Short Sale Lender Run Around

Asked by cfrlaw, 48201 Mon Jan 7, 2013

I have a situation where a bank did a BPO in April on a sale and the value came in at $100,000. The buyer submitted an offer for $100,000 and then backed out. A second buyer came in and made an offer for $100,000 and the lender ordered a new BPO that came in at $450,000. We asked the realtor who did it how it could be so high and she essentially said that the bank pays her salary! We then asked the lender if we could submit a valuation dispute. We did. We submitted a full appraisal which came in at $100,000. A comp analysis from the seller's realtor, photographs of construction damage to the property and a contractor estimate for repairs to the property. The bank declined to lower the price of the property based on the second BPO, ignoring the valuation dispute materials. Do we have options?

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Andy Hargreaves’ answer
Andy Hargrea…, Agent, Plymouth, MI
Mon Jan 7, 2013
Likely no, each bank will conduct their own BPO.
If you're the buyer and can "buy out" the seller for an agreeable amount (the $165k) to cover the first and leave them enough funds to pay off the 2nd?
If you're the seller -- they likely won't let you pay off the 1st for $165k and thereby eliminating the rest.

If you/they're deliquent on payments, does the $165k cover the attorney and recording fees they're likely adding up?
0 votes
cfrlaw, Home Buyer, 48201
Mon Jan 7, 2013
Thanks for the information. Keep it coming! I think I was surprised that they could just ignore a valuation and that they could ask for more than the outstanding amount on the mortgage. There is no PMI, but there is a second mortgage company. The second mortgage company agreed to $6,000 to settle their debt of $465,000. Do you suppose that the second mortgage company is aware of the updated BPO at the higher amount? I like the idea of paying off the first mortgage, but that just leaves the second mortgage at $465,000 and we will have to start all over again with them.
0 votes
Andy Hargrea…, Agent, Plymouth, MI
Mon Jan 7, 2013
It's not always as simple as the amount owed on the loan to a lender.
In many cases, there are 2nd or 3rd lenders or PMI companies who also have their hands in the mix.

Welcome to the wonderful world of short sales.
The statement "subject to Third Party approval" will always prevail in this situation where it makes sense or not.

In this case, you're dealing with "The Golden Rule -- those with the gold make the rules."

Like others have said -- you're likely not going to get very far. The bank selling doesn't give a hoot about any damage to the home, what some arbitrary contractor estimates damage to be -- they have their bottom line and likely can't deviate from what their investor requires to net.

Always keep in mind that an appraisal IS NOT a true indication of value. It is an indication of value for the last six months (ideally) within one square mile (most often) and is highly subjective to those who prepare it.
0 votes
Shanna Rogers, Agent, Murrieta, CA
Mon Jan 7, 2013
If you can pay the amount owed to the bank, it would not be a short sale and the bank wouldn't have to approve anything.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes
Shanna Rogers, Agent, Murrieta, CA
Mon Jan 7, 2013
Hi cfrlaw,

The bank does not have to approve a short sale. Since they are refusing to lower the price - even with the information you submitted to them - you need to walk away. Or, if it ends up going to foreclosure, you could try to get it then. However, it could be years before it becomes available that way. Find another property.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes
cfrlaw, Home Buyer, 48201
Mon Jan 7, 2013
I forgot to mention that the outstanding mortgage is only $165,000. They still want the $450,000.
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