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Every agent who has participated in a short sale transaction knows there may come a moment when the lender announces a reduction in the commission it will approve as a condition of accepting an offer. A great deal of angst circulates around this issue because, despite what the seller agreed to pay in the listing agreement and notwithstanding the advertised SOC, the transaction cannot close without the lender's approval which is often a "take it or leave it" position. The buyer and seller want the transaction to close and agents do not want to be a road block to that outcome. Balanced against this is an agent's and broker's need to earn a reasonable income and justify their own expenses and liability incurred in a transaction. If lenders condition acceptance of short sale terms on agents' willingness to accept a reduced commission, agents really have no power - except to decline to list or show short sale properties in the first place - a tragic result for everyone, including lenders.
Fannie Mae was made aware of this pattern and the adverse consequences of agents and brokers avoiding short sales. As a result, Fannie Mae announced a revised policy that took effect March 1. Now, "closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate." This policy applies to Fannie Mae loans only and only to those loans where the borrower is in default. Nevertheless, it should give agents and brokers a degree of comfort in knowing that the agreed and earned commission will be paid on many short sale transactions. For a property secured by a Fannie Mae loan, where the seller is in default, the lender may no longer condition acceptance of buyer's short sale offer on the agents' and brokers' agreement to reduce their commission below a total transaction commission of 6%.The new Fannie Mae policy says the following:
Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.Sandy Noll
Realtor
Keller Williams Realty Kirkland
425-890-0878
sandy@sandynoll.com
www.letsachieveyourgoals.com
http://positiverealestateprofessionals.com/washington/
Your Residential Real Estate Specialist
Great news Sandy! The last short sale I did paid 2.5% and I worked HARD!!! I always do though.
Wanda 2.5% isn't to bad, but you probably deserved the full 3% and then some!! Short sales require way more paperwork and time and explanation to the buyer....it's the last transaction that should be reduced!
This is our dues dollars and RPAC investments working. I hope you are a major investor, I am.
Sandy - If a listing agent and the borrower agree on a 6% commission, are there restrictions on how the listing agent splits the 6% with the buyer's agent? I believe in and practice 5-%/50% splits, but is seems to me that I am seeing numerous examples of what I think are uneven splits, say 3 !/2 - la and 2 1/2 - ba. Just curious.
Bob thanks for reading. It is my understanding that the split is 50/50 for a short sale situation regardless of the percentage. Of course if the seller wanted their listing agent to receive a higher percentage, I'm not sure if there are any restrictions on that. I don't personally know anyone who's ever received 3.5% and the SA only received 2.5% on any type of transaction, it's usually the LA who takes the lower commission if seller wants a reduced commission, at least that's been my experience.......
Karen I am!!
One of the agents in my office got this from Bank of America two days ago:"Hello,
I got the notes from customer service that you will not reduce the commission to 4%. I'm sorry but per our revised matrix this loan falls under the 4% commission. I am unable to give you anything more then that. We do not offer 6% commissions, the most we give out is 5% but this loan does not fall into that category. I'm very sorry, but please revise the HUD and send it in. If I don't receive it within 72 hours the correct way the file will be closed out for non compliance."
I guess she didn't get the memo that banks can't screw with commissions.
Gary
Gary was the loan in default secured by Fannie Mae? It does not apply to all short sales, only those secured by Fannie. If it was, I'd probably consult with my broker to see if there is anything that can be done, even if it's post closing.
How to tell, you might ask?? Look at a copy of the deed of trust and the form used at the bottom should state FNMA.
That is great news since short sales are such hard work for both sides.