Who pays the real estate agent commission on a short sale?

The lender pays it. The commission comes out of the sale proceeds at closing, the same as any sale, but because the lender is taking less than it's owed, the money is effectively the lender's. The homeowner doesn't pay it out of pocket.

How much the lender will allow

• There is no standard commission. Commissions are always negotiable between the seller and the listing broker, and no lender sets a fixed rate. What lenders do set is the most they will approve out of the sale proceeds.
• Lenders typically approve up to 6%. Fannie Mae and Freddie Mac programs allow the commission in the listing agreement up to 6% of the sale price. FHA, VA and private lenders set their own limits.
• It can get cut, often to 5%. The commission is one of the line items the lender reviews on the closing statement. Agents should expect it to be negotiated and tell the seller up front.

What agents need to watch for

1. Buyer-agent pay is now usually a seller concession. Since the 2024 industry changes, buyer-agent compensation is commonly written into the purchase contract. The lender can reduce or refuse that concession, so disclose that possibility to everyone at the start, in writing.
2. The deal has to be arm's length. On most loans, if the agent is related to the seller or buyer, or is the buyer, the lender may cut or refuse the commission.
3. No side deals. Agents can't take a fee or "gift" outside the closing statement to make up a reduced commission.

Short sale processing fees are separate

Many agents hand the bank negotiation to a short sale processor. The processor's fee is separate from the commission. Some lenders allow it on the seller's side of the closing statement; often it is paid by the buyer. It should be disclosed to the lender, and the buyer should know about it before making an offer.

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