From time to time the issue of commission comes up in the process of selling a Short Sale. Many lenders have tried to encourage the REALTOR® to “give up” part of their commission to make a transaction close. However, Fannie Mae and Freddie Mac have agreed that they will not require a reduction in a commission set for less than 6% for any of their loans.

The Lender is not a principal to the transaction, and can only say yea or nay to the total proceeds. Occasionally a Listing Agent agrees to reduce his or her commission in order to “make the deal work”. That decision does not affect the Buyer’s brokerage commission, unless the Buyer’s broker has agreed to such changes.

MRIS sets the subscriber policy for how commissions are shared. In December of 2008, MRIS released a policy clarification on how REALTOR® express commission in MLS.

The Policy set forth in Article X – Section 2 of the MRIS Policy Manual stipulates that compensation is delivered in one of three ways:

  1. By showing a percentage of gross selling price;
  2. By showing a definite dollar amount; or
  3. Commission may be paid on net sales price (sales price minus seller concessions) or on base price in new construction if specified in the system.

Section 6, had this change:
References to special compensation in any other field, other than the compensation fields are not intended to, or shall be construed to, permit any conflict with the unconditional offer of cooperation and compensation made in the compensation field(s). If there is any conflict between the unconditional offer made in the compensation field(s) and any other field. MRSI policy is that the information I the compensation field will control.

This clarification addresses the practice by Listing Brokerages of including comments like “50% split with commission received from Lender”, or other similar comment. There are two issues with these types of statements. First it reveals the Seller is pursuing a Short Sale and therefore requires prior permission from the Seller. The second issue is that the Buyer Agent is slave to the Listing Agents ability to negotiate with the lender. Therefore the policy says that the compensation offered in the compensation field controls the amount paid the Buyer Agent, regardless of what the Listing Agent agrees to negotiate away with the lender.

Another tactic used by some Brokerage companies is to counter the receipt of an offer on the Short Sale property with an agreement between the Brokerages to share any commission received in an equitable split. The question then becomes, what happens to the offer to purchase should the Buyer’s Brokerage refuse to agree to the new commission agreement? . Chapter X this issue is addressed more thoroughly, but the short answer is that it’s against the REALTOR® Code of Ethics and Virginia law to withhold an offer to purchase from the Seller unless specifically agreed to by the Seller.

Likewise, a Buyer Agent who does not like the offer of compensation in the MLS, may not attempt to negotiate a higher compensation in the terms of the offer to purchase, as this would be a potential violation of Article 16 (SOP 16-16) of the REALTOR® Code of Ethics.