One of the biggest questions for us in why our Short Sale team is so successful and why our training is helping Agents to experience above-average closing ratios is this... How do you establish true market value on a VA or Conventional Short Sale, let alone, ALL Short Sale properties?
We have a very unique way of establishing value for VA and Conventional short sale properties. You and I both know that the appraisal that the lender orders, wither done by a certified appraiser or an agent, can be a lot different from what we can come up with. In fact, most agents come in too low, compared to the bank-ordered BPOs and this causes huge problems in short sales, as you can imagine. Why do most agents low-ball their values? To attract an offer that most lenders will never accept to begin with. This is going to sound crazy, but for the past 8 years, we have studied and tracked variations between lender-ordered appraisals and the agent’s perception of what the value should be. Amazingly, on a scale of 0-10, consisting of a given range of comps, most agents typically came in at around a 2.5-3. Most bank appraisals or BPOs came in at around a 6.5. Determining what we call the “Safe Value” is one thing. Going active on MLS at a price that will minimize the risk of the lender asking for a promissory note, or threatening a deficiency judgment, is part 2 of what we teach in our CDRS course. You can apply the same set of comps to 3 different neighborhoods and we teach you to go active at different prices, based on each neighborhood and where in the pre-foreclosure process the Seller is, either the default stage, the acceleration or NOD stage, or the foreclosure stage. No one else is teaching this method in the country and it’s sad, because so many agents continue to unknowingly goof up their short sales from the very beginning and they don’t even realize it.
By the way, we use a mix of regular sales, short sales, and foreclosures, depending on level of concentration and number of comps available. Here’s my biggest piece of advice. It’s really not about what you’re trying to justify as the value, because that’s where the majority of the drama takes place when you are attempting to contest a high appraisal. It’s about putting yourself in the shoes of a person the bank is calling upon to establish the fair market value of YOUR listing and wondering what they might use to base their findings and, ultimately, their perceived value. Also, one of the best ways to contest a high appraisal is to send a printed report of a lockbox access report for the subject property to the loss mitigation dept, after making notes of what the price was at during certain time frames. Market value is what the public will pay and if the lenders disagree with that, sorry, they're about to take another property back as an REO and sit on it for a long time! If the bank’s appraisal comes in too high, your lockbox report will show little to no activity at that price bracket. Get your CDRS designation and you will be the best Short Sale agent in your market…guaranteed! Have a great day!
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