Sound Off About Short Sale Commission Rule

After careful consideration based on subscriber survey results and further review and feedback from broker leadership, the MLSListings Board of Directors has reached a decision about the short sale compensation rule recommendation issued by the California Association of REALTORS ® (C.A.R.) late last year. It has been determined that the recent C.A.R. rule recommendations are not a sound fit for our local business climate, unlike neighboring MLSs, and the board has elected to un-adopt the rule. Effective July 31, 2013, the Board has decided to return to the original MLS rules that did not require disclosure of a short sale status and the nature of Realtor compensation.

We greatly appreciate the extensive feedback provided by our subscribers via our surveys and comments. Final survey results will be posted shortly. More detailed information about the decision can be found in our June update.

Click an image to view the survey results


Short sales, those transactions where the seller owes more on his or her home than the home is worth, are unique in that a third-party lender can intervene in the terms of the sale and ask a listing broker to reduce the gross commission offered on the property. As such, NAR policy gives local MLSs the choice to allow listing brokers to condition their offers of compensation on lender approval for these types of transactions.

Recently, the California Association of REALTORS® (C.A.R.) removed the short sale compensation exemption to the unilateral compensation rule and MLSListings board of directors adopted this rule change in Dec. 2012. This means, short sale participants must disclose potential short sales when reasonably known, to the cooperating broker either upon or after MLS entry.

It also means that participants with short sale listings are not allowed to place any reduction conditions on compensation offered through the MLSs for items such as lender reductions of the gross commission, short sale negotiator fees or other administrative costs of the transaction. Any reductions from the commission for such items should be factored in as a reduced amount the listing broker initially offers to a cooperating broker and may not be made a condition of the offer.

The new rule went into effect on March 1, 2013. Listings entered after March 1, 2013 are subject to the new short sale compensation rule. You can learn more about the changes by checking out a helpful FAQ provided by C.A.R. Click here to access (C.A.R. membership credentials needed to access).


Comments (107)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    I’ve read most of the remarks and I think as an industry, Realtors continue to miss the boat in their thinking about commissions, period.

    In reviewing these ‘rule’ changes, I am reminded of a children’s bedtime story in which all the little forest creatures are huddled in a tree stump trying to decide how to defend themselves against the big bad wolf coming down the lane. What they don’t realize is, there’s a flood coming from the other direction!

    Let me explain using a different metaphor: We are micro-focusing on the symptoms and not the disease.

    Instead of focusing on only one detail of the problem such as short sale rules about commission splits in the MLS, I believe the direction we need to go is to put pressure on CAR and NAR to start spending our money more wisely: that is to lobby Washington to put pressure on the lenders to stop meddling in our industry’s livelihood by trying to control what we are paid, as stipulated in a pre-signed listing contract between seller and agency. THAT contract should be honored by lenders just as much as any other costs and fees, by any other professional entities, including property taxes, insurance, legal, etc. You don’t see the county reducing it’s back taxes in short sales, do you? Or title companies as a rule? WHY SHOULD REALTORS? Especially when short sales for example take at least triple the work of other transactions?

    It’s pure stupidity on our part to not have nipped this commission reduction nonsense in the bud years ago. We think we would dearly enjoy being respected as a professional industry, yet we’re accomplishing the opposite: we’re really perpetuating the sending of the subliminal message that we are not deserving of our commissions if we are caving in the first time anyone, especially a third party lender, whines about wanting a discount. Folks, we are allowing others to discount our own professional self worth.

    Shame on us!! At least Fannie Mae recognizes that professional real estate services are not to be tampered with and that doing so could be a future legal hazard from class action lawsuits by Realtors. (This novel concept came directly from a very high up Fannie Mae corporate legal individual who shall always remain nameless.) As far as I’m concerned, that’s such a good idea!!! and an additional direction we should be taking with our dues, thereby recovering our back commissions per our originally signed listing contracts all the way back to day 1. What a novel concept indeed!

    That would get the lenders and other meddling entities to think twice about tampering with our listing contracts.

    If ever there was a civil rights violation, in my opinion, this is it, and it’s industry-wide. We have allowed loopholes in our ‘rules’ which allow predatory lenders (yes they still are) and ‘predatory others’ to now focus on how to profit by taking money we have every right to collect if we do our fiduciary duties. They call it mitigating their losses. Wait a minute. We didn’t contribute to their losses. I call it extortion. We deserve to be paid for our professional services when they are in demand. I disagree strongly with the misconception that ‘everyone should take a discount’ in a short sale, and that’s why the commissions are up for grabs. When everyone is ill, physicians are in high demand, and by the way, paid for their services. No one ever questions it. When attorneys go to court because of some civil or criminal violation, their services are in demand and they are paid for their services. When there is a crowd to feed, chefs are in high demand. They too are paid for their services. Indeed, all are paid pre-arranged by contracts and agreements. When stocks are down and investors buy buy buy, you don’t see them discounting their profits do you? That is the point folks. It’s called FREE ENTERPRISE, and lenders are tampering with my right to earn a living. Short sale agents are in high demand. Yet they allow themselves to be paid the crumbs the lenders leave us.

    What’s wrong with this picture?

    I for one have done short sales for 30 years, negotiated them myself, because I have a strong belief about service to the maximum as a fiduciary to my client. I am proud to say I have never lost one. Not one. Have I been paid what I am worth? NOT ON YOUR LIFE. Negotiators and attorneys who act as negotiators get paid win lose or draw, and often up front, if not by the lender, then by the buyer or someone else.

    We must STOP the madness, grow a backbone and deal with what the true issue is: getting ripped off by third party entities who blatantly disregard pre-signed listing contracts.

    Let the lenders feel what it’s like to have a huge short sale department…which sucks up a lot of their overhead…suddenly have no short sales to process. Let them get overrun with REO’s and eat the losses, or more likely, backlog their foreclosure auctions until they realign their infrastructure to handle the boycott. Let’s see how fast they start paying what’s on the listing agreement!! Folks: This is simply getting paid what our listing contracts mandate.

