Bad News for Bank of America Short Sales

By
Real Estate Broker/Owner with Michael Smith (Homexpo Realty)

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.

Comments (3)

Trisha Bush-LeFore
Preferred Properties Land & Homes - Walla Walla, WA
Providing Realtor Services in the Walla Walla Area

I like your take on Short Sales.

Jul 13, 2011 05:53 AM
Michael Kelleher
American Trust Mortgage Inc - Swampscott, MA

i actually never found BOA to be to quick in the first place. This seems like something that if only you knew about it, it would be great but once people catch on i totally agree with you. Would love to get an update on this at some point! thanks for the post

Jul 13, 2011 05:59 AM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Michael, you have given much insight into how unscrupulous people will try to game the system for their own benefit and to the system's peril. It won't last if people do this and they will.

Sharon

Jul 14, 2011 02:35 PM