If you need to sell your home as is quick, a short sale may be the best option for you. Short sales can be complex and emotionally charged real estate transactions, often involving distressed homeowners, patient buyers, and a lender looking to minimize losses. But one of the most common questions sellers and buyers alike have is: do realtors make money on short sales? The answer is yes—realtors can and do earn commissions on short sales, but the process and payout differ significantly from traditional sales. In a standard real estate transaction, the commission—usually 5% to 6% of the sale price—is agreed upon between the seller and the listing agent, then split with the buyer’s agent at closing. In a short sale, however, the property is being sold for less than what is owed on the mortgage, and the lender must approve the sale and the commission since they are essentially taking a loss. This means that instead of the seller determining the agent’s commission, the bank or mortgage servicer holding the lien has the final say. Typically, lenders do approve a standard commission, though sometimes they negotiate for a slightly reduced rate, such as 4% to 5%. Still, this commission is paid from the proceeds of the sale—not out of the seller’s pocket—and is distributed at closing, just like in a conventional deal.
Navigating a Challenging Process for Payoff
Earning a commission on a short sale is often harder and more time-consuming than in a regular sale. Realtors who specialize in short sales take on extra responsibilities, including gathering financial documents from the seller, coordinating with lenders, submitting hardship letters, and navigating extensive approval timelines. These tasks can stretch out for weeks or even months, especially if multiple lienholders are involved. Because of the added workload and uncertainty, many agents avoid short sales altogether unless they are experienced in the process. The delays can be frustrating not only for sellers and buyers but also for realtors who must work diligently for a commission that might not materialize if the lender rejects the deal or the buyer walks away due to time constraints. Still, for dedicated agents, short sales can be a valuable niche, as the market always includes homeowners in financial hardship and buyers looking for lower-priced opportunities.
Who Pays and How It Affects Sellers
One major misconception is that sellers in short sales are responsible for paying the realtor’s commission. In reality, sellers who are underwater on their mortgages generally pay nothing out of pocket. The lender agrees to cover standard selling costs, including realtor fees, because facilitating the short sale helps them avoid the greater losses associated with foreclosure. The process is essentially a negotiation between the bank and the agents representing the seller and buyer. For sellers, working with a realtor who understands short sales is critical, as they need someone to advocate on their behalf, compile a compelling hardship package, and manage the many moving parts of the transaction. A skilled agent can significantly increase the chances of the lender approving the deal, and ultimately, of the homeowner avoiding foreclosure with the least financial damage possible.
Why Buyers Benefit from Realtor Involvement
Buyers also benefit from working with a realtor experienced in short sales. These transactions are far from straightforward—timelines are uncertain, approvals are slow, and inspections and appraisals can introduce complications. A buyer’s agent helps navigate these challenges, coordinate necessary disclosures, and negotiate favorable terms while keeping the buyer informed every step of the way. Although buyers do not directly pay the realtor, their agent’s knowledge can help them avoid costly mistakes or missed opportunities. Moreover, short sales often involve property repairs or deferred maintenance due to the seller’s financial hardship, making it critical for buyers and their agents to understand how to negotiate repair credits or plan on working with contractors after closing to bring the home up to standard.
Conclusion: Compensation Comes with Challenges
So, do realtors make money on short sales? Yes, but it’s not quick or easy money. Realtors working on short sales earn commissions that are typically approved and paid by the lender, not the seller, and only upon successful closing. The process involves more documentation, more patience, and more negotiation than traditional transactions, but for realtors who are knowledgeable and persistent, short sales can be a rewarding part of their business. Both sellers and buyers benefit from having professionals guide them through the intricacies of the deal, helping reduce stress and increase the likelihood of a successful outcome. For agents, the key is in managing expectations, being organized, and building relationships with lenders that allow them to navigate the system effectively. Despite the hurdles, a closed short sale can provide much-needed relief for a seller in distress, a great deal for a savvy buyer, and fair compensation for the realtor who brings the transaction to the finish line.