    I know what you’re thinking, I can hear your little wheels churning now: example: fiduciary comes first, what would this do to sellers…example1: lenders won’t approve the short sales, then what?….example2: I need to earn a living and short sales currently represent a larger market share opportunity…..example3: if I don’t take the listing someone else will, and for less….example4: free enterprise is tampered with because agents are not allowed to set their fees like any other professional service…example5: newbies in our industry will take any commission they can get because they’re not established and they’re hungry…example6: the banks will just disapprove short sales. (I say let them. The commission is NOT part of the contract! It is a pre-determined expense of selling on the HUD 1 and should not be in the negotiations of a short sale between buyer and seller.)

    NO CONTEST, you’re all right. However you’re missing the point: the issue is about the altering of a pre-agreed signed contract by a third party, not what the amount of the commission is; that’s is by agreement and up to the seller and the agency. However if as an industry we boycott short sales for say, even a few months these lenders will have huge short sale departments that are sitting doing nothing.

    You don’t think this will get their attention? Think again! I’m not talking about abandoning existing clients and throwing them under the bus out of principal. I’m talking about taking more listings and perpetuating the cycle. The cure is not really simple, but effective: First, the lenders would delay the REO’s because they can’t handle the workload; second, no newbie should be taking on a short sale, period, without a seasoned partner agent or broker. In my opinion newbies should have at least two years experience as a partner of no more than 50% in short sale partnership before they should be able to solo. (I think in ANY transaction…but that’s another blog). That alone will increase the need for a higher commission to make sure the seasoned partner also earns their share for tutoring the newbie, and make those newbies think twice about opening their wallet like there were free samples in it for anyone who asks all the time. (Talk about raising our professional standards in the public eye…that’s a biggie!) Next, everyone should stop taking new listings for a period of time. My vote: At least 6 months. Third, Washington should be smacked into action with a rolling pin post haste to get those lenders to honor a legally binding contract., and screw the contingency of a lender’s approval. Lenders are NOT above the law.

    I can hear some of you others saying “what about helping the sellers who need a short sale in the interim’? My heart goes out to them, but: My guess is that their file will be delayed, because as stated above, REO departments are not equipped for the higher volume. Lenders are also now mandated to allow so many extensions on foreclosures to protect that seller and give them every opportunity to save their homes now that people did not have the luxury of in other recessions. Most of them can and will hang in there. The worst that can happen to them is 4 years of credit purgatory before they are eligible to purchase another home should they not file BK and just let the property go. Att he risk of sounding callous, we as an industry did not get them into a pickle, but we deserve as an industry to be paid our professional worth to get them out of it.

    What you ask, would be the result of these efforts: 1. We will have our contracts honored and in tact. 2. We wil be paid what we have negotiated with the seller what our services are worth. 3. Lenders and others will get the message that we are professionals and not an ATM machine. 4. We won’t need these micromanagement MLS rules about short sale commissions; i.e., we should be treating the disease, not the symptoms.

    Short sales are here to stay, folks. Wake up and smell the coffee. Granted there may not be a flood of them at all times, depending on the economy; however, they are a viable source of income for professionals if we stand up for our rights regarding protecting and defending our listing agreements. As long as homeowners are in trouble, there will be short sales, regardless of the economy. Are we going to continue to SHORT-CHANGE ourselves because we can’t afford to help these sellers? We have a right to earn a living. Why oh why are we allowing others to determine how much we earn as individuals or offices or as an industry? What other industry do you know that will allow themselves to be treated this way?

    One of the other comments I read was very valid: ‘don’t worry about trying to put rules out there for scammers….that goes for agents as well’. If they are scammers to begin with, they will find a way around most rules, and authority for that matter. It will be a matter of time before they’re drummed out of the business.

    If after reading this we as an industry still do nothing about being ripped off, we might as well just call ourselves Doormat Realtors. That’s what we are, because we are sending the message that we ourselves don’t think we are professional enough to stand up for ourselves, and worse, that our professional worth is so low that we’d take any crumbs of a paycheck some third party feels like paying us. Worst of all, we are perpetuating the image that we are always greedily focusing on commissions instead of providing an extremely valuable professional service to the public. It’s about time our industry matured and became truly professional. Then maybe our approval ratings will finally climb in the public eye and we will be Doormats no more!

    In summary: Stop cowering in the tree stump! Boycott and sue the bastards in a class action before the flood wipes away your livelihood, your professionalism, and your dignity.

  2. Mickey Satterwhite says:

    It’s very difficult knowing in advance what commission percentage will be offered by the various banks when overseeing a short sale transaction. There are no specific guidelines and based on my experience, the banks are all over the place on this matter. As a result, this rule ADDS difficulty to the short sale process. I would very much prefer the Board reinstate the previous rule and give listing brokers the ability to state that reductions in approved commissions will be split equally between listing and selling brokers. Its much more fair and equitable to both sides.

  3. ACH says:

    As a listing agent I have closed over 50+ short sales in the last 6 years. The lowest commission I’ve ever seen the short sale lenders come back with is 5% total. The split has not been an issue. I offer 2.5% and in turn keep 3.5% at the 6%…if it must be 5% then the split is equal. I don’t see what the fuss is about.
    It seems a bit distasteful that there’s so much argument over offering of commission. But then again it’s just as distasteful when agents remark in the private remarks that the seller reserves the right to refuse.

  4. Richard H Habenicht says:

    to continue my rant against conditional listings, I understand if my local MLS put restrictions on brokers in an effort to get the banks to play fair, short sellers would probably seek representation by a broker from a different MLS organization. So I can’t advocate MLS listings declining conditional short sale offerings but I would encourage MLS listings to work with other MLS organizations to push back against this public abuse by the banks. The new CA short sale rule is at least a step in this direction, given that it is a statewide regulation.

  5. Wesley Franklin says:

    This new rule may have been with good intentions. It hurts the overall commission earnings. A better practice would be to state commission 50/50.

