Your short sale was approved?  Wonderful.  The buyer’s lender under-appraises the property?  Not so good.  What do you do? 

Do you call the short sale lender and tell them their comps were wrong?  Do you scream “the market is still going down, take the new price or the seller will file bankruptcy”?  Do you say “You’ll never get another buyer for this home”? 

The short sale lender has heard all that before.  Normally, they don’t care.  You’re just another whining real estate agent.  But there is a way to get a value changed if the circumstances are right.  How?  Factual errors.  Here is an example.

I recently had a Fort Walton Beach short sale approved for $117,000.  The house was a bit unusual.  It had a 350 square foot detached apartment.  The main home was 1350 square feet.  The property appraiser’s office considered the home 1700 square feet – the total living area.  Guess what?  That is not what the buyer’s FHA appraiser thought.  He only gave marginal value to the guest quarters, and primarily considered the home 1350 square feet.  Thus, his value was only $99,000. That is 15% less than the contract price and approved short sale amount.  That is all the buyer could get a loan for. The appraisal looked flawless to me.  I knew the BPO agent likely relied on the property appraiser’s total square footage, though, and that is how I planned my challenge.  Here is an excerpt:

Dear Sir or Madame:

1.     FHA/HUD appraisal for this property has found a sizable square footage error that was not reflected in your BPO Value.

2.     Public records states property is 1700 square feet, however, FHA/HUD appraisal measures home at 1350 square feet.

3.    This difference is 350 square footage less than your BPO value and public records.

4.    The actual and correct square footage brings the property value to $99,900 per current FHA/HUD appraisal.

5.    Please consider the revision of your value to $99,900 to coincide with FHA/HUD correct measurements

The short sale lender, Green Tree, submitted my challenge to Fannie Mae.  Two weeks letter they issued a revised approval for $99,000.  The seller was thrilled.  The buyer was ecstatic.

So next time you have a value-related issue on a short sale, and you are confident you are right, do your research.  If you can find a factual error in how you think the BPO was done, you may very well save your sale, and your seller from foreclosure.

It’s Wendy!

Wendy Rulnick, Broker, Rulnick Realty, Inc.

Call toll-free 1-877-ITS-WNDY (1-877-487-9639) or local 850-650-7883 ext 204

Email Wendy: itswendy@rulnickrealty.com

Fort Walton Beach FL Real Estate

Fort Walton Beach Short Sales & Pre Foreclosure Help.

Read Wendy’s Fort Walton Beach Florida Real Estate Blog

The post How To Challenge A Short Sale BPO first appeared on Rulnick Realty.

Yesterday I received a phone call from a competitor in my Destin Florida real estate market.  The agent had a short sale condo listed in the same building as I did, and questioned why my list price of $260,000 was $40,000 less than his unit.  He asked, “Is that price approved by the bank?”  I told him no, as most short sale lenders do not pre-approve prices.  He then asked if I truly thought I could get it approved, as he was hesitant to “chase” my price and match or beat it with his listing.  I thought about that, and the factors that go into short sale pricing.

When pricing any real estate listing, one must consider several standard factors.  Briefly:

1. Competition:  Similar properties for sale may be overpriced, since they have failed to sell

2. Pendings: Properties under contract indicate what price entices a buyer to purchase

3. Solds: What price buyers were actually willing to pay

4. Expireds: What price was rejected by the market place

The obvious strategy is to price a property to be the best value in the category. Further, once a property is listed for sale, prices should be adjusted upon the following circumstances:

1. It has been on the market for a reasonable period of time with no showings (buyers rejecting “price)

2. It has had many showings but no contract (buyers finding better value in price range)

With a short sale, there is the final factor- the “X Factor”.  The “X Factor” is the price the short sale lender comes up with after receiving a purchase and sale agreement. This is the price that can make or break a sale (although it can sometimes be challenged). The lender price is based on a Broker Price Opinion (BPO) or appraisal.  This third-party opinion changes the game and actually may distort markets.  The “X Factor” price opinion may come from an agent with one year experience who has signed up on a website to perform BPO’s.  The price opinion may come from one appraiser who does not adjust for inventory levels.  In the example of my condo listing, I may have “crossed the imaginary line” of what a bank may approve.  The question lingers, at what point do you disregard the “X Factor” guess, and adjust the price to entice a buyer.

In the case above, after 7 months of gentle price reductions from $329,000 to $260,000 – the unit finally had a showing this weekend, and is getting an offer today.  There are 2085 condos for sale in Destin.  Less than 2% of them sell per month and there is a 5-year inventory.  There are 120 units for sale in the subject’s complex, and the last one sold in December for $300,000. The offer price should be around $260,000- the list price.  Let the “X Factor” games begin.

The post Short Sale Pricing in Destin Florida first appeared on Rulnick Realty.