February 28th, 2011 at 10:32 pm
Agents handling short sales (almost all agents today) are all too familiar with lenders “cutting” commissions and the perils inherent in informing the cooperating broker/agent of said reduction. Suffice it to say, we have had many inquiries and Board Arbitrations regarding these issues. What language should our short sale listing agents place in the confidential remarks section when referring to cooperating broker compensation?
As you well know, the MLS rules pertaining to selling compensation are BINDING. As such short sale listing agents must employ the language mandated by the Model MLS Rules, Amended April 2010 and prepared by CAR, in particular 7.15.2:
7.15.2 Lender Approval Listings. Compensation offered through the MLS to
cooperating brokers on listings which require lender approval (commonly referred to as
“short sale” listings) is for the amount published therein
unless the listing broker indicates
on the MLS the following: (a) the fact that the sale and gross commission are subject to
lender approval; and (b) the amount or method by which the compensation offered
through the MLS will be reduced if the lender reduces the gross commission.
(Emphasis added)
For example: many short sale listing agents, take the listing for 6%, electing to offer 2.5% cooperating compensation. The agent then keeps 3.5% to compensate themself for negotiating with the lender(s). One way to place this scenario on the MLS would be: “
Cooperating compensation is 2.5% subject to lender approval. Any reduction off the gross compensation to be split 50/50 between listing and selling agent.” If the lender in this scenario reduced gross commission to 5% the listing and selling agent would each take a .5% reduction on their commission resulting in 2% to selling agent and 3% to listing agent. Of course there are agents that prefer to offer 2.5% without noting the possibility of reduction, banking on getting at least a 5% listing commission approval from the lender.
* Be mindful that any changes in the compensation offered must be reflected in the MLS immediately. Failing to place a formula pursuant to the above MLS RULE 7.15.2 or changing compensation after a selling agent has informed you they have written an offer will invariably launch you into a Board dispute that you most likely will not be able to successfully defend.
Like what you see here? Sign up for more! Our free e-newsletter informs you of listings in your community, insider real estate tips, the latest in home trends, and more.
