Florida Mortgage | Short Sales do not always mean that the Realtor does not get paid!

After reading a lot about short sales and those people that love or loathe them, one theme keeps coming up that makes me understand new topics for Continuing Education that would be exceedingly timely right now.

So many Realtors show their clients short sale or bank owned properties just to see the Mortgage Broker, Bank, Title Attorney and Buyer's personal attorneys get paid... but the Realtor either sees their typical commission cut dramatically or sees it disappear altogether.  It doesn't always happen, but it is not uncommon!

First of all, complaining about it isn't helping anything or anyone.  It just turns off your clients that may be interested in that deal because it is the perfect home for them and the only one currently on the market in that neighborhood or of that model! 

Also, saying you'll NEVER do a Short Sale is just cutting off your nose to spite your face in this market.

You can't always expect 3% on every deal. 

As a Mortgage Broker, I am used to my compensation fluctuating.  Just the market fluctuations themselves can create a last minute adjustment in my compensation.

Sometimes the pay off numbers on these short sale transactions are just too tight.  Between multiple bank liens, HOA liens, IRS Tax Liens, State Tax Liens and selling expenses including remediation and repairs, the margin on these properties are very low.  The banks understand they're going to lose money... but they also know what they're willing and able to lose. 

That's where Realtors need to get wise on the subject of "how low can you go!"...

Short Sale transactions really aren't like a Limbo contest... but the allusion is very applicable.  At some point, EVERYONE falls under that pole.  Just the best Limbo dancer usually never has to show how low they really can drop.

So we're seeing people enjoying Short Sales and people hating them... because some Realtors are willing to go lower!  They understand that the "traditional" 3% commission is an industry benchmark on listed properties purchased conventionally. 

Short Sales are unconventional.

So... this is where the best and most experienced Realtors and their supportive Brokers step in to make a move that keeps the bar from dropping that next level.

How?

First of all, If you have someone buying Short Sales, they're shoppers.  Get them into some level of a Buyer's Agency Agreement.  If you really do have great deals on great properties to show them, they will reward you with their loyalty in BLUE ink.

Second of all, you should have a new Buyer's Agency Agreement drafted for short sale commissions much like traditional Commercial Real Estate Agents use... including a Minimum Commission clause.

My first commercial real estate broker stated that every listing agreement had to have a percentage AND minimum fee spelled out in a dollar amount. 

1. So I would take a lease listing for 6% with 3% for the cooperating agent - the Tenant Rep
2. I would take 5% if I brought the tenant as well
3. I would take a minimum (per house rules!) of $1500 commission

Why? 

Well... most lease listing agreements were advertised for 3 or 5 years.  But what if 3% of a one year lease with extension options was only $800???  Then we had to agree on that bottom dollar number...especially if we had to split it!

So...my advice is when you are working with Short Sale Buyers, write a Buyers Agency Agreement and explain carefully something like this:

In most cases, I will receive my full compensation from the Seller.  In some cases, the negotiation of the short sale will make it impossible for me to receive my full commission.  In this case, the Buyer agrees to pay at closing (on the HUD) the difference in the commission paid by the bank and 3% of the purchase price... The most that the buyer will be responsible to pay will be $X.

note: this is a suggestion, I am NOT an attorney - and neither are you - so get a real attorney to write this for you.

At this point, you let them know what the maximum will be out of their pocket.  Remember, unless they are using a Hard Money Loan, they will likely have to pay you out of pocket... a Hard Money Loan may allow them to wrap closing costs into the financing. 

So since it is cash that they are spending, show them you're willing to cut the number down to make it agreeable for all parties... show them how low you can go.

Armed with a valid (have your attorney check the agreement before using it!) Buyer's Agency agreement with commissions spelled out, you are sure to get paid a fair commission on your Short Sale transactions...

and a paid Realtor is a happy Realtor!

Read more about Short Sales in Florida by following this link Florida Mortgage | Short Sales & Bank Owned Properties

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David A. Podgursky, MBA
TheMortgageGoToGuy.com
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