Is a second seller appraisal common in BOA shortsale?

Asked by Terri S., Las Vegas, NV Thu Jul 1, 2010

We bid on a short sale in April.
In early May, seller's bank (BOA) did appraisal and acctepted our offer of $270K (without us needing closing costs) but indicated there were some seller closing costs on the HUD1.
Seller has no money (but why would BOA not pay for it then?) so we offered to split their portion of closing costs.
Our bank (WF) did an appraisal which came in at $262K which we ammended to our purchase contract. BOA rejected.
So then we figured - we will use BOA for our mortgage. How can they deny us loan based on $270K if their appraisal showed it was worth $270K.

Yesterday we find out selling side BOA ordered a second appraisal. They did one less than 2 months ago.

Is this common?
or since we decided to use BOA for our mortgage are they trying to jack up the price, which if our side of BOA mortgage uses their appraisal, would increase our loan?

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Jason Allen…, , Las Vegas, NV
Thu Jul 1, 2010
Hello Terri,

Interesting situation, you are in gut it is a common one none the less. First, I must say congrats ob getting a response from BOA so quickly. I am a Listing Agent on several properties whose lender is BOA, and My first property received an offer in March and we are just now getting to the point to get our first Appraisal.

There is always Seller's Closing Cost on HUD-1s, which are usually handled by the Seller's Lender. If the Seller's lender is requiring the Seller to pay for the closing costs, then there may be evidence that the Seller may have some money somewhere. This evidence may be hidden deep in the tax returns, or there was money when the origianl transaction was processed, that is now unaccountable for in the hardship letter and subsequent paperwork.

It was good that you amended your PA for the WF appraised value, and I can see BOA rejecting the offer. Did youand your agent try to counter somewhere inbetween.

I do not think I would have advised switching mortgage companies, I would have just stayed with WF (in actually WF and BOA would be the last places I would go due to the constant delays they have in their mortgage loan processing).

BOA can deny your loan application, and is not attributed to the appraised value of the desired property. They have their own guidelines which are different than those of WF, also your credit score went down because of your hit to the credit for the approval of the WF loan. The approval or denial of the loan is based on your credit history, finances, debt, work history, etc. It is not attached to the property just because you are buying a property that has a BOA loan.

It is common for BOA and others to order additional appraisals or BPO's if they feel there is a change to the market value or there was an error in the first one.

The bank knows what it needs for the property in order to sell it as a SS instead of a foreclosure. If they are not making their net, they will forclose.

I hope this helps!

Jason Allen Gardner, SFR
Exit Realty Imoti
1 vote
Len McGuirk, , Las Vegas, NV
Fri Jul 2, 2010

It definitely makes sense why BofA would do a 2nd appraisal on the property after you have a value dispute with your appraisal. This is very common. BofA is just trying to make sure that your appraisal of $262k is accurate rather than them just reducing the price blindly without doing their own due diligence on value. Typically, an appraisal will get the bank to reduce their price if needed.

Good luck!

Len McGuirk
Prudential Americana Group
Cell: (702) 203-6688
1 vote
Edgar Theisen, , 89107
Thu Jul 1, 2010
Yes, it is very common that BOA does 2 Appraisals on Short-Sales. It is also very common for BOA to say yes to a Loan at the beginning and later when it comes to the end of the closing, they deny the loan. Very frustrading, I experienced it many times with clients who want to use BOA as their Lender.....
1 vote
Valerie Edwa…, Agent, Las Vegas, NV
Thu Jul 1, 2010
Unfortunately appraisals are the thorn in the side of everyone right now. Some appraisals seem to come in lower which you now know the downside of that. One minute you think you have a deal and the next minute it falls apart because of one appraisor despite other appraisals done in the past. Normally the bank will do a second appraisal if there has been an extended period of time between the 1st appraisal and the time of contract with the buyer. If the buyer's appraisal comes in lower than the banks appraisal then of course they are going to do another appraisal to determine if the property value has changed. Just because they agreed to a sale at one price, does not mean that they will agree to the contract if the sale price is reduced. At some point, the asset manager will decide that it is not wise to sell it in the Short Sale process but instead, let the home go into foreclosure. The bank can take the HO to court for the balance ont he loan as well as collect Mortgage Insureance (MI). It all comes down to the banks Net profit. We generally never know what there bottom dollar is. Once you go below it, they don't play anymore and just let it go to foreclosure.

Valerie Edwards, REALTOR
Premier Real Estate
(702) 371-5533
1 vote
Bryan Hixson, Agent, Winter Park, FL
Thu Jul 1, 2010
Good afternoon Terri,
I can see why Bank of America would order a second appraisal because the first appraisal came in under the contract price. Moving your loan to BofA would seem to make sense because you can negotiate to BofA at least they are taking a nonperforming asset and turning it into a performing asset on their books. This would be good for them because they can still make more over time by keeping the house on their books.

Is the sellers side using a negotiator for the short sale? You will also want to sit down with your agent and take a look at the recent sales. Together you can decide if this makes sense or not.

As for the seller side of closing costs, Bank of America has a number or percent they want fall between. Really its nothing more than a mathematical algorithm, like why Trulia is first on Google's home page. What it seems to me is if you fall outside of what they are looking for then they may ask for the buyer to absorb some of the costs. I can find that commonly in the case where HOA dues are over 6 months behind.
1 vote
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