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Short sales- when the bank BPO is out of the ballpark

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.

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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.

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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.



  1. Paula Henry

    August 24, 2010 at 8:32 am

    The worst is when the FHA appraisal is way to high; no way to get those changed until time expires. I have two like this right now.

  2. Sheila Rasak

    August 24, 2010 at 10:41 am

    This is excellent advice! I’ve been fortunate enough to have MOST of my short sale evaluations go smoothly. There was only one recent one where Chase asked me to go out and do another BPO as they also wanted my price opinion. You can imagine how fast I got in the car and took pictures of the neighborhood surrounding the subject property. Being the listing agent (and not an outside BPO broker) I was able to call attention to the neighborhood competion of newer construction that was being built in phases at the same price level the subject property was offered at.

  3. Mickie Shea, Dallas, Real Assets by Shea

    August 24, 2010 at 1:18 pm

    As an Asset Manager, charged with the responsibility of the disposition of REO assets in the default servicing industry, I have to say, over-valued BPO values are similarly frustrating to me.
    Those Out of the Ballpark values submitted to me for a property, are many times the culprit in keeping me from getting my asset sold.
    High value BPO’s suggest that the person originating the BPO is trying to ‘buy’ the listing. Or, affect a Short Sale. OR, it suggests they have not actually seen the property. Or, they accepted an assignment out of their area of expertise, either geographically, or type of property involved.
    The BPO form, itself, is a culprit, a deterrent from transparency of seeing the ‘real’ market value.
    And, to add to the scenario…the Asset Manager’s hands are tied in many banking or default servicing companies…their internal policies prevent further action, but demand that I accept the BPO value submitted. It its high, I waste my marketing time. So, I (and, my agent) work diligently, but its eating up my DOM, my ‘rating’, my broker’s rating, followed by multiple price reductions, with an eventual sale below market…but, I don’t need to tell YOU how this works, you know this.
    The Asset Manager is in the middle. I’ve learned one of several reasons for this. The bank doesn’t see this product as a home OR a property. This product is a ‘loan’. So, knowing this, understand that ‘understanding the marketing of real estate’ is not a high priority there. Knowing LOANS…that engages the statistician’s mind and he generates some matrices. There is abig gulf between the two languages.

    By now, you have probably figured out that I am also speaking ‘real estate’…unusual for an Asset Manager. I am a many-year broker, and, now I have experience as an Asset Manager. And, I’ve learned that both worlds speak different languages.

    • Joe Loomer

      August 25, 2010 at 6:02 am

      “the lender then provides a counter offer to the short sale buyer.” Left one option out – the lender can also just reject the offer and do nothing (more common here).

      @mickie – you’re spot on – another issue in my area is the BPO is assigned by the broker to a starving brand-new agent who has no idea how to even do a BPO but needs the 50-75 bucks. My wife had two new agents from other firms actually call her while doing BPOs on HER listing.

      Navy Chief, Navy Pride

      • Melissa Zavala

        August 25, 2010 at 9:58 pm

        Joe: I’ve never heard of BPO agents with no experience. That’s a new one.

        Mickie: It is always great to hear experiences from the other side. Apparently, everyone gets equally frustrated with the process.

  4. Atlanta REIA

    August 24, 2010 at 2:14 pm

    Yes, it is VERY IMPORTANT to meet the BPO agent or appraiser at the house when the BPO or Appraisal is being done. You need to be prepared to show them the comps you pulled, show them all the repairs needed to the house and provide a repair estimate.

    Thanks for the great article and blog.

  5. Mike Rohrig

    August 25, 2010 at 1:03 am

    I have not had favorable results trying to meet the BPO agents at my listings. Sure I could force the issue but what does that resolve? Luckily I have been very fortunate on my own listings but have heard of problems on others.

    Someone told me that if you get an appraisal that the bank will follow that. But you have to pay for it and won’t be sure you’ll get your value because they can be off too.

  6. Kathleen Scanlon

    August 26, 2010 at 9:03 pm

    Out of whack BPOs are the bane of our existence these days. I don’t know what area many of you are working in, but several BPO agents in the metro NY area do not have a clue as to valuation and commonly overvalue properties. I have had BPOs come in high because the BPO agent has a personal issue with a broker. It runs the gamut.

    Part of the problem is ignorance. For instance, you can’t use REO comps. The banks buy the property back at the upset price – this obviously skews the valuation because the upset price exceeds FMV. This is the type of nonsense we fight everyday.

  7. Judith Duran

    August 27, 2010 at 7:43 am

    I am in the process to negotiate a short sale that BPO cam back very high.

  8. Anne Lindsay on Bank Short Sale

    September 3, 2010 at 7:25 am

    It is true that most Bank Short Sales are too complicated and eventually end up in foreclosures. Serious relief is required to help processing of short sales and make them faster.

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