Short Sale Listing Agents, Short Sale Negotiators & Avoid This HUGE MLS No-No

By
Real Estate Agent with Realty Executives Alliance

Negotiator

As I was doing a property search in the MLS, I ran across three short sale listings from three different real estate agents where the agent clearly stated (in the agent comment section) that the selling office’s commission would be half of the total commission noted in the short sale approval minus half of a short sale negotiator’s fee.

At this moment, I want to transition gracefully into the next portion of this post but this is too important, so here it is: DON’T DO THAT!

Whether we split the cost with the selling agent or not, I think that we can all agree that paying someone to negotiate short sales definitely takes a good chunk of our already shrinking commission. However, there is an MLS rule (Rule 7.12 Unilateral Contractual Offer) that spells out how to go about having the selling office absorb a portion of that third party negotiation fee without jeopardizing our member status with your local board. 

Consequently, I negotiate my own short sales and negotiate short sales on behalf of other agents.  When I work with other agents and the subject of how I’m going to get paid comes up, I give them the option of absorbing the cost entirely or having the buyer’s agent pitch in. When asked my opinion, I always tell the listing agent to absorb my fee entirely (please don’t send hate email).

Now, I say this with good reason:

  1. As a short sale listing agent, my biggest asset (besides a cooperative seller) is an engaged buyer.
  2. An engaged buyer is only as good as the real estate agent representing him/her (sad but true; hate the game not the player, etc. etc.).
  3. Short sales are still considered substandard by many, especially among REO and standard listings. Therefore, having an agent willing wait around an additional 30, 60 or 90 days for you(us) to get your job done when he could probably find a more straight forward sale to dive into is a gift and ought to be appreciated.
  4.  Like me, the vast majority of listing agents are negotiating their own short sale transactions and not asking selling agents to pitch in some of their commission to compensate the listing agent for taking care of the negotiations. So, why would anyone expect a selling agent to forgo a portion of commission so that you, I, or anybody else could hire a third party negotiator?
  5. If someone handles your short sale negotiations, you would have the ability to leverage your time and market for more listings.
  6. As a listing agent, taking a short sale listing implies assuming responsibility for the short sale negotiation.... It’s okay. You don’t have to agree with me.

If after reading the words above you still believe the selling agent should help you cover your short sale negotiation fees then be sure to protect yourself by doing some or all of the following(these measures are specific to the state of California):

  1. Incorporate the short sale negotiation fee in your listing contract. Structure the listing contract so that the fee gets paid out of your commission. Most negotiators charge 1%-3% of the sales price. Let’s say your negotiator charges one percent of the sales price. You can write your contract to reflect a 6% commission with 2.5% going to the selling office. You have to disclose that there is a variable rate of commission in the MLS. I suggest you take the extra step and disclose the reason for the variable rate of commission in the agent comment section. This will only work perfectly when the lender you are negotiating with will not touch your commission. In my opinion, a 3% short sale negotiation fee is crazy high but I’ve seen it done and if you’re willing to cover it, call me(wink).
  2. Specify a dollar amount for short sale negotiations to be deducted from the overall commission in the MLS agent comment section. Doing this will save you a huge violation fee. The agents with whom I spoke stated that there would be a short sale negotiation fee but did not specify an amount. It only makes sense that Realtors everywhere could get in trouble for not disclosing exact commission reductions.
  3. Use the cooperating broker compensation agreement (CAR Form CBC).  Section 3 has plenty of options to choose from when it comes modifying the selling agent’s commission.

There is a fourth option to change the commission from a percentage of the sale price to a flat fee. I say good luck with that one.

In any case, you have to assume that even -or especially- in this market, hardworking agents will think twice before showing any listing when it means having to accept a reduded commission from the get-go. Happy short selling!

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Comments (6)

Lynn B. Friedman CRS Atlanta, GA 404-939-2727
Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Dear Brenda -

Every state has different policies. That being said, for me - ("please don't send hate mail") avoiding the extra negotiator is the way to go.

Have a happy day -
Lynn

Nov 15, 2011 05:07 PM
Ronald DiLalla
Century 21 Discovery DRE 01813824 - Anaheim, CA
No. Orange Cty Real Estate

Hi Brenda,  terrific post and explanation.....thanks for sharing.

Nov 15, 2011 05:09 PM
Brenda Uriarte Avila
Realty Executives Alliance - Cypress, CA
GRI, CDPE

Hi Lynn, Yes! Every state has different policies. I was definitely referring to California. And I agree with you, avoiding the negotiator's fee is the way to go. I appreciate your comment.  Have a wonderful evening!

Nov 15, 2011 05:16 PM
Brenda Uriarte Avila
Realty Executives Alliance - Cypress, CA
GRI, CDPE

Good evening Ronald, thank you so much! 

Nov 15, 2011 05:18 PM
Kim Frasier
Best View Imaging - Millbury, MA
Showcase Your Listing with its Best View

As I'm not an agent I'm still learning to understand short sales but this makes a lot of sense.  And congratulations on taking the initiative to negotiate your own deals

Nov 15, 2011 06:55 PM
Brenda Uriarte Avila
Realty Executives Alliance - Cypress, CA
GRI, CDPE
Good morning Kim! I appreciate your comment. Short sales are complicated to say the least but a lot of us are becoming familiar, which is great because they're gonna be around for a while.
Nov 16, 2011 03:30 AM