    • Fe Casem says:

      After reading all your comments. This is my share and recommendation below:

      This is the verbiage for my ” Short Sale Listing” Feel free to use it. “This will protect both LA/SA
      This is a short sale,all terms,conditions,reduction of commissions between LA/SA,and additional charges are subject to lender’s approval. Commission split 50/50 LA/SA”.

      In addtion, Most of the time in a Short Sale HUD Lenders will want to remove and reduce other title fees. It is now between the LA/SA to agreed to split the cost if the lender will not pay or just agree to remove from the HUD if Title officer will agree.

      Just like HOA docs and demand,most of the time lender will not pay. HOA Mgt.will demand payment up-front. As a listing agent I will inform the Selling agent if willing to split the cost and will just be deducted both on our commission.

      The key is the power of negotiation. Listing Agent to Selling agent,LA or negotiator/Lender,SA/Buyers

      With regards to hiring negotiator; I agree hire an experienced negotiator rather than waking-up in the morning or staying in the office. I’ve rather get more sales and be more productive. Spread-out your wings outside,attend mixer event, be recognize and do your farming, think of activities that will lead to more sales.

      In Real Estate, Disclose, over Disclose (Safer) and follow the Golden Rules! You will never go wrong.

  6. Mike S. says:

    In many short sale transactions, the listing agent does not know what the lender or lender are willing to allow for a commission. The best way to handle this situation is for the listing agent to offer to the buyer’s agent a stated percentage of the commission that the lender will allow.

    I do not understand how the board expects the commission rate to the buyer’s agent to be set prior to the knowledge of what the lender will allow.

    Deducting a fee from the commission for a short sale assistant should be stated clearly in the listing with all details of where the fee is being deducted from. A buyer’s agent can then decide to work or not work on the listing.

  7. This was a very naïve, short sighted and irresponsible decision that in practice has done exactly the opposite of what it was intended to achieve, ie protect the buyer’s agent’s commission. In practice it has reduced the buyer’s agent commission by 17-25% overnight in most cases, and has pretty much invited all the short sale lenders to further reduce the short sale commissions they offer (when they see MLS printouts offering lower commissions to the buyer’s agent). – If any of the board members can’t see this, then I very much doubt if they have personally done a short sale transaction in the last few years, in which case I respectfully suggest that they are not qualified to make such decisions on behalf of the membership.

    The MLS board of directors should not be imposing rules that directly cause a reduction of commissions to their membership whose interests they are meant to be representing. – You shouldn’t be ruling on anything regarding commissions without the utmost care, research, and feedback from the broad membership, and I would respectfully suggest, a vote by the full board, which was NOT the case for this decision.

    A board member’s statement to me yesterday that the board simply adopted CAR recommendations is a very feeble excuse for making such a poor decision that directly adversely impacts the income of so many agents.

    Whereas the previous Short Sale commission rules were seriously flawed (presumably also approved by the MLS Board of Directors !!), the new rules are even more flawed in that they are having an adverse effect on a much greater number of transactions.

    The new ruling seems to totally ignore the most important factor of short sale commissions, ie that the actual commission is set by the bank towards the end of the transaction, long after the coop commission is specified on the MLS.

    The simplest and most obvious solution, which I know was discussed prior to the decision, is to have an unconfirmed coop commission with the listing agent committing to split the final lender approved commission in some predetermined ratio.

    For example: “Final lender approved commission to be split 50/50 between listing and selling brokers.”

    Or example 2: “Final lender approved commission to be split 55/45 % between listing and selling brokers”

    Etc., etc.

    Such an approach is simple, fair, and is practical in that it handles the uncertainty of not knowing up front what the lender will approve.

    We can then go back to offering the buyer’s agent a fair proportion of the commission, subject to the above language which would be placed in the confidential remarks as before, to mitigate circumstances where the lender forces a commission reduction.

    Surely that is a much better solution for all ?

    Now how can we get the board to consider this proposal seriously ? I would suggest that we should all vigorously voice our opinions on this by calling each of the board members as listed here on the web site. We need to make an issue of this and get the rules changed quickly !

    The board should at least have sent out an email to everybody to bring attention to the rule change and the survey, but they declined my request to do so. In practice many MLS members still have no knowledge of this rule change.

    A board member told me that they don’t need my input on how to communicate with the membership. I beg to differ !

    Yesterday I listed my 1st short sale under the new rules, and am very embarrassed that I can’t offer out a full coop commission without taking undue risk.

    Please join me in actually calling each MLS board members to make your opinons heard.

    Dominic Godfrey, Intero Real Estate

  8. Christopher says:

    Short sales are a negative impact to the economy where no one wins. When a short sale occurs sure a seller feels relief, and the buyer seem gratified, but in the end that comparable ruins the neighborhood for 3 to 6 months. Get many of them and the neighborhood is stuck. In Mt View I just did a search on new home sales in a region. No homes for sale, nothing, yet the market is increasing 4% per month in value. The recent past is a sick analysis of foreclosures and short sales. The people left are too scared to sell.

    A better solution is mortgage releif and the simple way my credit union does it is write down the interest rates on my fixed mortgage. So instead of 5% as when the loan was first recorded, all the terms remain (Payoff date is still the same), the interest last year was rewritten to 4%, this year they are willing to go to 3.25%. Thus the payment drops and makes my stickiness in my home stay. The bank still makes its money (remember banks make 10 times their rate because of capital requirements) If everyone does this we will see inventory rise and viola, are sick real estate market back in business. This is the problem in our government, they have zero clue of what they are doing and only listened to the banking industry which my little credit union is not part of. We need a fix.

    This is Chase, B of A, Wells and HBSC to name a few who have kept their fee structures to maximum, their interest not at 29.5% but again at 295% because of a ten to one capital requirement (its gets worse with bond requirement in favor again of the banks) and they use their power to lobby and basically are killing our economy.

  9. tony says:

    So now we have all been heard when will this be overturned? What was wrong with it before?

