Yes, realtors make money on short sales, but the commission is paid by the lender (not the homeowner) from the sale proceeds and must be negotiated and approved as part of the short sale agreement, often resulting in lower rates (around 4-5%) than traditional sales, requiring specialized negotiation skills from the agent.
The commission is typically negotiated and approved as part of the short sale approval process. Most short sales offer a standard real estate commission of 5% to 6%, split between the listing agent and the buyer's agent. It's important for agents to submit a clear commission request with the short sale package.
In a short sale, the lender typically pays most of the seller's closing costs, including agent commissions, title fees, and taxes, because they are accepting a loss to avoid foreclosure. The buyer is responsible for their own closing costs, but negotiations are key, as the lender must approve all expenses, and sometimes the buyer may negotiate for the lender to cover some costs to get the deal done.
As stated above, the short sale process can get lengthy. There is a risk the homeowner can get into greater trouble with missing payments, and it can result in foreclosure. Foreclosure is a legal process that happens when the homeowner forfeits the property to the bank as a result of being unable to pay the mortgage.
If you're purchasing a short sale, your goal should be to make an offer that reflects the realistic value of the property while also considering any necessary repairs. A fair offer that aligns with market value—supported by a strong preapproval letter—goes a long way.
The "3-3-3 rule" in real estate isn't a single guideline but refers to different strategies: for buyers, it's about financial readiness (3 months savings, 3 months reserves, 3 property comparisons) or a financial affordability check (30% income, 30% down, 3x income); for agents, it's a marketing habit (call 3, note 3, share 3) or prospecting (talking to everyone within 3 feet). There's also a developer rule (1/3 land, 1/3 build, 1/3 profit), though it's considered outdated by some.
“Homeowners pursue a short sale when they can no longer pay the mortgage, need to move from the property and want to avoid a foreclosure. With a short sale, the impact on the homeowner's credit record might not be as bad as a foreclosure in some circumstances.”
And there are practical reasons for being wary of shorting. Short selling exposes investors to theoretically unlimited losses if the stock price rises, leading to dramatic “short squeezes” where forced buying by short sellers drives prices even higher.
The 7% sell rule is a stock trading guideline to cut losses quickly, advising you to sell a stock if it drops 7-8% below your purchase price to protect capital, remove emotion, and prevent small losses from becoming catastrophic, a strategy popularized by William O'Neil's CAN SLIM method for growth investing. It assumes that truly strong stocks typically don't fall much below their buy point, so a dip signals something is wrong, requiring you to exit the trade to preserve funds for better opportunities.
Yes, buyers often agree to pay part of the closing costs to make their offer more appealing, especially in competitive short sale situations. However, some loan types may limit how much a buyer can contribute. Since the lender is taking a financial loss, any cost added to the settlement statement must be justified.
The 80/20 rule (Pareto Principle) in real estate suggests that 80% of results come from 20% of efforts, applying to finding a home (80% fits your needs, 20% are compromises) and for agents/investors (20% of clients/properties yield 80% of income/profit). It's about identifying high-impact activities, focusing on essential needs in a property, and recognizing that a few key assets drive most of the financial success, guiding strategic prioritization for better outcomes.
In a short sale, the lender typically pays most of the seller's closing costs, including agent commissions, title fees, and taxes, because they are accepting a loss to avoid foreclosure. The buyer is responsible for their own closing costs, but negotiations are key, as the lender must approve all expenses, and sometimes the buyer may negotiate for the lender to cover some costs to get the deal done.
Jim Chanos. James Steven Chanos (born December 24, 1957) is a Greek-American investment manager. He is president and founder of Kynikos Associates, a New York City registered investment advisor focused on short selling. He is known for predicting the fall of Enron before its collapse.
Short selling is risky because losses are theoretically unlimited, as a stock price can rise indefinitely, unlike a long position where the maximum loss is 100% of the investment. Key risks include short squeezes, where rising prices force short sellers to buy back shares, pushing prices even higher; margin calls requiring more funds; borrowing costs, dividends, and potential regulatory bans.
In most cases, homeowners cannot pay their realtor directly in a short sale. The lender must approve all fees and commissions as part of the short sale agreement. Direct payment from the homeowner could be seen as a violation of the short sale terms and potentially jeopardize the transaction.
If a home is being sold for less than what the current owner owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale.
The "7% rule" in real estate typically refers to a quick screening tool where an investor checks if a rental property's gross annual rent is at least 7% of its purchase price, indicating a potentially solid income investment, though it's not a substitute for detailed analysis; however, other "7 rules" exist, like those focusing on agent performance (top 7% of agents do most business) or key investment principles (due diligence, diversification, market awareness, clear strategy) for long-term success.