreciating but depreciating, often sellers can no longer cover the commission, leaving it up to the 'generosity' of their mortgage lenders to do that for them. Sure, listings on the MLS almost always offer a 3% commission to the buyer's agent. However, there is usually a contingency attached to that listing stating that the listing price may be insufficient to cover all encumbrances, including the agent's commission.

This is a disservice to the agent, whether on the listing or the buying side, because both sides will be obligated to take a cut in commission.

Since agents cannot rely on receiving an equitable commission in exchange for their considerable services (and believe me when I say that a short sale/pre-foreclosure transaction often takes 3 to 4 times MORE work than an ordinary transaction), this puts agents at a severe disadvantage. In a way, agents are forced to rely on the 'charity' of the mortgage lender AFTER THE FACT, that is, after the purchase contract has already been agreed to by the buyer, the seller, and the lender. Agents, in the end, are left out of the negotiations and must settle for whatever is offered. This puts agents in a position that is anything but fair. If the lender, for example, were to offer the buyer's agent $500 upfront to bring the buyer on a $200,000 house, when ordinarily the agent would expect $6,000, no agent would take such a drastic cut in pay by willingly enter into such an agreement, and that house would certainly go unsold.

The lenders have established their own unfair set of rules. Leaving agents to rethink their positions.

That's why I believe it's so s important for the listing agent to obligate the homeowner/seller to pay the full 3%, even if the lender will not, and for the buyer's agent to likewise obligate the buyer to pay his/her agent 3%, again even if the lender will not.

I use a Buyer's Representation Agreement BEFORE the buyer enters into an offer to purchase. In this way, buyers understand from the outset how much they can offer on a house after first taking into consideration the possibility that they might have to make up for the difference between a 3% commission and what the seller's mortgage lender is willing to contribute. Yes, it puts more strain on the finances of the buyer, but no more than making allowances for a down payment, closing costs, and moving expenses. In exchange, buyers receive the complete and unfettered dedication of their agents from initial house search to offer through to closing.

Because the real estate market has changed the rules, it's up to agents to understand what they need to do to protect themselves, their profession, and their integrity; to inform their buyers of the full circumstances involved in getting a great deal on a great house; and to allow everyone to walk away satisfied in the outcome.

Judy Chapman
Marketing & Pricing Specialist
Coldwell Banker Residential Real Estate
521 E Mitchell Hammock Rd
Oviedo, FL 32765
(407) 227-7763
judy.chapman@floridamoves.com
My Profile: http://www.coldwellbanker.com/for/JudyChapman
My Blog: http://activerain.com/blogs/orlandoforsale
Specializing in Oviedo, East Orlando, Tuscawilla/Winter Springs, Chuluota & Winter Park
0 votes
Linda Slocum,…, , Santa Clarita, CA
Sat Jan 3, 2009
For bank-owned (REO) properties, the bank will typically pay commissions to both the listing agent (the one representing the bank) as well as the selling agent (the one bringing the buyer). Usually the commissions will be a percentage of the selling price, but sometimes they will offer a flat fee only. The amount that the bank will pay in commissions is disclosed up-front as part of the listing agreement.

For short sales (preforeclosures), the commission is negotiable as well as the price. Some banks will pay what would be considered "market rate" commissions, and some will pay virtually nothing.
0 votes
Dallas Texas, Agent, Dallas, TN
Sat Jan 3, 2009
Seller always pays buyer broker fees.
Web Reference:  http://www.lynn911.com
0 votes
tom roberts, Agent, powell, OH
Sat Jan 3, 2009
Yes Les,Always the seller,mostly.

TJ
Web Reference:  http://tjroberts.remax.com
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