    • MLSListings Inc says:

      Thank you for the questions, Tony. All the comments shared here and in the survey have been compiled and shared with the executive team here at MLSListings, various committee members and the board of directors for the next meeting. At that time they will review the information and make a decision. We will be posting results from the survey soon. In addition, we will share the decision of the board of directors about this rule when it is available.

  10. Anonymous says:

    not interested

  11. Lou says:

    If it isn’t broke. Don’t try to fix. I have never had any problem with the way short sale commission has bee structured in the past. If you don’t want agents to work short sales, keep this new rule.

  12. Joe R. says:

    This is dumb rule, it’s not based on actual practical experience. I had a situation where bank gave me 10 days to close escrow or close the file, 5% commission and selling agent would not close escrow for less than 3%. I worked my tail off on that deal end up splitting 2% with my office, which left me with peanuts but bitter and angry. The board should left market due what it must and stop meddling into negotiations that have little experience.

  13. Tim says:

    All of this sounds to my like greedy people who are used to getting their 6% of the gravy off of the top now simply complaining about earning a little less in a depressed market where everyone else has had to take massive cuts in income and profits for several years. Welcome to the party although we are very late in joining! Banks have been assailing other professions for many years while us Realtors have just stood aside and done nothing. Now that our toes are starting to get stepped upon the anger against banks starts. If you look at the other professions the banks have been abusing I can guarantee you that this is just the first step.

  14. Anonymous says:

    All this new rule does in a market like we’re in now is create an environment where the listing agent will do all they can to double end their own listing so they don’t have to worry about commission reductions. This will eliminate a “fair market” where buyer agents can have a fair shot at putting in the best or better offer than what the market may truly bear. The listing agent will keep the home on the market long enough to pick up the buyer themselves and sell it. Guess that means I just need to go out and get more inventory so I can sell it to the buyers I find myself.

    • I Agree with you. Stupid rule.

      In the 70′s, listings were at a premium, greedy Brokers started splitting 70-30.

      Later, they paid, although none would admit it, by having people not cooperate.

    • ILiketoDoubleEndIt says:

      Yes, true, but with this new rule, It just enforces me the notion that I will let my clients sign a clause where they do not want their house advertised on MLS. Like the sellers really care who they sell it…Then, I send this paperwork to MLS listings. I get my own buyer and I do not have to deal with crying and incompetent lazy agents. This worthless rule just makes us adapt more. I negotiate the short sale, list the property and find the buyer. Yes, I like to double end it and there is nothing illegal or unethical about it. I get things done and all parties in the transaction happy

  15. Anthony Stafford says:

    This new rule shows a lack of understanding of how the short sale process really works and how the board is going to severely hurt the listing agent. I negotiate all of my own short sales. The banks are always looking to take money out of the commission and the languages we use in our rule help us negotiate with the banks better. If the board understood the process, they would understand that the broker that negotiate the deal does all of the work and spends all of the time on the phone with the banks while the buyers agents sits buy and waits. Some times this has taken as long as 13 months. This rule change put all of the burden on lost commission on the listing agent and none on the buyer’s agent. In some cases, I would get nothing from the sale with this rule in place. If I change the way I write the commission to protect my office and agents, the banks would take that a sign of unbalance commission structure and reduce the commission to be equal and we all loss. My office always splits their commission 50-50 with the buyer’s agent and will do that in the future. We donate good money to our associations at the local and state level to protect us and the home owner for changes that would cost transactions a few hundreds of dollars and this change will immediately cost the agent thousands of dollars and our board did it to us. The board needs to get realistic immediately and return to the old policy.

    • Chez Christian RE says:

      It is well say!

    • Pat C says:

      I agree. This is placing undue stress on the process. I will need to offer less at the beginning to the listing agent that might mean the homes gets shown less and sells for a lower price and if the lender at approval still reduces the commission due to the disparity of compensation then we call lose. The client does too!

    • D'Lorah Alva-Castles says:

      I also agree with Anthony’s comments. The last transaction I worked on with another agent where she was the listing agent, Bank of America put her through so much I just told her I was there for the long haul and let me know what I can do to help her. They changed their systems and she had to re-enter the information multiple times. We have enough trouble dealing with the banks and now CAR who is supposed to be on our side is also causing us more hardships. Please change your rule immediately!

    • Anonymous says:

      Recall the board. Sounds like they do not know what Thayer doing.

    • Rafael Castro Jr says:

      I agree 100%. Lots of work for the listing agent

  16. [...]… For short sales you MUST NOT put a high commission on the MLS if you believe there will be a reduction in commission! Wait a minute?! How are we supposed to know of any reductions in commissions – can we read the lenders mind? That means if you are using commission money to settle liens, or pay a negotiator then you MUST put the estimated amount of the commission that is left.  So for example if the lender gives you 4% and you are paying 1% short sale processing and settling a junior lien for 1/2% that means 2.5% remains, so on the MLS instead of putting 3%, you will put 1.25% (which is 2.5% divided by 2) But wait that means the buyer’s agent will not show my property?  Probably. Why are they doing this? A few bad apples have failed to follow my previous advice which was to GET FORM CBC signed.  Whenever commission changes at all, the best way to protect yourself is to get CBC signed.  I advocated full disclosure and the proper MLS remarks “Lenders may reduce commissions paid to agents” “Commissions to be split 50/50″.  Can you charge more for processing the short sale and offer the agent less?  Yes I am willing to defend you doing so IF (and only IF) you get CBC signed and disclose the reduction properly. Do not get CBC signed at the last minute when the agent is pissed off (because they are earning less than you), get it signed early on and if uncertain you can write “to be amended later if subject to a reduction in commission) or checkbox (see checkbox 3 (iv) on the form). CBC form: So practical example: I have a new short sale listing, I am having a licensed person negotiate and giving them .5%.  Based on past experience, the bank will offer only 5%, the seller has no liens to deal with other than the mortgage.    Therefore 5% – .5% = 4.5% divided by 2 = 2.25% should be put in the MLS along with the disclaimer of reductions in commissions.  Will an agent show it in this market?  yes but only because inventory is so tight. BTW we have some new listings coming and agents will have the opportunity to hold the open house and capture buyers.  We will give agents the first opportunity when it comes on the market.  We have a regular sale with a deadline of today if anyone has any offers: Also dont forget to sign up for the rebogateway lead generation tool with the discount I got. (cannot put the discount amount on our blog) Lastly our blog can be seen at: [...]

