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Short sales – how to overcome a poor appraisal

As part of the short sale process, short sale lenders conduct appraisals or Broker Price Opinions (BPOs) on the subject properties. In the wild world of short sales, sometimes the BPOs come in very high, and other times they come in very low. It’s not surprising that the results are so disparate, especially when some lenders hire BPO agents from outside of the local area.

When the BPO finally gets into the short sale lien holder’s hands, that’s when the bank makes their counter offer to the short sale buyer. Recently, I had an offer of over $300,000 and the bank made the counter offer at $195,000. I thought I was going crazy until I contacted bank supervisors and learned that the BPO came back at $195,000—despite the fact that the listing agent and buyers firmly believed that the property value is over $300,000. Talk about a poor BPO.

On the flip side of the coin, I’ve got three or four short sales under my auspices where I have had to submit value appeals because the BPOs came in too high. Again, this is likely due to the fact that the BPO agent was unfamiliar with the property or the surrounding area.

What can be done to resolve this problem?

When your short sale receives a bank counter offer that is so dramatically opposed to your purchase contract, this is likely due to the poor BPO. One way to overcome this matter is to prepare some comparables and a value appeal (a two or three paragraph explanation). Your comparables should include three recently closed transactions (last 90 days) that support your property value. Send your value dispute package to the lender for review, and wait patiently for a response.

Another way to dispute the value is to have the buyer order an appraisal. While there is a cost associated with this method, it is often a successful way for the bank to verify the quality of their BPO.

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No matter what—you should definitely not throw in the towel. While short sales are not for the faint of heart, they are going to be a great income stream in 2012. That, and BPOs, too.

Photo: flickr creative commons by quinet

Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

22 Comments

22 Comments

  1. Minnesota Homes For Sale

    November 29, 2011 at 7:38 am

    BPO ? Appraisal – the headline is very misleading

  2. realestatesteve

    November 29, 2011 at 11:08 am

    After submitting additional properties for comparison and submitting to the lender, how long do you expect to wait to hear a response? Do you call the lender weekly, bi-weekly, or not at all?

  3. Kathleen Cosner

    November 29, 2011 at 5:18 pm

    I would also say give any repairs that may not be readily noticed to the appraser or agent, major repairs, like a septic or something. It's kind of a appreciated. There are times though, and it never made sence to me, we (BPO'res) do a ton of exteriors for short sales, instead of interiors. That could make a ton of difference in value.

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