Understanding Short Sale Commissions

A common question from homeowners and agents alike is, “What is the commission for a short sale?” The answer may surprise you. In most short sale transactions, the lender (mortgage servicer) pays the real estate commissions, not the homeowner. The commission is typically negotiated and approved as part of the short sale approval process.

Typical Commission Percentage

Most short sales offer a standard real estate commission of 5% to 6%, split between the listing agent and the buyer’s agent.

However, the lender ultimately approves this amount. They may:

> Offer the full 6% total (3% to each side)

> Reduce it to 5% or even 4%, depending on their guidelines

> Rarely, try to negotiate even lower to minimize their loss

It’s important for agents to submit a clear commission request with the short sale package. The commission is paid out of the lender’s proceeds at closing, meaning homeowners don’t bring extra cash to cover it.

For more on the typical steps and documentation involved, visit our page on the Stages of a Short Sale.

Who Pays the Commission?

In a standard home sale, the seller pays the real estate commissions from the sale proceeds. In a short sale, it’s technically the same — but since the lender is agreeing to take a loss, they approve and directly fund these commissions out of what they recover.

This is why the listing agent needs to work closely with the lender throughout the process to ensure commissions are properly authorized. If you’re an agent, our team can help support your negotiations. Visit our Realtor Resource Page for more.

Will Agents Earn Less on a Short Sale?

Sometimes. Because the lender has final say, they might cap commissions at 5% instead of 6%, or disallow certain extra fees.

That said:

> Agents still get paid at closing, from escrow, just like a traditional transaction.

> Commissions are never paid out-of-pocket by the homeowner.

> Short sales can also help build long-term business by avoiding foreclosure outcomes and supporting clients in difficult times.

Bottom Line: Commissions are Paid, Just Controlled by the Lender

If you’re a homeowner worried about paying an agent out-of-pocket, rest assured — in a short sale, the lender covers commissions from the sale proceeds.

And if you’re an agent preparing a listing, be sure to understand the lender’s expectations early on to protect your compensation.

Learn More . . .

>For homeowners: What is a Short Sale?

>For agents: Short Sale Process for Realtors

Need help? Contact our short sale experts at https://www.shortsale.co/contactus/.