Since this is being posted on localism.com for people in Oklahoma City to read, a brief definition. A short sale is a workout negotiated with a lender or lenders, and can have a mortgage insurer involved if conventional, that sells a home for less than what it would take to pay off the debt. The lender side saves themselves from a greater loss in foreclosure, and the owner avoids having a foreclosure on their record, and minimizes the credit hit. That is the Readers Dgest abridged version. Now for a few details.
Once a contract has been sent to the lender with all documentation, and if it is an FHA or VA, an appraiser is called in to check value. It is in conventional type loans where the horror exists. Your short sale will depend on two types of evaluation, a BPO and a RMV.
The BPO is a Brokers Price Opinion. Here is the main qualifications. First, you are a Realtor. Second, you sign up to do BPO's. Third, you have the fastest finger in the west. What? Yes this is correct. When the order is sent out it is sent to many and it is first come, first served. You may have only made two sales in your life, and you qualify. You are paid very little and often it is reflected in the work. One example was in a neighborhood that was new in 2004 and only one builder. The 2005 house was sold orginally at $99 SF. Current 2009 houses were selling at $103 SF by the same builder with the same features. The BPO came in at $105 SF. Great work wasn't it. Three months later we closed it after protesting and getting another opinion. Meanwhile the seller was hanging in the wind. This year we have a house totally destroyed in the interior, and sold at $120K and that was amazing to get that. The BPO agent did not make an appointment, did a drive by, and came in at $170K. I could go on but on to the next nightmare.
A RMV is a Real Market Value. This has been explained to me without detail by a person at Well Fargo as their "staff appraisers" who have never been to Oklahoma to compare their value to the BPO, or as I like to say, the blind leading the blind. No one will tell me the exact process, but I believe it can involve looking at Zillow, or going by the taxable amount of the property. First, places like Zillow can be 30% off either way, or on the money. They do not have the time nor money to go into a detailed evaluation. Taxes are an equitable distribution of the neighborhood or area assessment. This is not a value to depend on, and some areas in the last few years vary widely on how they are dealing with this in a volitile market.
This has got to stop. There are some really good BPO agents out there, but honestly a busy Realtor doesn't want to take the time for say $45 to do a first class job. The RMV should become more transparent and I wonder if lenders really want for us to see the man behind the curtain pretending to be the Wizard of Oz. I know that appraisers aren't perfect, but pay them a decent amount, and we will get closer to the truth. Short sales require a patient buyer willing to gamble on a long term process that may risk losing a lower interest rate on a quicker close. A seller of a short sale can even lose a job over a foreclosure in some cases. Both parties deserve better than what they are getting with the current system of BPO's and RMV's and change is necessary.
For help with short sale questions go to our website www.avoidforeclosureoklahoma.com.