Short Sale Appraisal Came in Lower Than Sales Price

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Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194
https://activerain.com/droplet/p5

 Question: I have an accepted offer on a short sale where Bank of America owns the mortgage, and I am using Bank of America for my lender.  The appraisal came back $40,000 less than the offer price. Will Bank of America lower the price?

Answer:  The short answer is they may possibly lower the price.  Here is the long answer:Bank of America is no better or worse than any other bank right now. It is very hard to deal with any of the big banks. That being said, they do not actually still own the note on the house in house. They sold their mortgage notes to other investors, Fannie Mae, Freddie Mac, Wall Street, China, etc.  Many of these loans that were sold to investors are still serviced by the banks that did the loans to begin with. So let's say that B of A made the loan and sold it to a Hedge Fund. The owner of the home can not make the payments and asks B of A to let them do a short sale.  B of A is now responsible for co-ordinating the short sale, but may not be the decision maker.  There are two classes of B of A short sale loans, delegated, or non delegated. If the loan is delegated it means that B of A has the ability to make financial decisions about the loan.  If the loan is non delegated it means there is an investor who is the one making the decision. So, let's say everyone comes to an agreement on the price, the sellers, the buyers, B of A, &/or the investor. You have your appraisal done but an appraiser hired by B of A who says the house is worth 40K less than the agreed upon price. If the loan is delegated it is probably more likely that B of A will act rationally and lower the price. If the loan is non delegated, it is entirely up to the investor as to what they will do. The person who is in charge of short sales for B of A suggested that the listing agent ask the negotiator whether a loan was delegated or non delegated. If the negotiator says, "I can not tell you" that means it is non delegated and you are at the whim of an investor who may or may not know anything about the market. Remember, the banks are not obligated to approve a short sale. If it is in the best interest of them or their investor they will, and if it isn't they won't 

I personally have not had this problem with B of A short sales, but it did happen once on an REO owned by B of A.  My buyers had an offer accepted at what we believed was a very good price.  They opted to go with a lender from B of A who was terrific. The appraisal was ordered and came in 30K less than the offer price, but we felt the appraiser did not use good comps. He used comps that were on the same street, but in a different neighborhood that had less value. (It is a long street) My buyers agreed to let B of A throw out that appraisal and order a different one.  The new appraisal came in at the value of the offer, but they said they would not do the loan because the roof looked like it needed to be replaced. At this point my buyer asked B of A to replace the roof and they did.Marcy Moyer's Sale Pending Sign 

So the bottom line is that you will not know what B of A (or their investor) will do until you ask.  Logically, if the value has dropped, they should take a lower price. However logic is not always dictates the decisions of the people involved.

 

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E. 01191194

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Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties

 

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Rainer
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Linda Humphrey
Humphrey Home Connections Realty, Reno, Nevada - Reno, NV
CRS, Broker/Owner HHC Realty

Great post! So often you hear comments like, for example, "BofA always wants blah, blah" or "BofA never agrees to yadda, yadda, yadda". It all comes down to who is calling the shots. B of A may look like the Great and Powerful Wizard of Oz but there is usually someone behind the curtain pulling the strings.

Dec 31, 2010 01:02 PM #1
Rainmaker
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Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

Linda, that is a perfect analogy. I wish I had thought of it.

Dec 31, 2010 01:09 PM #2
Rainer
113,244
Jerry Cecil
Bloomtree Realty - Prescott, AZ

Yah what a mess things are, huh?  I mean, I guess the rules out there always existed, but now the loopholes and the shortcomings are so evident.

Dec 31, 2010 01:34 PM #3
Rainmaker
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Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

Even so, I would rather be doing a short sale now than two years ago.

Jan 01, 2011 03:12 AM #4
Rainmaker
345,972
Anja Kerstens
Coldwell Banker Residential Brokerage - Morgan Hill, CA
GRI, CDPE, CHS, ASP, Selling Silicon Valley Real

Marcy,

Interesting and informative post. The misconception is that all banks are the same.  I get questions all the time related to this short sales and whether or not one should default on the loan because they want out.

Eagle Ridge real estate

Jan 02, 2011 06:02 AM #5
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Marcy Moyer

Probate, Trust, and Investment Specialist
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