The short sale condo I'm interested in buying sold for $485k back in 2006 now the BPO came in at $407K and

Asked by Anthony, California Thu Jul 24, 2008

the listing agent said that is the bank approved price. The property is located in Cypress CA. We really like the property.

Should I make an offer of $407K? Now I've seen some other properties whose values went down a lot from their 2005-2006 values how come this one didn't?

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7
Team Kociela, Agent, Tustin, CA
Thu Jul 24, 2008
BEST ANSWER
Wow, Anthony--there's no quick answer. Great homes in great areas in great condition will lose less value than distressed properties. At nearly $80,000 less than the last sale (and selling for less than what is currently owed on it), you already know that it is a "good" deal. Add to that the fact that you really like it , and, I'm assuming, want to live there for the next 3-5 years, so the only real question is are you over paying?

Here's a few things to keep in mind.
1) Your agent will be able to provide you with the recent comps in the development, as well as the current market situation. In many cases, we're seeing short sale and bank-owned properties in this price range selling in a matter of days with multiple offers. Remember, these are not normal sellers. These types of properties are already at the bottom of the market. That said, the bank may have approved a price that was submitted months ago--and is no longer accurate. Only your agent can tell you for sure.
2) Many buyers will hold to their guns about paying $5000 less than the asking price--but will then lose thousands more when interest rates go up a quarter of a percent. That's penny wise and pound foolish. In many instances, it's better to pay more and get a lower interest rate. With rates on the rise, in many cases you do better locking in a higher sale price and lower interest rate right now.
3) Although you can write an offer for lower than the bank-approved amount, the bank does not have to accept it, and may takes weeks or months to respond to your offer--if they do at all.
Short sales are a complicated animal--be sure to work with an agent who has experience in bank negotiations--even then they can be a bear.
Good Luck!
Web Reference:  http://www.RoomToRoam.net
2 votes
Kyle Souza, Agent, Carlsbad, CA
Thu Jul 24, 2008
I have to agree with Erin. Make your realtor do some work and get you some comps. You may also want to consult an appraiser as to what the value is. Don't trust Zillow for values, it is a starting point but can be very inaccurate.
Real estate is very local. Here in San Diego County some places have lost merely 10% and others have lost as 50% or more. Desirability of the area will definitely affect value.
One last comment, BPOs are typically completed by real estate agents that are looking for some extra income and to gain REO listings. If they do a good job on the BPO the bank may ask them to sell their REO listings. Some BPO agents will actually overvalue a property in anticipation of the short sale not going through so that they can gain the REO listing when it goes to foreclosure. I have actually had a few short sales slowed down due to overvalued BPOs. When we provided the comps to the lender and they enlisted their appraisal review committees they realized that the offers that we had on the property were good and they approved the sale.

Good Luck and do your homework.
1 vote
Vicki Lloyd, , Lake Forest, CA
Thu Jul 24, 2008
If it is true that the bank approved the $407K price, then you know that's the maximum you have to pay, unless it goes into multiple offers.

How many homes have you seen? Is this the best one at that price? You should have your agent run the comps for you and come up with an independent value, then make your decision about what to offer!
Web Reference:  http://LiveLakeForest.com
1 vote
Charles K. P…, , 90630
Sun Oct 11, 2009
I don't know why I got this Q&A in my email from Trulia dated more than a year ago! Definitely, the prices should have come down since 2008. But in my area of Cypress, the prices have now stabilized and beginning to inch up.

Charles K. Park, Broker.
Web Reference:  http://www.charleskpark.com
0 votes
Sandra Carli…, Agent, Newport Beach, CA
Sat Aug 2, 2008
I agree with Erin but wanted to add this:

When making your offer, consider the current inventory levels and rate of sale for the area. Does it look like prices will hold or is inventory still on it's way up.

Also make sure that you include a short sale addendum w/your offer. You don't want your deposit going anywhere until you have WRITTEN approval that YOUR offer is accepted for the agreed upon price.

BPO's are derived from recent sold comps. Banks don't want to give away more than they need to.

*** You should not be putting anything into escrow without written approval from the bank.
Web Reference:  http://www.OCBeachBlog.com
0 votes
Jeremy Lehman, Agent, Garden Grove, CA
Fri Jul 25, 2008
I would make sure you have thorough research by you or your agent to make sure it is a good value. There are too many factors to consider to answer here on Trulia, but in general, you might expect a lender to accept up to 30% less than the amount owed on the property. I work with some agents and assett managers where properties have sold for 60% less than they did in 2006. You also need to consider what the windshield view of the market may bring. How many NOD's in the area? What is the current foreclosure ratio?

If you are not currently working with an agent, feel free to contact me for more information.

Jeremy Lehman
Century 21 Beachside Realtors
http://www.LehmanHomes.net
Jeremy@LehmanHomes.net
(714)580-3274
Web Reference:  http://www.LehmanHomes.net
0 votes
Joe Homs, Agent, Laguna Hills, CA
Thu Jul 24, 2008
Anthony,

This is a perfect example of why I personally recommend that my clients stay away from the "Short Sale" market for now. I recommend that they wait until the property is actually foreclosed and the price significantly drops.
I hope you are working with another agent and not the same agent representing the seller, as the seller’s agent is representing the best interest of his seller and the bank.
Remember the bank wants to get the most money for its loan. This is just a starting point and an opinion on price by another real estate agent. Negotiate, Negotiate, Negotiate...
If you need any further assistance or representation let me know.

Joe Homs
Realty Partners
949-625-4533
joe@joehoms.com
Web Reference:  http://www.joehoms.com
0 votes
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