Tips and Tools for an Effective Value Dispute

Jul 25, 2012

If you have processed a few short sales, then you may have run into a problem with property value. That problem is often due to the value that has been received or calculated by the lender. You see… During the course of the short sale, the short sale lender sends out another Broker or agent to complete a Broker Price Opinion (BPO) for the short sale listing. The bank then, in most cases, bases its price on the value stipulated in the BPO. However, oftentimes, there is a slight (sometimes large) discrepancy between the value stipulated in the BPO (what the bank wants) and the offer amount (what the buyer wants to pay). In many cases, what comes next is a valuation dispute. And, at some lending institutions, this is much easier to complete than at others. Here are some tips for successfully disputing the bank’s property value:

Tell your short sale specialist at the lending institution you are working with that you would like a reconsideration of the value.
Ask your short sale specialist if he or she has a document that specifies all requirements for a successful value dispute.
Fill out the form and attach any requested evidence. (Do not leave any blank lines.)
Stay in touch with your short sale specialist for results.
Usually, a value dispute takes about 10-12 business days to review once all required information has been received.

What to do if there is no specific form required by the lender:

Use a standard BPO form (or make a copy of one used by REO agents in your brokerage).
Complete a Comparative Market Analysis, and focus your value on recently sold properties (within the last three months) in order to support your value.
Send in the buyer’s appraisal—the one s/he is using to obtain the loan.

Here is the evidence you will likely need in order to support your valuation dispute:

Provide comparables that are recent, proximate (nearby), and similar to the property in question.

“Recent” means sold within 90 days of the actual value document date.
“Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate.
You should also provide additional notes to highlight the characteristics of the comps.

When the dispute centers on property condition or hazards:

Provide two itemized estimates from a licensed contractor on the contractor’s letterhead.
Provide photos to illustrate the repair, condition issue, or hazard you want to highlight.
If the property will not qualify for financing due to condition or other circumstances, explain how that will impact the valuation.

If your valuation dispute relates to the condition and significant repairs are required (which in turn, lower the subject property’s value), it’s best to have multiple bids in order to support your position. Just don’t expect the bank to pay for reseeding the lawn and adding a rose garden to the side of the house.