This is good advise. We have so many California Association of Realtor documents and MLS regulations that much of this, (if our fellow colleagues in CA know how to follow the rules), has already been handled by the paperwork itself.
Ken,
That's a good idea. I always state the possibility of a reduction in the agent comments.
Ken,
We pretty much do that, and I see the disclaimers everywhere that commissions are contingent on Lenders approval and any reduction in commission will be split evenly between the listing and selling brokerages
Ken, The first few short sales I did our MLS had no specific forms covering short sales or commission adjustments. I listed them as 3% to the cooperating broker and when the commission was cut to 5% I had to lose out. My last one prior to our MLS creating a form addressing the issues I put into the listing data that the commission was subject to lender approval. The best offer that came in required the buyers agent to get 3%. Fortunately my client asked about that provision and axed it. We replaced it with one that stated the commission approved by the lender would be evenly divided between listing agent and buyers agent.
We now have a pretty good standardized form which covers this and subsequent offers.
Good idea to discuss it with the agent, but also by now any agent doing short sales should be aware that the commission is mostly to be reduced and that it is split 50/50 - at least in most cases.
I still think it shouldn't be reduced. The bank is supposed to approve or not approve the contract. If the price or terms of the contract need to be changed that is one thing but the commissions are a part of the listing between the seller and the broker.
Great information. I have the language in my listings now, after losing out on one commission. After all the work it takes to get the closing to the table, we don't need to not get paid.
I like the idea of 7%.
Virtually all the agents in my area use the agents comments line to state that commissions are subject to lender approval and are to be split 50/50.
Ken, it is so important for the Listing Agent to have a disclosure that "discloses" what can happen with the commission in a Short Sale. It's a requirement with me on all Short Sale Contracts that all Buyer's Agent must sign along with the submission of an offer to purchase.
Thanks for your comments.
Remember that some boards do not permit the language, so we have provided a means by which you can still follow the law and get the job done.
Also remember that some boards are staffed by people who do not care about you, and still others have arbitrators who will not follow the law and do not care about the law.
Remember that if you don't ask for a full commission, you won't get it.
Finally, remember that neither the servicer nor the secondary market investor can reduce your commissions illegally. It is important to understand what reductions in commissions are legal and which are not.
Thanks everyone.
Ken
Thanks for your comments.
Remember that some boards do not permit the language, so we have provided a means by which you can still follow the law and get the job done.
Also remember that some boards are staffed by people who do not care about you, and still others have arbitrators who will not follow the law and do not care about the law.
Remember that if you don't ask for a full commission, you won't get it.
Finally, remember that neither the servicer nor the secondary market investor can reduce your commissions illegally. It is important to understand what reductions in commissions are legal and which are not.
Thanks everyone.
Ken
Just came across a commission hickup. I had the buyer. The bank was offering 6% the listing agent representing the seller was offering 5% (2.5% to selling agent).
So I was thinking unfair ... right? I just thought that I would bring it up. It turns out that their is also a middle man that gets 1% ( an REO service) ... so it ended up being a 50/50 split. The agent could have avoided the situation by just disclosing right upfront what was going on.
I'm just saying!
What is a "full commission"? I thought there was no such thing - that all commissions are negotiable!
Oh, when I refer to "full commission", I am talking about you getting paid the commission to which you negotiated with your seller. The secondary market investor (SMI), who actually owns the note, will often (but not always!) reduce your commission. Further, the servicer may also either properly or illegally also attempt to reduce your commission further. When that happens, the selling, or buyer's, agent may raise a holy fit about not being paid the commission published in the MLS. A Commission Modification Agreement meets the ethical standards of practice by the NAR and causes you both, in advance, to agree on how to handle any such reduction in order to avoid a disagreement, bad feelings, or worse: a complaint to the local board or legal action.
Thanks for your comment.
Ken.
I need to learn how to deal with when the first is willing to accept the commission but the second is demanding a lower commission. Too often I have seen the commission dropped on both.
A very important concept to keep in mind is that there are protected classes of citizens in our country. The lenders cannot discriminate against people on the basis of age, race, national origin, gender, or religion. Now, since they cannot ask if anyone in the transaction is in one of those protected classes, they must have published policies that are consistent so as to avoid discriminating.
So, they can demand a lower commission if it is published and applied to everyone. Knowing if they do comes either from research, inside knowledge, or experience. If the second demands a lower commission and you know they are being discriminatory, good negotiating tactics should be able to correct it.
Our firm regularly is confronted with these types of demands and about half of the time they are discriminatory and we put a stop to it.
An important factor is whether the second is the investor or merely the servicer.
Feel free to call me if you wish to discuss it in more detail.
Thanks for your comment.
Ken
Ken- That is a timely commentary! I actually underpromise and love to overdeliver on the commisson!! If the low is not met, I pay it. Of course, that has never happened :)