Home : Blogs : Debbie Summers - MoveToLakeMary.com or 407-758-1020 : Lake Mary - Central Florida Real Estate

The Things That Make You Go Hmmm...

Why do banks/lenders who have to grant third party approval in a short-sale transaction often reduce the broker's compensation to a rate that is less than what the seller agreed to in their contract with the listing broker?

Yet, when these banks/lenders take possesion of homes through the foreclosure process, at an expense that often exceeds $20,000 - $30,000, do they offer compensation in amounts that far exceed what they typically authorize in a short-sale?

hmmm...

It almost appears that they want to discourage the real estate industry from trying to help homeowners avoid foreclosure, doesn't it.

A short-sale is a time consuming endeavor for a REALTOR, often an exhausting waste of time. If these financial institutions truly wanted to help Americans avoid foreclosure wouldn't they take advantage of the "free labor force" of the the real estate industry that is trying to help them dispose of their non-performing assets prior to taking a much greater loss?

I just don't get it.

Debbie Summers, Lake Mary REALTOR, ALHS, e-PRO

407-758-1020 or Debbie@MoveToLakeMary.com

Search for Homes For Sale in Lake Mary & Seminole County, Florida

Posted by Debbie Summers - MoveToLakeMary.com or 407-758-1020 on 02/25/2009 07:11 AM

Comments (47)

short sale, foreclosures

Post is included in group: RE/MAX Active Rain Bloggers
Post is included in group: e-PRO Internet Technology
Post is included in group: Diary of a Realtor
Post is included in group: Dedicated Bloggers

47 Comments on The Things That Make You Go Hmmm...

FEB

Hi Vickie...Hopefully someone from the Banks are Listening .

Cheers, thanks for sharing your thoughts :O)

Debbie, I went to a short sale training a few months ago and according to the people doing it there is this magic number that the bank wants to make and if you go below that number in the asking price then they come back and negotiate our commissions. I have the formula put away for my next Long sale experience. They are so much work to make less money.

You'd think. But given how poorly the banks have mismanaged themselves to this point, would you expext anything less?

The banks behavior in short sales is generally irrational. The smaller banks are doing a better job. They have less bureaucracy, have suffered fewer staff cuts, and are generally closer to the people they are working with.

I recently went to a short sale training where the instructor had been hired by Fannie and Freddie to train loan servicing companies to better aid their defaulting clients so that they would decrease foreclosure rates.

From what I understood, the loan service collection depts. like foreclosures better because they rack up more fees. If it goes into a short sale, the managers of the collections departments don't get as much of a bonus. Guess what department your defaulting client is directly routed to once they enter their loan number? That's right , collections!!At least that is what the trainer said was going on just a few months ago. She quit her job and became a trainer to help teach agents how to help people get to short sales with their clients vs. foreclosure. I truly do hope the government is listening.... we can't afford to continue making the banking system rich at the expense of our citizens.

Debbie,

That's thhe fun of it. You look at it as if the bank is one person, but it is not. The Loss Mitigation is most probably is a subcontractor doing it for the bank, and they have one set of rules, and Foreclosure department has a different set of rules, so even though it looks crazy, they do not see it this way.

Just do not take it to close to heart. It is not you, it is them.

Marchel- The short sale trainer was not totally correct. While this is the case with some banks, that they will not cut into your commission as long as they get what they want to net- there are many banks that have it set in stone to pay only a 5% total commission. When this happens it is because the negotiator is making 1% on the short sale. The part that gets me is that the commission agreement is between the seller and the listing agent. The lender is actually interfering with a contractual relationship. Katerina

Debbie- If you get your HUD approved before the sale you will know which banks will be adament about reducing your fee and which ones are willing to work with your fee.

You would think that they would be paying us bonuses and higher commissions but you must see that usually you have a servicer involved. The servicer's job is to net the most money for the note owner. If we can prove to the banks that we do a better job than the servicer does, then the servicers would no longer be needed. The servicers are going to do whatever they can to make sure that does not happen. Katerina

Ok, I'm a little embarrassed to admit I never actually considered this. EXCELLENT observation!

FEB

Park and Follow Zone. Although I like the new comment feature. I kinda prefer to let YOU know I'm here :)

TLW...ROAR!

