Short Sale Obstacles - Part Deux

Since my last post a follow-up questioner asks, shouldn't it be obvious to my lender (in a short sale situation) that the price they want me to sell my house at is just too high? Shouldn't it be obvious to them? Should I tell the buyers to move on and find another buyer willing to pay the higher price?

The listing agent should do everything s/he can to portray the home in the worse possible light to the lender's short sale negotiator and put their buyer's offer in the best possible light. This must be done with an accurate portrayal of his client's home's value, but with the goal of representing his seller-client's best interests.

Being in a distressed situation the seller wants and needs to do everything they can to keep their buyer on the hook and sell the home before it forecloses.

Often, lenders have to be hammered into seeing the obvious. A bad BPO by an agent not familiar with the nuances of a community will throw a wrench into the machinery. Most negotiators are just a stop-gap to the lender and are just trained slightly more than collection agency callers. Since they are off in another state they rely almost solely on the BPO for the home's value. They mostly follow a script and once they have a short sale package and sales price within their script's guidelines they can forward to their "investors" (the lender) for approval or modification. They are also working hundreds of files simultaneously, so they don't have the time (or will) to investigate their commissioned BPO. This responsibility must fall to the listing agent to hammer away at them and convince them of the home's true value.

I've had a couple of bad BPO's in the past where I had to do all of the procedures I mention in my earlier reply and then argue (in the most diplomatic way) why they (negotiator) should accept the offer on the table.

Of course, there are times where the home is already bargained priced and a buyer will come in seeking an unreasonable low sales price, but it is the buyer's option to do so and in this market I can't say that I blame them. If I do not have any other prospects about to make an offer on the house I will go ahead and recommend to my seller-client we submit the low offer for three reasons.

1. Some lenders will place a "working" status on the foreclosure process which doesn't stop it, but it can slow it down while they consider the short sale offer.

2. You just never know. A bad BPO is a double-edge sword. Sometimes it can come in too high, but that same agent unfamiliar with the area can also place too low of a value on the home and the buyer get's a steal.

3. If the BPO comes in at/or above market value, I now have a lender-approved number I can work with (or argue). The buyer can now step up and negotiate their offer higher or move on while I seek additional offers using the lender-approved price.

Either way, the low offer's submission was a worthwhile exercise and benefited my seller-client.

Short Sale Obstacles

A distressed homeowner attempting to sell his home short, recently asked, "Why (does) the bank not want to lower the sale price on (my) short sale? It is obvious that (my list price) is way higher than the comparables in the area. What needs to be done?"

If you find yourself in a similar predicament, your best course of action is to have your Realtor (if they have not yet done so) provide your lender the listing history of your home. Hopefully it shows a progressive lowering of your home's list price over a period of time to it's current short-sale list price. This will show your lender that no offers were obtained at higher list prices.

Your Realtor should then combine this report with an accurate view of your home's market value using comparable sales in your community then aggressively (yet diplomatically) argue a lower list price (or the acceptance of an existing reasonable offer) with your lender. He should contest the BPO (appraisal) your lender commissioned on your home. When provided with accurate comps, a lender will often go forward and order a new BPO (Broker's Price Opinion) and obtain a second opinion on the value of your home. We've successfully contested several BPOs in the past.

Short sales are a lot of work. We've done a bunch of them. Your Realtor needs to be a squeaky wheel to your lender's assigned negotiator by getting on the phone every other day and calling them and then notating and dating everything discussed. But, at the same time, being an apparent partner to your lender by continually reestablishing the fact that he is trying to provide them the service of off-loading this asset for them. It's a very fine line the Realtor has to walk and the proper walking of that line only comes from the experience of successfully closing many short sale transactions.

If s/he is unable to reason with the negotiator and make them see the light, then it might be time to go above the negotiator's head and get a hold of a supervisor or ask for another negotiator to be assigned to your file. But be advised that you could be burning bridges at this point.

If after talking with the higher-ups, if you're still stuck with the same negotiator and you can not get them to accept a lower, REASONABLE, offer. Then your lender's negotiator could be your obstacle. Negotiators have personalities too. In very extreme cases, and if you still have time prior to any foreclosure, it might be better to cut your time lost with the current negotiator and let them close your file. Then resubmit the offer and have a new negotiator assigned to your file.

BUT BE ADVISED, this is a risky, last-ditch, all-else failed, effort as your lender might not consider to reopen your file AND your buyer has to be okay with the longer delay AND the clock is still ticking on the foreclosure sale date. So make certain that the offer you have on the table is a reasonable offer and that you and your Realtor is doing everything you can to obtain a higher offer.

And as always, augment this information with that of your lawyer's and financial advisor's advice.