The big drawback to working short sales is that the agents typically receive a reduced commission, from the loss mitigation department, for more work than what is normally required.
So, how do we stop the banks from fighting us for what is rightfully ours? How do we give in to something that one REALTOR® will never even ask another REALTOR® - a cut in commission?
Well, I don't know if we can stop the lender from asking, but why not turn the tides to our favor. Lets ask for more to start with!
When I take a short sale listing today, instead of the typical 6% commission I now insist on 8%. That's right and the seller will give it to me every time.
Now I can ethically post in the MLS that the buyers' agent will receive 4% - of course I do have my normal disclaimer that the transaction is "Subject to 3rd Party Approval".
I let the seller know that this is a bargaining chip. Every negotiation is about give and take and in most cases the bank wants to dominate the structure. It is a given that they will lower the commission that is asked for - so now I let the homeowner know that I am willing to give up to 2% back to the bank as a point to negotiate and still end up earning a fair commission.
Now, I have not yet personally closed a 8% commission for a short sale, but a friend of mine claims he just did last month - he got the full 8% with an offer that was approximately 85% purchase price to current fair-market value. Other than this one instance, I have seen 6% awarded on numerous occasions.
What I really do not want to see is an agent taking a 5% listing, offering the buyers agent 2.5% and then have then bank cut that down to 4%. You have to admit, that really bites.
I hope this little tid-bit will be found to be useful to some.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner please call (951-443-6259) for your free copy.
This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.
This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.
I am proud to be a full time REALTOR® with Mission Grove Realty who is proud to be a contributing member of the ActiveRain community.
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The market has changed and so have I. I am now in my second year of successfully working with banks and Asset Managers in the preservation and sale of REO Properties throughout the Inland Empire, CA
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Thanks John, I like this stategy and am dealing with one right now.
The second day in a row I was surprised to see your face at the top of my "subscribed to" list. It's good to see you back.
It sounds too good to be true. I will try it with my next one.
Missy Caulk Ann Arbor Real Estate - Again, I am glad to help any way I can - I hope this works out for you.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Chris Elizabeth Griffith ~ Bonita Springs Fl Real Estate - Thanks Chris, its good to be back...and on top too!
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Stella Barbour - Real Estate Agent - Serving Northern Virginia - You must remember there are no guarantees or set rules, but a rule of negotiating is you have to give up to get something in return...so I give up my "high commission" in return for ...
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
I love it! Fantastic advice. Have a wonderful monday.
Christin Griffin - thanks for the endorsement - try it, you'll like it
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
John. Realtors DO ask that of other REALTORS, lowering commissions. They count on the flawed belief that, when a seller lowers the commission that we split 50/50. NOT SO.
My commission comes from the listing agent's offer of co-op in the MLS. I don't care of the bank reduces the listing fee. The listing broker pays me what they offered for me to show and help sell their listing.
This is a game a lot of listing brokers are playing. Take the listing and if it turns out to be a short sale, not to worry. If the bank lowers the fee, we just pass the loss on to the buyer's agent.
Not this buyer's agent.
Lenn Harley, Homefinders - I did not write this to create a controversial debate over the value of buyers agents or the terms of the contract the MLS creates - It is simply a post to help educate listing agents maximize the commission that everyone earns.
I understand the purpose of the MLS and the contract that is made between REALTORS and that is exactly why it is paramount that the listing agent include in the agent comments and create additional terms that the offer is subject to 3rd party approval. If that is not good enough, then please don't submit your offers in the direction of the listing agent!
I for one prefer to do business in a spirit of cooperation and not confrontation. There is too much confrontation going on int the world that we don't need to create our own over such a trivial issue.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
John,
I agree with your post... I list at 7% and usually get 6% as a result. Just yesterday I negotiated to 6% and gave the 1% and an admin fee as part of the negotiation. Deal goes thru and the bank can "win"...