I'm seeing the drop in commission too. On my listings I now disclose a lower commission, but let the other realtor know if I'm able to get a higher commission from the bank, they share to gain. These short sales are too time consuming to end up with less money.

Amen , Amen , Amen. I was about to write a post on short sales until I read yours THE BANKS STINK when it comes to this

No wonder we are in the mess we are in the mortgage industry. Not properly working with sellers for a short sale, it going to foreclosure and then taking much less than contract offered as a short sale ... hmmmm. Discouraging professional Realtors who work much harder for a short sale less commission and holding them hostage to accept that in the negotiations .. hmmm. Good post!

Debbie, it's always made me go Mmmm, too. Thanks for raising the question.

And Katerina, thanks for the insight. It seems that business is business, which means self-interest, and not practicality or fairness, gets in the way. Why would I think it would be any different?

OMG...I couldn't have said it better Debbie, it is absoloutely rediculous. I/m hoping for the day that we never see "third party approval" on a listing again!

Portsmouth NH Real Estate

"Why do banks/lenders who have to grant third party approval in a short-sale transaction often reduce the broker's compensation"

Because they can. Because agents and brokers are so beaten down, don't know the MLS regulations regarding co-ops, that the banks take charge of our business and too many agents let them.

In Virginia, agents who arbitrate the co-op after the listing brokers pays less than in the MLS, they have won.

Banks get by with this and listing brokers cooparate with them because they can.

Banks deserve everything they get when it comes to losses. They are not supporting us why support them.

I've never heard a good answer to this question. There may be some issues with PMI mortgage insurance that come into play on a short sale that are not around when it comes to REO. It makes little sense to me. On an REO the bank assigns a specific asset manager to the transaction and the price and terms of a contract can typically get approved in a matter of days. On a short sale, nobody knows when or if it will ever get approved because nobody is assigned to the file often for months. Even back when the first $700 Billion stimulus plan was being tossed around in Congress last Fall, I begged my Congressmen to please put something in the law requiring banks to streamline the short sale process.

Well, I think we all agree that they do it because they can. However, I closed a short sale a few months ago in which Citi paid 3 % listing and 3% selling commission. So, there are a few that will pay appropriately.

Debbie--It is very interesting to read your observation and all of the following comments. I am learning so much as I have avoided short sales for this very reason.

I agree with Lenn - I may try the arbitration route and encourage others to do so.

Mainly I think this happens because the banks want to sell RE and squeeze out agents.

As we can clearly see, the banks are NO GOOD at it.

This is so true, hmmmm. I had not taken into consideration that the servicer was taking a percentage of the pie. Hmmm.... why are we in such a mess with all these foreclosures, and short sales? There needs to be a better solution to "servicing" these loans. Better communication between all parties might be a step in the right direction (especially internally within the bank).

Its tough out there at we all need quality leads to make a sale or get a new listing.

Why not become a property reporter at Property News Today and tell the world your local property news by posting a blog, video or plain old news in the section of site.

Buyers and Sellers trust agents who know what is going on in there local community. Help our website visitors learn about the latest information in your area and in turn gain there trust to use you to move.

It takes a few minutes to become a reporter and post your first blog, news or video and get on our home page to drive traffic to your site.

Debbie,

I have heard this, and I don't know how true it is, but supposedly if the negotiator for the bank gets the Realtors to cut their commission they get a bonus for that.

I too have thought about this very thing. It seems that it would cost them less to get the property off of the books rather than have the expense of foreclosure. Hmmmmmmm!

I have also been told that banks that try to reduce your commission are interfering with the listing contract between you and the seller. I will say that not a lot of what they do makes sense to me.

Too bad we can't band together like the UAW and tell them NO. I guess our union isn't as strong as other unions.

While I hate having my commission cut, do you hate even more going back out in the car with your client because the bank wouldn't accept their less than full price offer? Some banks will negotiate on a short sale and still pay a full commission and some will negotiate to less than full price after they cut our commission. It is frustrating since I didn't screw up the banking industry but they are screwing up the real estate industry! They should be paying for their own losses.

Hi Debbie,

If you aren't familiar with short sales they can be very confusing; both as a Realtor and a buyer. They're not really that complicated it's just a lot of back and forth, then the long WAIT, then more than likely a REJECTION OR COUNTER! I can go into a few situations I've experienced but I think I'll just do a post instead.

