The Real Deal Miami

Are short sales shorting broker commissions?

By Jennifer LeClaire | June 05, 2008 11:46AM

The bleeding hasn’t stopped yet.

Foreclosures are on the rise. South Florida has seen dramatic year-over-year property value losses. And home prices are still falling in some cities.

Can short sales – the sale of a house in which the equity falls short of what the owner still owes on the mortgage – put a tourniquet on the wound until the market heals? Or will it run realtors ragged?

While short sales may save some homeowners from bankruptcy and may keep realtors busy, short sales are, in many cases, twice the work and half the reward for area brokers. Still, some South Florida brokers are choosing to specialize in short sales in effort to carve out a niche in a down market.

“If I could avoid short sales, I would. But I can’t anymore,” says Mark Doran, a broker at Prudential Florida WCI in Delray Beach. “When I look at the MLS, about 50 percent of the properties are either in pre-foreclosure or a short sale situation.”

Doran figures short sales force him to work twice as hard. Lenders are doing due diligence to ensure owners of short sale properties aren’t just looking for a quick bail out. Commissions are less because the properties are selling for lower values. But that’s not the worst of it, Doran says.

“Many times, the lender will beat the broker’s commission down just to make the deal,” he complains. “Some lenders feel everybody in the equation has to pay for it. But we have to do our jobs. That’s the bottom line.”

David Koster, a broker at Related Cervera Realty Services in Miami, has been working with short sales for the past six months. He says most short sales are residential properties that sell for less than $1 million. Koster doesn’t mind working with short sales, though he admits it does require more time and effort than traditional sales.

“It gives me great satisfaction to close one of these deals because I am able to relieve the burden for a seller and at the same time help a buyer find a opportunity that may not otherwise have,” Koster says. “However, the reward of helping someone in a distressed situation cannot be calculated in dollars and cents.”

As Koster sees it, the biggest challenge in working with short sale buyers is that the bank has to approve the offer. The biggest challenge working with short sale sellers is, again, the bank. And after all the work brokers do to make the deal happen, he says, they often have to fight for a commission.

Ray Hanna, the broker/owner of Property Impressions Real Estate Corporation in Coral Springs, has carved out a niche as a short sale specialist. Since he also carries a mortgage broker license he understands the lender process and the lingo of loss mitigation.

“Banks are so inundated with short sales that it’s becoming increasingly difficult to get a response. The time frame seems to be pushing out 30, 45, 60 days at a minimum,” Hanna says. “It seems agents and buyers are starting to steer away from short sales some because of the amount of time that it takes in dealing with the lenders. It’s difficult for everyone.”