It’s Not the Bank Who Pays the Short Sale Fees
I’ve probably written about this before, but every time I overhear another agent advising their client that the lender pays the commissions on the transaction, I think, no, that’s not exactly true.
The lien holder on your property is a third party to the real estate transaction. They aren’t involved in the actual real-estate part of the deal. They’re absolutely involved in the note that is secured by your home. The job of getting a short sale approved involves convincing the bank that their note is secured by a property that is worth less than the amount of the note.
Technically, the seller pays the commissions, closing costs, etc. On the HUD-1, in the seller’s column, it’s clear what the “Seller’s” responsibility is. It’s clear what the “Buyer’s” responsibility is. It’s also very clear that the bank doesn’t get a column. Therefore, they do not pay anything.
The Money Flow in a Transaction
It goes like this.
- The buyer secures funding.
- The buyer’s lender sends money to the Escrow company.
- The Escrow company disburses funds to the lien-holder, the brokers, and the seller.
This is a very basic example. In a short sale, there aren’t enough funds to cover the lien holder(s), so where would the funds come from to pay the brokers and the seller? Well, the seller receives nothing in a short sale. The brokers get paid because they do the hard work of selling the property short. The only way they can get paid is if they allow the seller to pay them less than they owe on the note, so the seller has the funds to bring to the broker(s) at closing.
So, while it’s the lender who takes the loss, it’s actually the seller who pays the commissions.