How to Get the Short Sale Lender to Drink Your Kool-Aid

May 19, 2014

One out of every two short sales faces issues related to property value. That is, the bank tells you that they want more than what the buyer is willing to pay. This can be a problem as often the short sale lenders to not have all of the pertinent information about the property and, as such, the sale price that they have requested is not in line with the local property values and the value of the subject property.

After a short sale package has been submitted to the bank, the short sale lender sends out another Broker or agent to complete a Broker Price Opinion (BPO). 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, this is where the problems begin. If there are no buyers willing to pay what the bank wants, how do you get the short sale approved?

The answer is simple: a valuation dispute. (Of course, the dispute itself is not nearly as simple as the answer.)

Here are some tips for successfully disputing the bank’s property value:

Tell your short sale specialist 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. Treat this part very seriously, take time, and show proof
Stay in touch with your short sale specialist for results.
Usually, a value dispute takes about 10-12 business days because the lender reviews your information.

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.
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 licensed contractors 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 lowers 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. It just doesn’t work that way. Be reasonable, professional, and comprehensive when preparing a valuation dispute.