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BPO’s can kill a short sale
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One of the fastest way to “kill” a short sale you are trying to purchase, is for the lender to receive an inflated BPO.
Let’s start with the basics
What is a BPO? The initials stand for Broker’s Price Opinion; and most lenders will order at least one, maybe two or three BPO’s , which is how they come up with a value on a property.
Who does the BPO?
BPO calculations are not an exact science, they are based on an opinion. M
ost lenders will hire Realtors to put together a BPO on a property, and in turn pay a Realtor a fee for the BPO. The fees can range from $25.00 to $125.00; and in my opinion the lenders get what they pay for. As an example, a typical BPO order requires the Realtor to drive by the property, take pictures, upload the pictures, find 3 active properties and 3 sold properties; and put all of the information together in some of format that the lender requires. A BPO can take from 3 hours to 7 hours to complete. If the lender is paying $25.00 that equates to $8.00 an hour; not much pay for how much work they are asking to have completed. At 7 hours it equates to less than $4.00 an hour. Most Realtors will try to complete the BPO as quick as possible.
Many lenders don’t have many requirements for a realtor to be qualified to do a BPO; hence a brand new agent who doesn’t have any experience actually selling properties can qualify.
It’s important to know that BPO’s are not an exact science. As an example, if I was hired to do a BPO for a house selling in a Stratton Meadows, a subdivision in Southwest Colorado Springs, near Fort Carson, I could choose from 40 houses that have sold in 2011. If I narrow the list down farther to houses less than 1000 square feet there are 27 houses that sold. The sold prices have ranged from $45,000 to $105,000. Hence if I pick the higher-end houses for the BPO, my final value for the BPO will come out higher. If I choose the lower end houses for the BPO, my valuation will come out lower.
The lender will typically take the BPO price and come up with a decision from this document on what to accept on a short sale offer. In this particular Stratton Meadows subdivision, my BPO can be as low as $50,000 or as high as $90,000. The high BPO valuation could definitely kill a deal, as a qualified buyer may only want to pay $60,000 to $70,000; but the bank may say that they’ll only accept a minimum of $70,000 based on the recent BPO they received.
Seems to me the process is flawed. Maybe a lender should always get 2 to 3 BPO’s and average them out? Every realtor who has ever been involved in short sales has a story about a transaction that didn’t go through because the BPO was too high, hence the transaction never went through.
Seems like there should be a better way.
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To find out more information about buying a home or Short Sale Home in Colorado Springs area, call ….
Kathy (719-287-1049) KTorline@msn.com
The 2nd can blow the deal
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Short sales can be difficult to negotiate, but they aren’t impossible. When I’m representing a buyer in a short sale; I always do my homework on the property. I typically have the Title Company pull an O & E (Owners and Encumbrances report) so I can see what type of liens are on the property and how many liens are on it. I know from past experience the odds are much better for approval if the home only has a first loan; vs. a first and a second loan.
It’s important to know that each lien holder needs to agree to the short sale. Even if the first and the second are with the same lender; they all need to agree to a “short sale payoff”.
Some Realtors have the misconception that if both the first and second are with the same lender, you’ll only have to work with one negotiator to get approval. In my experience, this isn’t true with most lenders; although I’ve heard that some banks are starting to change this. Most of the time, the seller and the Realtor have to submit a short sale package to each lien holder. Both lenders have to agree to accept the short sale. There are many times the first mortgage holder agrees to the short sale; but the second doesn’t agree. Or if they do agree, the second wants more money.
The second lien lender may be holding a note that’s worthless in a foreclosure. If the first lien holder forecloses, the second lien holder typically gets nothings. But second lien holder who has the second mortgage is in a pivotal position; they have the legal power to block the short sale by refusing to agree to the deal.
It’s very difficult to find exact statistics on this; but my guess is that 75 % of short sales with only a first mortgage reach final approval and close; but the percentage drops to closer to 25% when a property has a first and a second mortgage involved.
There are currently 383 homes that are listed as short sales in the Pikes Peak MLS. I wonder how many will actually get the short sale negotiated and sold to a buyer before being foreclosed on.
If you want to buy a Colorado Springs Short Sale; make sure you know the facts before you submit your offer. If you’ve just found your dream home that is listed as a short sale; you need to be realistic about the odds of getting it accepted; especially if it has a first and a second mortgage on it.
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To find out more information about buying a home or Short Sale Home in Colorado Springs area, call ….
Kathy (719-287-1049) KTorline@msn.com
5 tips to buying a short sale
Do you want to buy a Short sale in Colorado Springs?
