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“Commissions are subject to lender approval and will be split 50-50.”

Such notations are becoming common place in the MLS as the number of listed short sales increase. That the bank usually will demand the listing agent reduce the commission is nearly a given since the bank’s already accepting less than what they are owed on a short sale. But how the listing agent handles such a situation, both before and after hearing from the bank, says much about their own ability to negotiate.

And that, dear readers, is where the public should take a second look at whom they are hiring. The most important attribute in an agent listing a short sale is negotiating ability. Pricing’s all but irrelevant since list prices essentially are mythical creations. Marketing is important but with a fictional low price marketing gets much easier (and many agents see this as the extent of their marketing.)

But negotiating - the ability to stand up for your best interests when dealing both with the other agent and with your lender - is paramount.

Commissions become part of the negotiation even though they should not be. The only two parties to the listing agreement detailing commissions are the seller and the listing agent (actually the brokerage, but we’ll say they’re one and the same.) Neither the bank nor the buyer nor the buyers’ agent is a party to that contract.

The bank can’t force a commission reduction though it’s commonplace for a lender to make that demand. Some agents who have worked with short sales intentionally will raise the initial commission to give themselves room to negotiate later. Others simply will sit back and take whatever crumbs the bank is willing to offer.

Then they take those same crumbs and offer half to the buyers’ agent as compensation - except such an arrangement can’t be enforced regardless of notes in the MLS listing. The rules in the MLS are iron-clad:

12.01:   Cooperative Compensation Specified on Each Listing

The listing broker shall specify, on each listing filed with the MLS, the compensation offered to other MLS Participants for their services in the sale (or lease) of such listing.  Such offers are unconditional except that entitlement to compensation is determined by the cooperating broker?s performance as the procuring cause of the sale (or lease).  The listing broker’s obligation to compensate any cooperating broker as the procuring cause of the sale (or lease) may be excused if it is determined through arbitration that, through no fault of the listing broker and in the exercise of good faith and reasonable care, it was impossible or financially unfeasible for the listing broker to collect a commission pursuant to the listing agreement.  In such instances, entitlement to cooperative compensation offered through the MLS would be a question to be determined by an arbitration hearing panel based on all relevant facts and circumstances including, but not limited to, why it was impossible or financially unfeasible for the listing broker to collect some or all of the commission established in the listing agreement; at what point in the transaction did the listing broker know (or should have known) that some or all of the commission established in the listing agreement might not be paid; and how promptly has the listing broker communicated to cooperating brokers that the commission established in the listing agreement might not be paid.

The compensation amount shall be either a percentage of the gross selling price or a definite dollar (non-zero) amount.  Compensation amounts that are not based on the gross selling price (i.e. the base price of a newly constructed home) must be shown as a fixed dollar (non-zero) amount.  ARMLS shall not accept or publish any listing that does not include an offer of compensation expressed as either a percentage of the gross selling price or as a definite dollar amount, nor shall ARMLS include general invitations by listing brokers to other Participants to discuss terms and conditions of possible cooperative relationships. 

In filing a property with the MLS the Participant makes a blanket unilateral offer of compensation to other MLS Participants, and shall therefore specify on each listing filed with the MLS the compensation being offered by the listing broker to the other MLS Participants.  Specifying the compensation on each listing is necessary because the cooperating Participant has a right to know what his compensation shall be prior to commencing his endeavor to sell.  The listing broker retains the right to determine the amount of compensation offered to subagents, to buyer agents or to brokers acting in other agency or non-agency capacities, which may be the same or different.

All the emphasis is mine, incidentally.

Buyers’ agents have a right to know what their compensation will be if they successfully bring a buyer to a property. This compensation can be guaranteed with a buyer broker agreement, where the buyer agrees to a set compensation rate for their agent, but many buyers are of the mindset that paying the commissions is the sellers’ responsibility.

In short, if a listing agent is willing to take a listing and not stand up to the lender for what they believe is fair compensation, that’s their issue. But they can’t pass along their inability to negotiate to the buyers’ agent.

And that’s what it comes down to - an inability to negotiate in a situation where negotiation is paramount.

Having to sell your home via a short sale is difficult enough. Don’t make it worse by hiring an agent who may be unable to negotiate sufficiently to get the deal done.

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… which is a shame primarily because of the high quantity (and occasional quality) of free food and drink available at such conventions, particularly when they are being held in Las Vegas.

Putting that side, about the only event at this year’s NAR Convention that holds a great deal of interest would be the blogger meet-ups. Some are flying in just for that; three kids and a wife preclude me from doing the same.

All in all it’s for the best that I didn’t schedule a trip to NAR as I have showings scheduled with different buyers every day this week. I’m sure I could find the last time such a thing had happened if I searched hard enough but I don’t have the time to dig.

What’s becoming apparent is more people are seeing through the doom and gloom and deciding that if we’re not at the bottom of the market then we’re fairly close. I can’t say if they’re right or wrong though I’ve said in the past picking the bottom is tricky if not ultimately impossible.

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