Short Sales

• Short sales are real estate sales in which a homeowner and lender agree to sell a financed property to a new buyer for an amount below the balance of the current homeowner's outstanding mortgage. The lender writes off the difference between the sale price and the debt. Short sales usually involve houses that have fallen in value and borrowers who are having difficulties making monthly payments. The lender often agrees to a short sale as an alternative to foreclosure because short sales tend to recoup more money than foreclosure auctions.
  
  

Agreeing Commission

• A real estate agent representing a homeowner trying to orchestrate a short sale must submit a short sale agreement to the lender for approval. The lender and the agent must agree upon a sales commission that cannot exceed 6 percent of the sale price. Generally, if both the buyer and seller employ an agent, the two agents split the commission equally. However, in some instances, especially when only one party hires an agent, the lenders and the agent agree on a reduced commission.
  
  

Sales Contract

• Some homeowners agree to short sales before obtaining approval from the lender to do so. In these situations, the homeowner submits a signed sales contract to the lender for the approval after which the lender and seller must agree to a short sale agreement. If a seller signs a sales contract prior to a short sale agreement with the lender, then the lender does not get to negotiate the real estate agent's commission. The real estate agent receives commission based on the terms of the listing agreement established with the homeowner when the home first went on the market.
  
  

Agents

• Real estate agents who buy and sell homes typically handle the sales themselves rather than hiring another agent. However, if you are an agent selling or buying a home in a short sale transaction, you cannot receive any commission from the sale proceeds. This rule applies to both residential and investment property sales and prevents situations where a real estate agent could have a conflict of interest.