  17. John B. says:

    What everyone seems to be missing is the slimey listing agent that (secretly) signs the listing paperwork at a 9% total commission with 3% going to the selling agent – any commission reductions split 50/50, of course.

    In this situation when the bank reduces the total commission to 6%, all of a sudden the selling agent is now getting 1.5% with absolutely no warning at all. And the listing agent is still getting 4.5%!

    Even more fun if the bank reduces the total to 5%.

    • Guy C says:

      Precisely John. This is why we need the new rule. It’s not that hard to calculate what you might get in the end and, if you are paying someone else to do your job, (negotiating the short sale), then you, the listing agent should either pay it yourself or disclose to the cooperating agent that they will share this cost.

    • Chez Christian RE says:

      We never see a 9% in our area Monterey County in any HUD1. I think that your local board should go on a case by case after these agents. Some of these short sales have been taking over 3 years, giving buyer’s agent 2% and seller’s agent 3% is common sense. And in many time, we used that money for repairs and peoples that process our short sale.

    • Pat C says:

      I have never seen such a scenario.

  18. Rich Kwok says:

    A preapproved short sale is a short sale where the price is approved by the bank (like BofA) google for ‘no doc short sale’ and you’ll see. Even preapproved short sales are subject to commission reductions by the lenders however. The best way to protect yourself and avoid disputes is to execute form CBC – cooperating broker compensation. This is especially important after the short sale approval happens (remember the buyer gets to back out up until the time the short sale gets approved with form SSA). If the buyer continues best practice is to send the agent to CBC outlining the terms of the SSA (even if commission does NOT get reduced). It clarifies the commission breakdown and helps, this form can be used to reduce buyer’s agent commission below 50/50 if needed – to pay a short sale processor for example, etc. More importantly it keeps the agents out of the contracts as agents are not a part of the contract; references to commissions should not be part of NODPA or RPA. to see the form go to

  19. PR, pending release should not be used as a loan contingency nor should it be used to indicate Bank approval in Short Sales. PR is a release clause usually 72 hours in length in a purchase offer.

    How about PBA to indicate pending bank approval.

  20. Chuck Harmon says:

    This is another rule that misses the real abuse by a wide mark. Stating that the lender MAY reduce the commission is fair notice to any prospective buyer’s agent. Listing the commission so low as to avoid any potential reduced commissions will only encourage lenders to pay lower commissions; and, greatly reduce the exposure of the homes to the public through hard working Buyer Agents. BRILLIANT!

    I am still angered that our Boards, claiming to encourage moral behavior in the industry, would focus on this non problem while the unethical practice of under-listing properties at prices the sellers would never agree to sell at continues unabated. If I bring in an offer on a listing at the advertised price and there are no other offers, my clients deserves to buy the property at the listed price. This is not complicated, but is not enforced. And we wonder why Realtors have such a “smarmy” reputation?

    • Steve Pogue says:

      Amen, Chuck! In a regular sale, if someone offers full price and no one beats it, it is hard to say no. But the practice of listing short sales at 20% below what the lender will ever actually approve not only frustrates the buyers, but makes it hell to price a regular listing. You have a property that is realistically worth $450K, list it for $460K, figuring to get $450K, and someone has one listed down the street just like it for $370K, knowing they will never accept a dime less than $450K. But buyers ask, “Why is yours so high? I could buy that other one . . .” to which the only answer is, “Yeah, try and buy it for that. You will wait a year and still pay $450.” To me, it is unethical to offer something for sale at a price that will never be accepted, but it is mostly the lenders’ fault, not the agents.

      • Chuck Harmon says:


        My comment about not accepted full price offers regards both regular sales and short sales.

        I have had agents not present my full price short sale offers. At a minimum, the offer should be accepted by the seller and left up to the bank to approve or deny. But when the short sale seller doesn’t accept their list listed price, games are being played! But our board was too feckless to do anything about it!

    • Pat C says:


  21. james dill says:

    I believe this rule could be detrimental for both listing agent and selling agent. For example,it would be difficult to be competitive in a market when the listing agent places 1-1.5 percent commission on MLS listing in hopes of generating prospective buyers to preview their property. The chances of a selling agent showing a short sale property with the lower commission compared to a regular sale I suspect would reduce showings; I am not sure a 1% or 1.5% on the MLS for commission would increase the Seller’s client traffic and offers.
    Lender visibility, lenders are looking for ways to reduce their cost and one way is through a reduction in the commission they pay to the listing agent of a short sale.
    If the lender notices that a 1.5% (or less) commission was offered on a short sale property, they may determine that is the “new” way of doing business and continue the practice of reducing the commission to the listing agent.
    I strongly believe that the new ruling does not allow nor provide the selling agent an incentive to increase showings and offers for their client if the commission is reduced by the lender and a reduction is offered on the MLS.

  22. Becky says:

    I’m a Seller in CALIFORNIA, “Bank approved Short Sale.”
    My realtor never asked or told me that he’d OPENED ESCROW, despite me mentioning who I wanted to use. He chose a different company. More to that, but not in this Forum.

    He continues to ask me, though, for the “Statement of Information,” – and its not for the Escrow/Title company; he states that its for the 2nd Lienholder involved.

    Have you run into this and why does a 2nd Lienholder want this, in the first place, since it has nothing to do with my financials?

    . . . the Preliminary Title is in my name and clear with no liens or judgements other than the Lender and this Lienholder; the Buyer’s offer has been Accepted by me(investor = cash offer); the $$$$ amount on the estimated HUD-1 is already stated what the (beginning?) negotiation amount for the 2nd Lienholder (Line 505).

