When you do a short sale, the lender most likely will order a BPO.
BPO stands for Brokers Price Opinion and is a process by which a realtor
appointed by the lender, comes out to evaluate the property and give his “opinion”
on what the value of the property is. So the lender sends a realtor out to the
property and it’s your job to influence the BPO to come down as low as you can.
This is the whole key to a successful short sale. This is why you want the lender to
contact you, so you can meet the realtor at the front door and influence their
BPO to come in as low as possible. To build your case, the first thing you
should do is show up with a list of repairs and estimates for the property. If you
have to go get a contractor to bid a job or repair, go get one. The higher the quote,
the better. This is good evidence. The second thing you should do is show up with
a list of comps in the area that are low. Most real estate agents appreciate you
doing some of their work for them. Provide them with the lowest comps you can
find and they will decide if they want to use them or not.
When you meet the realtor on the property steps, just tell him you are the buyer and
doing a short sale on the house. Then you will proceed to walk the realtor
through the property. When you are walking through the property make sure you
point any and every repair or problem with the property. Again, you are trying to
make the value of the home come in as low as possible. If you are dealing with a
nice house with minor cosmetics, you may really have to search for problems.
Then call him the next morning to see if he was able to get the price you wanted. Sometimes they will tell you sometimes they won’t. Just ask to find out. If they won’t tell you, call the bank. Many times they will tell you. You really have no control over this process. You can encourage the BPO to come in low, but this does not always mean they will come in low.
If there is someone living in the property, you may want to ask them to leave when
the realtor comes out to do a BPO. If they can’t, just tell them to stay out
of the way. Explain to them you will be trying to make the house value look as low
as possible. They may not understand why, just tell them it is the only way to save
their house. Also, tell them not to worry about cleaning up at all, leave it the way it
is. This is the one time your house can be a mess. You need to make the value of
the property look as low as possible.
If the loan on the property is FHA or VA, they will not take less than 82% of the BPO.
Usually you can expect the BPO to be in the range of 80-90% of the
repaired value. So if you have a house that is worth $120,000 after repairs, the BPO
you would guess to be about $98,000 to $108,000. Then multiply that amount by
82% and this should give you a good estimate of what to offer. If it is not a VA/FHA
loan, then you can offer whatever you want. It is a good idea to start low, just in
case your BPO comes back lower than you thought, you can always raise the offer. It
is an educated guess to find out what the BPO will be. If it comes back
high not in your favor, sometimes you can call the loss mitigation department and
tell them the BPO is way to high. Many times they will work with you and
order another BPO. Whatever you do, don’t ever give up. If they don’t accept it,
negotiate with them some more. Ask them what they are looking for, or what they
are trying to get. Sometimes they will tell you, sometimes they won’t. Be
persistence. Be patient. Ask, ask, ask. Part of being successful in this business is
how you negotiate. You don’t ever want to be rude to them, but let them know
where you stand. Make them aware of what’s happening to the property.