How Banks Decide on the Price for Short Sales


I've gone around and around with banks on price more than any other aspect in a short sale. For example, I listed a short sale home for, say, $199,000 and received an offer for that price. The bank decided it wanted $235,000. The buyers agreed to increase the price to $235,000. Then, the buyer's lender appraised it at $199,000. The bank then agreed to sell at $199,000.

Most banks rely on an appraisal done by an appraiser or a brokers price opinion. They hire an agent who is in the business of doing quick mini-appraisals at a cheap price to do the brokers price opinion. That agent looks for homes within a radius from the subject property. The homes are similar square footage, age and condition.

This system works well as long as there are comparable sales within the last 3 months and as long as the neighborhood is the same. But often a BPO agent may need to adjust for value by deducting from or adding to the sales price for non-comparable homes. Not every agent knows how to do this. Or, the agent might cross neighborhood boundary lines and not realize a different neighborhood commands a different price.

BPOs, like an appraisal, are a combination of art and science, not a science. Before you make an offer on a short sale, you should ask your agent to run the comparable sales, just like a BPO agent would do it. Then, you'll have a pretty good idea of whether the bank will accept your offer. If the seller believes the bank will accept your offer, the seller will accept your offer.

TIP: You also need to know what type of loan the seller defaulted on, for example, if the seller had an FHA loan they defaulted on, then HUD will only allow the buyer's a 1% sellers concession for an FHA loan to purchase the property and they will not allow any sellers concessions for any other type of loans.  You really need to have an agent that understands short sales whether you are buying or selling a short sale...That's the secret.

Cynthia Brower

Cynthia Brower

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