What’s in a Short Sale for the Agent? A Look at the Commission

Since short sales aren’t done by commission like traditional property sales, it’s often hard for buyers to understand how they work. Granted, short sales are a bit more complex than ordinary property sales. So how exactly do real estate agents make money from short sales?

The Difference Between Short Sales and Traditional Home Sales

Short Sale Difference

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Usually, the full balance owed the mortgage lender is paid at the time of the sale. A short sale involves the lender agreeing to accept less. Lenders look at their losses for a foreclosure versus a short sale and determine which option is best for them financially.

How Short Sales Go Down

Short Sale Process

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A homeowner gets behind on their mortgage and wants to avoid bankruptcy or foreclosure. They may approach their lender about a short sale. During their evaluation, the lender considers how much they can take off the principal owed, as well as fees for the listing agent, buyer’s agent, legal fees and similar expenses. The lender weighs these costs against the costs of foreclosure. They then make the decision to accept or deny a short sale.

What This Process Means for Real Estate Agents

Real Estate Process

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The mortgage lender is the one who pays the fees for a short sale, including fees for both the listing agent and the buyer’s agent. However, real estate agents make considerably less on short sales than ordinary sales. Most aren’t used to doing short sales, and one who is familiar with short sales can get a lot of business that other agents pass up. The high volume of short sales can make up the difference in their income.

For instance, Las Vegas, Nevada was hit especially hard during the recent recession. As a result, for a couple of years about two out of every three home sales were short sales. Since most agents steer clear of short sales, the few agents who had knowledge and experience in this area were able to make great profits on short sales when there was virtually no money to be made in ordinary home sales.

Short Sales Are Anything But Short

Short Sales Take Time

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It typically takes three to four months to complete a “short” sale, and there are times when it simply isn’t possible. Some mortgages or properties don’t qualify. If the mortgage lender deems a short sale more costly than foreclosing on the loan, they’re going to foreclose. Since this process is lengthy, many investors don’t bother. But the ones that do can make a huge profit from these transactions, because they are able to buy properties for significantly less than the actual value and sell it for the going rate. The key to success in buying real estate through short sales is patience.

Software to Help Investors and Agents

Real estate agents and investors can make use of computer software by FreedomSoft that conducts online appraisals, generates contracts, produces proof of funds letters and much more. If you’re an agent or property investor looking to delve into the profitable market of short sales, this software can be tremendously helpful in your efforts.

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