    Everything’s done, except for this Buyer to make his “Bid” on, and of course, must be the highest bidder, and then I guess they begin the “negotiating” part with the 2nd Lienholder?

    My decades-of-experienced Escrow Officer friend (not with the Escrow company who will do the Escrow on my house), concluded that the Seller’s realtor either does not understand due to lack of Short Sale “experience,” – but that he must really mean that it is for the Title company, but then, logic dictates why wouldn’t the Title company just ask for it, and he say they want it?

    My Escrow friend said that otherwise, there is NO logical or legal reason for this document to be NEEDED by 2nd Lienholder.

    Has any realtors ever run into this before?

    Becky Benson-Reyes

    • Becky,
      I get your concern. I am a listing and selling agent who works mostly in Santa Clara but I also deal in San Mateo. One of the requests that I have from my sellers is which title company that want to use and I personally follow their request. That being said, there are stand customary fees for closing costs, In Santa Clara County, the seller customary pays for the title insurance and most of the fees, thus, the seller can determine who they want the escrow to go to, then in San Mateo, the buyers generally choose the title company, even after I have opened up an escrow, the buyers can choose who they want. The standard rule is if you are the one paying for it, you should get to choose. Hope that helps.

  23. Anonymous says:

    There is too much whining about imaginary commission reductions by lenders. Also, if you need a negotiator because you are too lazy or uneducated to handle a short sale – don’t take a short sale listing or pay the fee yourself.
    I would never sell a listing which requires the buyer to pay a negotiator.

    • Anonymous says:

      thats because you probably don’t have any listings. I would rather focus my time on getting more business then talking to ss lenders all day. Its not about being lazy its about being smart and using your time to create more deals.

      • Guy C says:

        Then pay the negotiator yourself. Why should the buyer or buyers agent pay part of the fee so you could “create more deals”?

    • Pat C says:

      I have done a lot of short sales. I hire a negotiator to deal with the lender interaction so I can concentrate on getting the most $ for the home. I am not lazy or uneducated.

  24. John V. Pinto says:

    Listing agents have much more control and leverage in a transaction , and this rule change gives the buyers’ agent some commission protection. Short sales have matured to the point that the listing agent has very good visability on the short sale commission being approved by the bank. Lastly , this precludes violations of the MLS’ “covenent to cooperate” by listing agents playing the game of “Listing and Buyer’s agent to share equally in any reduction of commission” when the listing agent intentionally highballs the commission request to the SS lender.

    • Guy C says:

      You are right John, this “game” that listing agents have been playing created this situation that required the MLS to change the rule. The real boogyman here are the unscrupulous agents that play it and they should be the subject of our ire, not the MLS, (at least not this time:)

  25. I Like to Double End It says:


    I will just keep on double-ending the short sale transaction. This rule makes things worse.

    • Anonymous says:

      and I hope you lose your license.

      • Pinoy says:

        This is the trend right now. Look at how many agents are double ending the transactions. It is unfair to the sellers.

      • I like to Double End it says:

        Why would I lose my license. I am not doing anything illegal. Why would I deal with ignorant agents who bring in flaky buyers. The seller can care less to who he sells it to. He relies on me to perform and close quick.

  26. Stuart Shankle says:

    Wow!!! And I thought that I was the only broker that had a problem with this rule change…. From what I heard MLS Listings did not think that the rule change was creating any issues/problems.

    There are so many layers and levels of potential problems with this rule, but one of the most significant issues is the downward pressure on commissions which I believe will clearly affect the seller.

    I can understand at this point why the number of “off market” deals is so big and increasing as well as the allure of the private mls. I look to my mls to support and handle the data, not make my job more difficult.

    The old rule was more transparent and more equitable. The “bad guys” that manipulated the system will continue to do so just by a different means.

    • Guy C says:

      More transparent? The buyers agent never knew until short sale approval what their compensation was going to be, how is that transparent?

  27. Anonymous says:

    Again… the Realtor takes it in the shorts, from our own because of a few bad apples!

  28. Ellie Love says:

    I think the new rule is a bad decision. It hurts the seller because the listing side is showing a lower commission to protect themselves, and many buyer’s agents won’t show the lower commissioned properties. The MLS should stop making all of these changes and just let us do our jobs!!

  29. Old timer says:

    Seems like most of short sales are handled for both seller & buyer by the listing office, no other agents can expect to receive a commisson.

  30. Anonymous says:

    There should be a rule that requires listing agents to split commission 50/50. I’m tired of seeing 2-2.5% being paid out to the selling agent while the listing agent is getting 3.5-4%. I’m looking forward to the market turning and going back to regular real estate.

    • I Like to Double End It says:

      I hassle to get my listings people and short sales require a lot of work. You should go out there and knock doors if you want to get some listings. Stop crying and get out of the office.

    • Pinoy says:

      It is slowly returing to regular sales. REO’s are down and soon, Short Sales will disappear as values are going up a lot.

  31. tony ambriz says:

    Has the mls not have better things to do than to make things more difficult and complicated ?

  32. NA says:

    MLS listings is the worst of all California MLS systems
    if you try the others you will see why much easier to use and less BS to deal with.

    • John V. Pinto says:

      This rule change was a result of a grass roots effort by Realtors disgruntled with the state of short sales , convening to discuss chages as part of the N.A.R/C.A.R. processees , and resulted in changes to National MLS bylaws.

      In turn , MLS’s and their BOD’s deliberated on whether or not the new rule would be adopted.This was a completely transparent , democratic process with an outcome that reflected the will of the majority . This is why I stay involved , so I know what’s coming down the pike.

      • Dave Frazer says:

        The will of the majority? C’mon John, this is a ridiculously thought out rule change. I understand that people can make bad decisions, but if the Board that adopted this rule change does not realize now that they made a mistake, then they are not fit to serve on the Board.

