I was working with two different clients today and in each scenario we wore working with short sale properties.Â On one of the homes, there was no need to offer less as it was already agressively priced and the bank had approved the listing price.Â One the other one however, the listing price was way over inflated and IÂ suggested to my clients that they offer considerably less, which they did.
Here is the way short sales work.Â An agent lists the property for what they think will be an agressive but accurate number that is within a range of fair market value.Â When an offer is made, and presented to the bank, the bank send out for a BPO or Brokers Price Opinion.Â A BPO is a cheap way for the bank to get an appraisal done without paying the high appraisal costs.Â Real Estate Agents do them every day and they are not difficult to do.Â
Once the bank gets the BPO back, it then uses that as its base to begin working off of.Â It is not unusual to get 5-10% off of fair market value in a short sale and the banks expect that will be the case to some degree.
In my case today: the property was listed at $160,000.00.Â The comps for the area suggested that fair market value is about 139-143K +/-.Â My clients offered 135k as thier beginning price expecting that the bank will counter.Â When you look at the area and realize that nothing has sold for more than $143,000.00 the bank can not ask financing buyers to pay more than fair market value because a true appraisal has to be done and the financing bank will not allow for that.Â Also Realize that these banks are under no obligation to negotiate and make a short sale work.
Important to note is that the converse is true.Â If an Agent lists a property for $100,000 and they get an offer for that, and the fair market value is $175,000.00 the bank is not even going to entertain that offer, meaning everyone has wasted their time.
Being smart and understanding the process will save you a lot of head aches in the end.
As always, I am here to answer any questions you may have.
Roy D. Barker, Jr.
PADI Course Director 199390
(786)863-7764 Direct Line
(239)848-7773 Assistant Direct
A member of Sandals Realty