The asset managers for large REO portfolios know that real estate agents are essential to selling their inventory. As many bank-owned properties sell at dirt cheap prices, realtors don’t have a lot of incentive to promote these Columbus houses for a standard 3% commission.
It has been common practice for sellers of low-end properties to offer a fixed commission of around $1,000 or $1,500 to both the buyer and listing agents, in order to keep them motivated.
Over the past few weeks HUD has quietly changed its commission structure. On some properties HUD no longer offers a minimum commission.
This may have an impact on you as a buyer, too.
Over the past couple of years HUD’s minimum commission was $1,250. It applied to HUD houses that sold for less than $42,000.
With many homes selling for $10,000 or less, it will be harder for agents to make money on HUD home transactions. They may get paid $300 or less for that sale and still have to split it with their broker.
How many hours can you spend for $150? It usually takes at least half an hour for the agent to drive to a house for a showing, spend another half hour in the house and then go back. That’s already 1.5 hours, not considering the gas.
The agent also must submit the contract, collect the earnest money deposit and mail in the original documents, schedule inspections, utility activations, coordinate with title agencies, call home owner associations, and attend the closing.
You better be very efficient to make money with cheap properties.
We already saw the fall-out!
A few buyers have called and told us that their realtors refuse to show HUD homes or submit an offer for them, because they can’t make enough money. I understand. It’s their business. If you can’t make money, then you can’t do the deal.
Most likely more buyer’s agents will steer clear of HUD homes and focus on other types of REOs to earn a minimum commission. Buyers will have to call the listing agents directly to purchase HUD houses.
To find HUD homes that come with minimum commission, go to the HUDhomestore and look at the Status column. If you see the symbol on the left “the listing and selling brokers are eligible to receive a commission of $1,250 for the sale of this property.”
