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Lender only willing to pay 4%......

What do you do when a lender stands firm on only paying 4 or 5% commissions on a short sale? In the past, 4 and 5% were expected on a short sale. In todays troubled climate, 6 and 7% are becoming more prevalent as it should be.

Lets talk about how to turn the lenders narrow thinking and stingy ways around. Here's the scenario:

A property has three mortgages, 1st=$155,000, 2nd=$53,000, 3rd=$12,000 The Fair market value (not appraisal) is between $210,000 and $220,000. Good neighborhood, clean place, an average middle class home. Minor cosmetics needed to get the home to it best condition.

The 2nd lender is foreclosing and believes the value to be $233,000

The Realtor working this transaction has said the lender is standing firm at the 4% commission. Lets get some dialogue going on this and see what you think. I'll reserve my thoughts and comments for a little while to see what ideas and concerns come from this.

Enjoy!!!

Posted by Wayne Garab on 11/08/2007 06:28 AM

Comments (6)

real estate, short sales, training, education, better economy, nefar, commission

6 Comments on Lender only willing to pay 4%......

I would be happy with 4%...in south Florida, you are lucky to get 1 or 2% on a short sale.

11/08/2007 06:38 AM

by Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! (Coldwell Banker Fort Lauderdale Beach)

Wayne, you've got bigger problems than the commission. Has the holder of the third disappeared? If he's still around you need to "negotiate" him out of the picture. All your commission is in the third.

Holders of seconds generally get negotiated out of the picture. Maybe he is feeling "powerful" because this time he's in charge.

I would think that an offer to buy out the third would be in your seller's best interest. Then it could be sold as a regular transaction rather than a short sale. Your seller should explore this possibility. Even if they have to borrow elsewhere it will be worth it to them in the long run.

Bill Roberts

11/08/2007 12:19 PM

by Bill Roberts - "Baby Boomer" Retirement Planning (Brooks and Dunphy Real Estate)

4% total??? That's crazy. Short sales are a ton of work and lenders should be grateful and aggressively trying to incentivize agents who help them avoid having an REO listing.

11/09/2007 09:21 AM

by Nancy Moeller (Seven Gables Real Estate)

Bill, you make some keen observations. This scenario is one that a Realtor came to me for advise on. As it turns out, there was no need to even discuss commissions with any lender. As Bill stated, the money is in the third.

Here's how it's being played out now: First gets full payoff, the second has agreed to $28,000 as settlement in full, the third has agreed to $1000. There is a purchase contract for $210,000

As you can see, everyone walks away from this happy. The Realtor is getting a 6% commission, all costs are being paid from seller proceeds and there might even be money left on the table depending what the approval letter states.

Moral of this story is not to get tunnel vision when doing your first or second short sale. Look at the big picture and formulate the best exit strategy for all involved.

11/10/2007 09:23 AM

by Wayne Garab (River City Home Solutions, Inc.)

Interesting responses here. I am also seeing on the approval letter the actual commission offered right on it.

11/10/2007 10:16 PM

by Stella Barbour - Real Estate Agent - Serving Northern Virginia (Jobin Realty - Real Estate Agent)

Wayne, I really appreciate your expertise and the others' comments here. I'm new to short sales and wanting to learn all I can.

11/19/2007 08:25 PM

by Palmetto Bay | Redland Real Estate | Maggie Dokic (EWM Realtors)