Short Sale Valuations by Your Lender Can Be Successfully Challenged

By
Real Estate Agent with Keller Williams Realty Coeur d'Alene AB37665

Janna Rankin Scharf, GRI, SFR, CLHMS - Coeur d'Alene Idaho Short Sale Realtor

Coeur d'Alene Idaho Short Sale RealtorShort short sales make up a substantial percentage of all real estate sales in Coeur d'Alene, Idaho these days, and according to CoreLogic that number is projected to nearly double in 2012 over the record set in 2011.  My personal business seems to bear that out as I currently have seven listings with contracts pending, and six of those are short sale transactions.

One thing I have learned is that the valuation
a bank sets for a listed property, establishing the amount they require  in order to approve a short sale, is a figure NOT cast in stone. 

When the bank has set a valuation too high for the market, it is possible for a good short sale agent to challenge that valuation and get it lowered.

I recently challenged the established values of three Coeur d'Alene short sales, and succeeded in getting the required net substantially reduced on all of them.  All of these deals were salvaged and successfully closed.   I'm challenging another short sale valuation right now.  I am anticipating a reduction in the established value of about $20,000.   

Twice, I successfully challenged the short sale valuation based on repairs needed.  What I have found is that if the repair is something that the appraiser, or agent who performed the BPO (Broker Price Opinion), could Coeur d'Alene Idaho Short Sale Realtorhave seen when they inspected the property, the lender will take the position that they would have already accounted for the needed repairs in their valuation. 

But when a buyer's inspection turns up something substantially wrong with the foundation, roof or major electrical or plumbing system which would NOT have been obvious, they WILL reconsider their value based on repair estimates from licensed contractors.  Lenders understand that the construction and systems of a home have to be sound in order for a buyer's lender to approve a mortgage for the property.

On the third Coeur d'Alene short sale valuation that I successfully disputed, I followed the process that is outlined here.  This is Bank of America's revised process for contesting the value given a short sale.  When the initial valuation came in, I wondered what comps the appraiser could have possibly used to substantiate a sky high price for which the house would NEVER sell.  I was able to get a reduction in value of $19,000 on this property.  Without it, the buyers couldn't have qualified for the mortgage needed, and the home would have gone to foreclosure. 

In almost every short sale transaction there are curve balls that come up which could not have been anticipated. It's important to have a skilled and tenacious listing agent who understands how to negotiate short sales and get over the hurdles that pop up.  I can't stress this enough.    

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Janna Rankin Scharf provides a superior level of real estate service to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com for area information and to search for all homes in the Coeur d'Alene Multiple Listing Service. 

No matter how grand or modest your real estate dreams may be, you can turn to me in confidence.  Give me a call today so I can  be of service to you!

Janna Rankin Scharf AB, GRI, CLHMS, PMN, SFR  208.651.9700

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Comments (4)

Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Good morning Janna,

Excellent post, points that many agents are not aware of.  Short Sales can be successfully negotiated, but it takes knowledge and patience!

May 04, 2012 12:45 AM
Wayne Zuhl
Remax First Realty II - Cranford, NJ
The Last Name You'll Ever Need in Real Estate

I've never challenged a valuation but it's good to know it's possible, especially since we handle so many of them here in NJ!

May 04, 2012 01:12 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Just went through a Wells Fargo short sale that required a challenge to the value set by the BPO. It was embarassingly unrealistic...it took effort, but the deal closed two weeks ago. ( There are several so called short sale experts who claim Short Sales are not negotiated, merely faciiliatated...I disagree...they often require skilled negotiation). It sounds as if you too, "get it."

May 04, 2012 01:22 AM
Janna Scharf
Keller Williams Realty Coeur d'Alene - Coeur d'Alene, ID
Coeur d'Alene Idaho Real Estate Expert

Debb - Yes. it's refreshing to find some else that "get's it."  Here, it's become the norm for every agent to take short sale listings even if they don't understand what it takes to get them closed.  They pass them off to the title companies who are happy to "facilitate" at no cost to the agent, but by state law they can't negotiate.  They can upload documents and relay messages but that's all.  They can't raise questions, challenge a decision or go to battle for the distressed seller.  I had one local agent tell me it's just a numbers game.  Take as many short sale listings as possible, let the title company deal with them, and free up your time to go get more short sale listings.  He said even if they only close 50%, he is still better off financially in the long run.  Is this in the best interest of his seller clients?  Of course not, but it IS in his best interest.  Personally, my success rate for my short sale clients is 100%.  As one who "gets it", I'm sure you know the herculean effort it takes to keep that record! 

Wayne - It really is a straightforward process, so if you truly believe a valuation is inaccurate, don't hesitate to give it a shot.

Lisa - Patience, absolutely.  The best way to get buyers to hang in for the long haul is to manage expectations from the very beginning. 

May 04, 2012 03:11 AM