In case you haven’t seen the announcement Fannie Mae published on February 24, 2009 as an addition to its Servicing Guide, I wanted to let you know about a change that will make being involved in short sale transactions more attractive to real estate professionals.

In the past, many agents have been frustrated by the fact that a commission structure that was agreed to by the listing agent and the home owner didn’t always survive the short sale process.  Loan servicers were fond of renegotiating the commission to increase their proceeds from the sale.

That practice put agents who had spent months working with potential buyers to arrive at a solid contract on the house in a difficult position.  If, after all that work, the loan servicer undercut the agreement that was in place between the listing agent and the homeowner, the agent ended up giving away much of their work for free.  It often made working on short sales an unprofitable undertaking.

With Announcement 09-03, Fannie Mae has instructed servicers not to negotiate commissions unless they exceed 6% of the aggregated price of the property.   The announcement does recognize that obtaining approvals from third parties – such as private mortgage insurers, for example - may impact commissions, but it is a big step in the right direction.

Fannie Mae is recognizing the amount of work that is required on short sales.  NAR has urged both Fannie Mae and Freddie Mac to address the issue of negotiating commissions on short sales, and it’s hoped that Freddie Mac will join Fannie Mae in curbing the practice.

The change was effective March 1, 2009.  You can read the entire announcement here.  The related paragraph is in the middle of the second page of the announcement.