THE BROKER’S PRICE OPINION:

Once the Lender has received the short sale application, the next phase of the approval process is the Lender’s independent verification of the value of the home based upon its condition and market conditions in the neighborhood in which the subject property is located.  This is usually accomplished through the Lender or an agent of the Lender contacting a licensed real estate broker’s office requesting a “broker’s price opinion”.   This is the critical phase of the entire transaction.  If the Broker’s price opinion values the property higher than you have sold the property, the Lender may deny the short sale application, believing that the property would yield a higher payoff at auction.  The key to successfully navigating this phase of the transaction is to control the broker’s price opinion.

I cannot help but note that there is a bit of irony in the fact that the fate of the Short Sale Listing Realtor’s comission ends up in the hands of  another Realtor who may sabotage your short sale by overpricing the Broker’s Price Opinion (BPO) in order to obtain the listing from the Lender after the auction.  It is a fact that there is a large industry of Realtors that sell bank owned properties. Some Realtors have signed on with various agencies to be contacted by Lenders in order to receive bank owned property listings.  In the not so recent past, the realtor who found the highest value for a bank owned property would be awarded the listing.  There may be an incentive for the Realtor conducting the BPO to find a higher value than the market value. 

Another factor that may be working against a fair market BPO is the relatively low pay that a Realtor receives for producing a BPO ($75.00 - $90.00) There is only so much time that a Realtor is going to put into a BPO and it is human nature to shortcut this process in order to quickly complete the project and move on to more profitable business!

The successful short sale Realtor controls the BPO.  Beginning with the initial letter to the Lender it is important that the Listing agent makes it clear that she alone should be contacted  for the house to be shown to anyone for the BPO or appraisal of the home. I is my practice to provide all of the listing agent’s contact information to the Lender, indicating that only the Listing agent is available to allow access to the home.  When the Realtor is called, she should immediately assist the Realtor conducting the BPO by emailing or faxing all of the information that she has gathered for the short sale package.  The Realtor should bring a copy of the short sale package and any other information that the Realtor has in order to influence the BPO.   The key is to make the other Realtor’s job easy by providing all of the research to her.  It does not hurt to quickly run through the hardship issues of your seller either and how badly they need this short sale to go through.  Tell them why you set the sale price at the price that you sold the property and why you think it is fair given all of the circumstances and the data that you have gathered.  No one is going to argue with you too long for $75.00! 

If you are unable to make contact prior to the showing of the property, be sure to bring the following with you and provide them to the Realtor conducting the inspection:

-     Photographs of the home, highlighting any imperfections inside and outside
-    repair list
-    any quotes for repairs
-    inspection reports
-    taxes and utilities owed

WHEN THE SHORT SALE APPLICATION IS REJECTED:

Work with attorney if short sale is rejected.  We need to find out why.  If the BPO came out too high then we need to request that a second opinion be rendered and again submit all information showing why the valuation should be lower. Ask for information - what comps did the agent use?  Are they valid?  Did they take into consideration the repairs?

You might consider paying for a second BPO ($75) if first was a drive-by - insist on meeting the agent at the property with your package and try again.  Another option is paying for an actual appraisal if your client is willing to pay and you firmly believe that your pricing is correct.  Many Lenders will listen to what you have to say and they will reconcile the two BPO’s and / or appraisal against the information that they have already received.

WHAT IF YOU GET AN APPROVAL BUT YOU ARE STILL SHORT?

Ask again.  As it turns out, asking is mostly free.  The only time that you can ask the wrong question in my experience is in Court.  That’s another story.  With short sales, you sometimes have to go back to the well a second time of a lien arises that was not previously there or if the Seller suddenly reveals that they have no where to go an they need first and last month’s rent.  - This actually happened to me and I was able to get another $1800.00 from a Lender so long as it was paid directly to the new landlord!  The Lender will have made their decisions as to what the lowest price they would accept in a short sale negotiation based upon the BPO and other factors and your short sale request may be well within the Lender’s guidelines. . . so ask away!


Final Notes - This is a good times to be involved with short sale transactions.  The banks need your services and are willing to allow the real estate professionals involved in these transactions to earn full 6% commissions and increased legal fees!  Just remember the following key concepts and your short sale should go smoothly:
1.    Do your homework  - verify status of foreclosure and evaluate total debts effecting equity

2.    Get the attorney involved early to assist with number 1 listed above

3.    Be prepared for the day you have a signed contract so thatyou can quickly submit a complete short sale package

4.    Control the Broker’s price opinion by meeting with the Realtor face to face and providing the Realtor with all of your information on the property.

5.    Fight for your position if necessary

6.    Never be afraid to ask for more!