  33. Marcy Moyer says:

    This is a very bad new rule. There is no way for the listing agent to know what the approved commission will be in advance or who will be the buyer’s broker. Some banks will only give 4% commission if both agents are from the same company. The listing agent could have a situation where the bank says 4%, 2% on each side and have to give 1% to a negotiator. If she offers 3% in the MLS because the seller signed the agreement and the situation got so complicated that an unexpected negotiator had to be called in the listing agent could get nothing. If only 2% was offered at the beginning the buyers agent could steer their client away. If it is less than 2% many buyer’s agents won’t bother.

    • Anonymous says:

      No! What this does is cause the lender to pay a fair commission. Bank of America has already published that they pay a 6% commission with a minimum of $3000.

      If you are such a poor negotiator or agent that you have to pay a party to negotiate for you then you should pay that expense or really consider getting out of the business and leave it to the professional.

      • Anonymous says:

        you probable don’t have any listings. I would rather be out looking for new business then siting on the phone with a lender all day. Negotiator is the way to go if you are a top producer. Plus, most agents let items fall through he cracks which causes delays in the closing.

      • anonymous says:

        I pay a negotiator, to work with my short sale listings and I do a great job for my clients.

        Having a team of trained professionals to help us do our job is a smart use of our time.

        While you sit on the phone with bank, or upload docs in equator, I am talking to client, or taking another listing.

    • Marcy,

      Well said…


    • Pat C says:

      Thanks Marcy. I agree. Sad rule.

  34. Anonymous says:

    This is new rule is causing a lot of agents to really lower their commissions and so this is creating a de-service to sellers because no one is going to show their properties.

  35. Sara says:

    I firmly oppose the new commission MLS Rule. And to all agents, Why not keep it all fair and simple? Everyone works as hard, if this rule gets reversed, make your commissions 50/50%. I am sure that when you are representing the buyer, you too want to get 3% or at least 50% of the (Short sale approved) commission.

  36. Freddie Gonzales says:

    This is a rule that is not good for everybody. How do you expect the listing agents to put 2.5% or higher commission to selling agent to stimulate more showings? If they see a low commission of 2% most agent will shy away from showing that listing especially if it is a short sale with no guarantee of closing. This is a ridiculous requirement set by CAR especially now that most agents are hurting. Commissions will be set by lenders and not the owner of record. We are on the mercy of the banks, lenders or investors whoever might decide on what the price and terms should be. If you are the listing agent, how would you protect yourself from paying the buyer’s agent if the lender comes up with a commission much lower than what you put in the MLS?

    • I like to Double End it says:

      Shy away? Are you kidding? There is low inventory and selling agents are starving. Double-ending is the way to go. I made over $170k last and I work solo! I do not need to babysit agents who sit on their behind and cry all day. Get out there and find your listings.

  37. BNF says:

    Knowing what we now know – that lenders really do not want to foreclose in the current legal environment unless absolutely necessary – I wonder if every agent would just stop rolling over and accepting cuts by lenders to their short sale commission that this garbage would cease. Basically, lenders want agents to participate in the lenders’ losses (how ridiculous is that!) yet they do not cut title, escrow or other vendor fees.

  38. Jonathan Ng says:

    This new rule shows the obvious disconnect of the MLS to the real estate agent.

  39. Steve Barsanti says:

    The bottom line is the current rule should be reversed TODAY. This survey only emphasises the mistake that was made.

  40. Drake Fenn says:

    Dominic has the most sensible solution. In an effort to police the few that try to get around what’s fair and ethical MLS Listings has inevitably successfully punished those who are doing things right & equitably.

    This is a bad rule which does not solve a problem, but really only acerbates the situation.

    Again if the ultimate split percentage (50/50-40/60) is required to be stipulated it will do a better job of correcting the problem.

  41. howard clark says:

    HOW SHORT SIGHTED ! There is a CAR form CBC clause 3A(iv) that clearly spells out that the commission may be reduced from what was in the MLS. I USE IT EVERYTIME WHEN I COUNTER AN OFFER ON A SHORT SALE ! Of course I am the only one that I ever seen use it, but it’s NOT really that complicated. IF a short sale is noted in the MLS like it’s supposed to be ANY agent should kow that the reduction is a possibility. As long it’s 50% 50% that’s the point. IF an agent doesn’t declare a short sale then that’s different, th elisting broker needs to take the hit and pay what is advertised !!!!

    AND what will CAR do on Probate Sales where court confirmation is needed and the courts can reduce the commission, the same thing ? OF course not no one thought of that yet. Use the right forms, do the right job and there won’t be an issue.

  42. MS says:

    RAy Tate said something about Scam! I have seen listings that says Fixer Upper or need TLC, but when you go to the property you do not find any of that applies. I think those agents are trying to Scam lender by selling at lower price to their investor clients. This is to me is a big scam!

  43. Diana Plank says:

    As if the lenders are not more than willing to reduce our commissions as it is. Let’s try this: I negotiate a 6% commission from the seller. Typically I would offer half or 3% to the selling agency. Now in order to protect myself, I have to reduce the offering to the selling agency. Say, 2.5%. Now the HUD will show 3.5% to the listing side and 2.5% to the selling side. Lender will see the inequity and determine that the total should be 5%. Thanks for the automatic reduction to my commission. The grace for Short Sale commissions should be reinstated. It’s only fair.

  44. It would make far more sense, and would be much simpler to keep the current ‘unconfirmed commission’ option in place and to specify how the actual Lender Approved Commission is to be split between Listing and Selling brokers. ie 50/50 etc.

    This new rule change is inherently bound to cause a lot of issues between listing and selling agents and brokers which is the very worst thing for us to be doing to each other in our industry. We have enough external problems to deal with, without our MLS board causing rifts between Listing and Selling agents. The new rule certainly does nothing to support the interests of the MLS membership who you are meant to be serving. It is a very poor decision which should be changed immediately.