Mark Ryan
Mark,
It's good to know that my theories not only work for me - they are becoming the way of the industry. I guess it is easy to spot these trends when your in front of the curve as it appears you are and where I hope to remain.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
John,
Forgot to respond to Lenn... I add to the MLS that ALL terms of the agreement are subject to third party approval and that includes commission. Again, you are right... spirit of cooperation. Why should I as the listing agent take 2% and give the buyer agent 3% and do all that work??? I work for a win win deal for EVERYONE involved in the transaction, buyer, seller and agents... that is the best most likely way for everyone to get to the closing table and get to their goal...
Mark
Lenn has a good point, the buyers agent doesn't have to accept less. If a listing agent suspects that they might have to reduce it has to be put in the contract and all parties agree ahead of time. I'm working on a strategy that will prevent the banks from reducing I'll run it by you before I post.
Brian Sharkey Real Estate Team - I am definately interested to see what you come up with - this is one of the big issues with short sales - getting paid what we are worth.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Mark Ryan - I agree with you - COOPERATION is what makes up professionals and not some greedy ambulance chasers.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Brian,
I would love to hear you strategy... that is something real and can be an unknown problem...
Thanks
Brian Sharkey Real Estate Team - See....inquiring minds want to know, just look at what Mark Ryan has requested...
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
I've recently started to list at 7% - 2.5% to listing broker, 2.5% to buyers agent, and 2% to negotiator. I also just added a SS negotiator to my team.
Its garbage that the listing broker wear 2 hats (listing agent and negotiator) and receive only 50% of total commission. It is just as much work to sell a short sale and get it to the closing table as any other listing.
I have a couple of SS's submitted with the negotiator fee on the HUD - we'll see how it goes.
I am an agent that does negotiations for other realtors. We start out with my fee as a line item separate from the 6 percent commission. So far, about 30 to 50 percent of the time it remains a line item and is paid separately.
About the 3rd round of negotiations, lender payoff approval letters will many times just say..."as long as we net $x,000, we will accept it. That is when you can capitalize on the 6 percent and line item commissions.
Also, lenders will sometimes not do the math when offers follow the market down e.g. the first deal submitted to the lender us $400k, the second $380k, the third $350K and finally the one that closes is $340k. Keep the commission such that the starting 5% commission ends as a 6%.
Very helpful, it never fails the Listing Agent is expected to reduce and I have been trying to think of a creative way to try and get some more money out of these tedious transactions.
Wendy Smith - I like it, I like it. Do you use your own name as the Negotiator, or a team member, perhaps? I just think when you wear too many hats, the bank will cut it down - but why not create a simple dba entity to be your own SS negotiator?
Did I mention , "I like It!!!"?
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Jack Hartzell - Welcome to ActiveRain - I see you are a new agent. I am hoping to see more of what you can offer.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Amber Castonguay - I agree, the listing agent is very much consumed with the transaction and does much of the work - but the buyers agent does have the buyer and right now it is the buyers who are controlling the market, so either way, we both bring a lot to the table.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
Maybe I'm completely naive here but my listing agreement is with the seller, not the bank. When I get the short sale approved and the bank says, "short sale approved based on a 4%, 5%, or whatever less than what I have negotiated with the seller, I just tell them I have a contract that states otherwise and I represent the seller, not the bank. A few times I have had to say, "now if this becomes a reo and you would like to use my services, we can negotiate my commission" - other than that, reducing my commission will make the short sale not happen and that 1% won't make much of a difference to the bank when they eventually get it back.
Tina Merritt (Realtor, Virginia Beach) - Yes this does work some of the time - but especially when there is a 2nd and they are only waling away with $1K to $5K - on a $60K to $150K loan or LoC they are not thrilled with a Realtor walking away with a commission larger than their net. There are times when commissions must be negotiated. Certainly, I would never kill a deal because I wasn't getting my full amount.
This is why all of my commissions start out at 8% these days.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR®
Mission Grove Realty
John, I think I will try that. I always list the house at my full commission but rarely get it.
Melonie Haag
Thank you for that strategy. I have subscribed to you blog for more of your knowledge.
John, Good point! What my team and I have been doing is starting at a comm of about 7% then ending up at about 6% and also using our LLC as a third party negotiator to charge an additional 1.5% for a fee to negotiate.
The Keutla Team