Short sales are not always smooth sailing. In fact, I’ve only closed a few short sale transactions that were run of the mill. Most short sale negotiations, sadly, are like a series of unfortunate events (with a nod towards the juvenile book series of the same name). Sometimes the unfortunate events can begin as early as the faxing of the authorization (which somehow is lost despite the fact that it has been faxed several times) and, in other short sales, the unfortunate events begin much later.
Many times the unfortunate events begin to unfold after the BPO (Broker Price Opinion) is received by the mortgage lender. In the past few weeks, I’ve seen several BPOs come in with a significantly higher value than the real estate agents’ perceived market value.
When a mortgage lender receives the BPO, the mortgage lender then compares the BPO to the offer in the short sale package in order to see if the two values are about the same. In the case where the BPO is significantly higher than the offer on the table, the lender then provides a counter offer to the short sale buyer.
BPO Out of the Ballpark
But, what happens when the BPO is incorrect and the BPO value is completely out of the ballpark?
It is sometimes difficult to convince the mortgage lender that their BPO is incorrect. So the onus falls on the listing agent or the individual who is processing the short sale to explain to the bank that their value is incorrect.
Sometimes this can be done effectively by preparing a list of comparables. These comparables should be recently closed transactions in the same neighborhood that would support the correct value. Other times the mortgage lender may need a full appraisal in order to be convinced that their value is incorrect. Either way, you need to make sure that your message is heard loudly and clearly by the correct individual at the bank. A problem such as this could hold up short sale approval for several weeks.
One way to attempt to avoid this unfortunate event is to attend the Broker Price Opinion meeting and open the door for the individual who has been hired by the mortgage lender to ascertain the value. In this way, you can assure that the individual has actually seen the property and all of its features and pitfalls.
It is often difficult to convince the banks that their value may be incorrect. So, be patient and resourceful and emphasize the fact that if the property does go to foreclosure, the bank will be losing out even more.
There are so many unfortunate events that can occur during a short sale that many agents shy away from them. That being said, short sales can also be a way to fuel your real estate career. So, if you haven’t listed a short sale yet, maybe you should.