The Importance of Appraisals in Short Sales

Conducting a short sale should not be executed by an inexperienced Real Estate agent. There are skills and tactics that experienced brokers have accrued over hundreds of successful deals that are indispensable traits you must consider when choosing your agent. One of the most important parts of a short sale are BPO’s (Brokers Price Opinion) or Appraisals. This can make or break the sale as the success of the short sale is largely contingent upon the appraisal.

How does it all work?
After submission of the short sale packet, lender’s hire agents for minimal compensation ($40-$60) to appraise the property’s value. The agent drives to the home, takes pictures, drives back to the office and comes up with an estimate of the home’s worth based on current conditions and market value. This task typically takes 2-4 hours to accomplish. Once the assessment is completed, it is given to the lender whom evaluates how much they should receive for the home.

What is the importance of this?
It is known in the short sale community that these BPO agents are giving overpriced appraisals for the home that is attempting to be sold. Why is this a problem? Because it decreases the chances of your short sale file reaching a consensus thus producing another rejected short sale.

For example, let’s assume a home’s true value is worth $400,000 but the BPO, who has hundreds of more files to go through, inaccurately assesses the value of this home at $440,000 due to improper research. The buyer of the property is willing to purchase the home at $400,000 but after submitting the offer, it is denied because the lenders believe they deserve $40,000 more for the property. Simply stated, the core of the problem is rooted in the appraisal of the property.

Most of it has to do with lender’s trying to extract whatever money they can get from the home along with BPO agents who just don’t have the motivation to properly assess each and every property’s value.

What is the solution
Again, let me emphasize the importance of finding a skilled short sale agent. Using the $400k home example above, our team of agents who are experts in handling BPO’s and appraisals, proactively goes to the BPO agent on site and directly influences the BPO with accurate information on the home and its conditions compared to the market so the value comes in at $400k or less. If the value still comes in at $440,000, our experts would immediately send a value dispute package with several comparable homes in the area as well several other evidences that prove the value of the home should be lowered. Our professionalism in this area has brought us hundreds of successful short sales in Washington so be sure you only choose experts who have tons of experience and the skills/tactics to handle your short sale transaction.

Hope this helps

Peter