    What is the appeal process for objecting to the new rule? How do we get some common sense applied to the decision making process, along with inputs from a broader cross-section of the membership ?
    Dominic Godfrey, Intero Real Estate

    • Luis says:

      I agree with your comments/concerns and from others and will like to add that Banks ask for an MLS sheet and they make note of the commission. If they see that only 2% is being offered, they will authorize only that amount and probably insist for the listing agent to get the same.

    • Michelle Montez says:

      Well said Dominic. I think this policy change will mean more exclusions to keep properties off the market until they are in contract, creating more opportunity for agents to double end…which does not give true market exposure in getting the highest and best offer at all. Unconfirmed compensation is what is fair and logical for all parties, until such time as the lender approves the HUD, the compensation can and often does change.

    • I agree with Dominic Godfrey completely. This decision can only cause problems and bad will among realtors and brokers and was a bad decision.
      How can you committ to offering a specified compensation to the selling agent when you don’t know what it will be?

    • I agree with just about all of the comments provided here. Dominic Godfrey articulated a significant point; its bound to cause a lot of issues within the listing/selling agents/brokers. Why wasn’t this huge decision brought to the members of MLSListings first for discussion vs now!? For MLSListings to Surprise its members like this is disappointing. This will have a negative ripple effect I’m sure that wasn’t in the vision of those that were in favor of this decision.

    • Pat C says:

      Good statements Dominic.

  45. Jesse says:

    Well, this is not fair to listing agent as we never know, what bank or banks well stcik the Realtor during final negotiations. I’ve had two Jr. Liens say…contribute comissions and help settle sellers debt.
    As a listing agent that I am, come March first i will only offer 1 % to buyers aget to protect myself from unwarranted comission surprise.

    • Galia says:

      Well, how is this fair? Have you ever had a case where the bank lowers the total commision to 2% after you asked for 6%???

  46. Joseph Weinstein says:

    This will force our team to use another MLS for Short-Sales. It is 100% beyond our control if the Bank decides to reduce the commission rate. Why should listing agents be penalized when they are representing the Seller and there is no Agency Relationship with the Bank. I agree on the “negotiator” aspect, but commission rate is beyond our control.

  47. Allan Craig says:

    This is counter productive. I can now se agents putting short sales on MLS offering 2% to avoid this. Typical, CAR and MLS listings trying to help will end up hurting buyers agents. We were already seeing 3.5 to 2.5 now we will see 4 to 2.

  48. Neil Najibi says:

    Real estate boards all over US can help all sellers and buyers if:

    ONLY APPROVED SHORT SALES TO BE LISTED ON MLS. AGENTS SHOULD DO THE REAL LEG WORK AND GET THE APPROVAL FROM THE BANK AND THEN PUT IT ON MLS. As it is any seller may decide to go the short sale route just because well it worth to try it.

    • JAM says:

      Is there such a thing as “approved short sale”…??

    • Christine LeQuang says:

      What pre-’approved” short sale? Never seen it since SS started.

    • Rod Creaosn says:

      Short sales are NEVER approved before an offer is made. Period. You may have a price or a net that the bank says they will approve (non-binding), but approvals are only made with a specific offer and a specific buyer.

    • Bob Jamison says:

      Pre-Approved short sales are out there but they are not the norm. An example is HAFA or some of the new Chase and BofA pre-approved short sales that are mailed direclty to the seller and then the seller hires the agent. For my non-preapproved short sales my office will now offer only 2% to cooperating brokers since that is the minimum we have seen paid out to each side after settling Juniors, HOAs, and the IRS.

  49. MC Dwyer says:

    Explain to me how this is going to work. We don’t know when we take a listing if the lender is going to reduce our compensation. We’ve all considered it fair to split these reductions with the cooperating agent – if I’m reading this right, your new rule will “stick” the listing agent with any reduction the lender hands down – often months after escrow is open.

    • Bill Emmert and Jean Marie says:

      MC, this is why you are starting to see 2% compensation to the Buyers agents.

      • Richard says:

        So now, because some agents were scamming the system, we all have to protect ourselves from being scammed? And how many agents who, under the former system split final commissions 50/50 as they outlined in the MLS, will take more than 50/50 when able to because they have said they will offer only 1%-2%? How many arguments will there be between offices when there is discussion or delay in the handling of the CBC forms? How many battles over that will occur for no reason other than that the lender is taking forever to give an answer but the buyers agent is convinced the listing office is playing games?

        What this new system has done is throw out the baby with the bathwater. Anyone representing buyers will soon see short sales offering very little. The listing brokerages, afraid of losing big $$ if they offer more in the MLS only to have the banks cut the commission to the bone as a condition of short sale approval, will want to protect themselves.

        If listing a home for 9% (an example I read above), offering 3% to the selling office and then cutting that down when the lender cuts the commission, allowing the listing office to make 5%-6% on the listing is a problem, create a rule that will stop that.

        Create a rule that tells a lender we don’t cut our commissions. They can negotiate other things on the short sale. Is there anyone who believes the banks will go under if we get our full commissions? We need to eat, too. And I would feel much better if systems were not being put in place by those who claim to be protecting my interests that make a bad situation even worse.

        I understand wanting to protect people. But I don’t think rule this protects anyone but the lenders and their ability to cut pay we in any other situation would fight tooth and nail to keep.


        Richard Weber
        Hollister Realty

  50. Ray Tate says:

    As long as it is legal do what you want. There will always be those that try to scam the system.

    Change of subject:

    Why is it so hard to use ListingBook as a source of income.
    I belong to a board in NV and they have no roadblocks to use this fantastic FREE service.
    I have over 300 contacts in this service and have sold over 15 homes using it in the past 2 years.
    I prefer ListingBook to the program offerd by our board.

    Time to rethink this roadblock.

    • Nick Lomoro says:

      Hello Ray,

      You are welcome to go to MLSListings App store and sign up for the basic Listingbook service at no charge. It does not allow you to upload your profile photo or company branding, but you can still load all of your contacts and set up listing drips to your clients.

Leave a Reply

If you want a picture to show with your comment, go get a Gravatar.