Short sales are anything BUT SHORT!! I did a few of them last year-VERY VERY TIME CONSUMING, AND EMOTIONALLY DRAINING. Even though I explain the process during my consultations; buyers really DO NOT get a full understanding of the process. Unless they are a seasoned investor of course, but for first time primary homeowners I always have to stress BEWARE!!! Especially if you have a deadline that you want to close by. At the end of the day when a buyer is looking to you for answers regarding the banks behavior........there is really no ONE answer; it's not black or white- there's always a shade of grey involved.

The most you can do is not just learn all you can about foreclosures and short sales but it's imperitive that you actually experience the process because there are many different facets. You're really at the mercy of the banks........so it's best to be patient, not pushy. Who knows; they may call on you to sell a few of their foreclosures.

In a short sale , they are trying to minmize their loss. In an REO, they are trying to expedite the sale by offering a higher commission. A properly negotiated short sale seldom has a commission cut.

I don't get it either Debbie. Blows my mind completely. KM

Debbie,

I recently lost a buyer after 10 weeks waiting on wells fargo, then they came to me with a price and net that they they would accept which was 12% lower than my buyer's offer.

I went back to my buyer and he agreed to take it at the banks price. The HUD 1 met the banks net number but they still came back to me saying FHA would only allow 3% less than contracted commission rate. At the same time they want to give the seller a 1% bonus. All after costing themselves 12% in the first place.

They just don't know what they are doing. I have sent many buyers to them over the years and my own mortgage is with them. No wonder banks are in trouble.

SO MUCH about the short sale process is aggravating and frustrating. Less commission is only the start!!!

I am trained in short sales, and they are so time consuming -- even with the system I have in place -- that I get aggravated when the banks just start slashing our NEGOTIATED commission.

You wonder why banks "renegotiate" the listing commissions.

Well . . . because banks want to interfer with our business practice. Period.

Debbie-You make some very interesting and valid points! I like you, just don't get it! The only thing I can think of, is the banks didn't have to deal with short sales (on this level) in the past and like anyone new at anything, your kind of green until you tweak your business plan ect..

So here's hoping THEY start to get it soon!! Best to you~

I've seen Wells Fargo, Select portfolio servicing, and Taylor, Bean and Whitaker pay 6% commission. I'm also noticing better turn around time for short sales so maybe we will see improvements???

Debbie, Although I haven't read through all the comments, I just had to say that I'm with you...HMMMMMM. A lot of things simply don't add up. WHY are banks going out of their way to discourage, delay and otherwise derail the process of trying to clean up the excesses that are draining our economy?

Debbie, there are actually some reasons for the banks behavior, but none of them are good and they are currently squandering our bailout money and not helping Realtors out at all.

Debbie, I have tried to make sense of the banks and SS, there is none. I think if they would use some common sense we would not be in the mess we are currently in.

FEB

It's true and sad but honestly when it comes to what the seller puts in the contract it's the same as the price of tea in china. It really doesnt matter what the seller wants or thinks. I have thought about getting back into the short sale realm but not sure I want to go that route. In 2007 things werent as bad with the banks.

FEB

Everyone... Thank you for the insightful and thought provoking comments. I know that we are all frustrated with the short-sale process, it would be wonderful if there were universal guidelines so that the process would be "shortened", it would help us all.

It is no surprise to any of us that when a home goes to Foreclosure and is eventually sold by the bank, the sales prices are traditionally less than a standard or short-sale, therefore pushing values down even further.

Thank you all for taking the time to comment, I have read each and everyone!

MAR

Hi Debbie~ I can't understand why these short sales really take so long. It appears that they don't really WANT to sell at all! I don't have a problem with saying NO toreducing my commission! I work way to hard for it!

Dear Debbie,

Some homeowners are cutting commission to the selling agent too. I would think that they would increase the split to encourage showings.

Barbara

Debbie:

You know that is a good observation. They are taking advantage of the brokers because of the circumstance. It another one of those, if you don't cut then there is no deal. They are in the bad position, they are just using the carrot or stick to solve their problem.

Richard

MAR

The Tribe has spoken...

As of March 1, 2009 - Fannie Mae has stopped allowing lenders involved in Short Sales that they back to cut the real estate brokerage fee as long as the gross does not exceed 6%... Hopefully FREDDIE will be on board soon.

Read the article here!

MAR

I would think that the banks would want us to help them with non-performing assets.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?