I just read a post by another agent who believes that Bank of America's new policy of being able to reuse approval letters when a buyer walks away is a positive development. I actually believe it's bad news and here's why.
It's a nice thought that Bank of America would allow the reuse of it's approval letters in a perfect world, but this is not a perfect world. Unfortunately, many agents will submit offers that have no hope of being approved. Others will begin pricing short sales far below market to overcome the stigma associated with short sales and entice buyers to make offers. Most offers will be declined but the agent will have obtained the coveted approval letter. The agent will then market the property as approved to get the buyer who will actually consummate the purchase.
So why is this bad news? Two problems arise out of this new policy; first, Bank of America's wait times will increase due to the increased workload caused by double submissions. I currently employ a policy with Bank of America short sales to only submit offers which have a high likelihood of being approved with this new policy I'm more willing to submit offers that have a lesser chance of getting approved because of this approval letter benefit. Second, market prices will have increased downward pressure as short sales are priced below market to entice offers from buyers. Banks who hold REO inventory will be forced to price these assets competitively against under priced short sales even when an approval is unlikely.
It's my hope that Bank of America will repeal this policy and other banks should adopt a no reuse policy.
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