For a free Buyers Guide, Email Kathy Torline at KTorline@msn.com
Related Article:
If you are wondering what it takes to successfully buy a Colorado Springs home listed as a short sale, here are some tips.
1. Be patient – This is by far the most important thing to remember when buying a short sale. If you need to move by a certain
date, purchasing a short sale isn’t for you. Again, remember patience.
Don’t put in an offer, and then a week later give up on it. It’s a waste of every-one’s time. Be prepared to wait a couple of months for an answer.
2. Decide what price to offer – Have your Colorado Springs Realtor obtain information on other properties that have sold in the area. Also, ask your Realtor to obtain the listing history of the subject property as well as prices on other comparable properties that are listed for sale. After looking at all the fact, decide what price the bank may accept. According to the National Association of Realtors, 80% of the offers made on short sale properties are not accepted. It’s important to understand that lenders will not accept 50% of what the property is worth.
3. Homework - Do your “Due Diligence” on the home before making an offer. Most Short sale properties are sold “as-is”; consequently you may want to have an inspection on the property before you put in an offer on it. If there are “major” things that need repaired, you may want to get an estimate on them and take pictures of these items. It may help the lender be more willing to accept your offer to have the repair information and estimated costs to fix the items.
4.Pre-qualification letter – Give your Realtor a pre-qualification letter from your lender if you are finance the purchase. This letter will be submitted with the contract to the lender. (See: Pre-Qualification or Pre-Approval, which do you need to buy a home?)
5. Experience – Make sure your Colorado Springs Realtor has experience with short sales. (I’ve seen more deals not go through because one of the Realtors didn’t understand the short sale process and didn’t explain to the buyer what to expect.) Don’t be afraid to ask your Realtor have they successfully closed any short sales.
If you enjoyed reading this article, why not Kathy (719-287-1049) KTorline@msn.com
8 reasons NOT to buy a short sale
8 Reasons NOT to Buy a Colorado Springs Short Sale
For a free List of up-to-date Colorado Springs Short Sales, email Kathy at KTorline@msn.com
Short sales in Colorado Springs happen when home sellers do not receive enough money from a buyer to pay off their existing mortgages, and the lenders agree to take less than the amount owed to them. On the surface, it appears that a short sale buyer is getting a good deal. Although a some short sales may be a great deal for a buyer, many of the times, a buyer would be better off buying a home that is not in default or a bank-owned property.
1. Sellers Paid Too Much
If a home originally sold for $300,000 a few years ago and is now for sale at $200,000, this doesn’t necessarily mean a buyer is getting $100,000 of equity for f
ree. It may mean the seller paid too much in a rising market and now the market has fallen. It does mean the seller has no equity. It’s important for buyers and their Colorado Springs Realtors to do their homework and make sure they know how much the property is worth in today’s market.
2. Sellers Borrowed Too Much
Some banks were eager to lend money and allowed borrowers to over-mortgage the home, meaning the borrower’s loan balance exceeded the value of the property. Appraisals have always been subjective, and not all appraisers will place the same value on a home. Although against the law, some appraisers used to be pressured by banks to appraise at the amount the home owner wanted to borrow.
3. Not qualified
Some Colorado Springs Realtors don’t understand short sales, and they might convince a seller into considering a short sale when the seller does not qualify for a short sale. Sellers must prove a hardship and submit evidence of the hardship to the lender for approval. Occasionally some agents list homes as short sales without ever talking to the lenders or pre-qualifying the sellers.
Sunday Foreclosure Bargains
Foreclosure Listings in Colorado Springs as of November 1, 2009
During the last two weeks of October, 64 bank-owned properties came on the market; 15 (24% ) of them are already under contract, or pending.
Homes in Fountain and in the Southeast area of town continue to see the most foreclosures
For a FREE list of up-to-date Foreclosure Homes, Email KTorline@msn
5 things to know about buying a short sale home
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Related post: Buying a short sale vs. a foreclosure, what’s the difference?
For a FREE List of Foreclosures and Short Sales email Kathy Torline at KTorline@msn.com
Do you have questions about buying a Colorado Springs home that is noted as a “short sale”? Here are some of the most frequently asked questions I often hear from buyers, along with a brief answer.
1. Is the Short Sale negotiation process the same for a short sale as for a regular sale?
Yes, except that there is one EXTRA layer: After the buyer and seller agree on a price and terms, the seller’s 
lender (or lenders) and other lien holders must also agree on the offer. This can add anywhere from a month to 5 or 6 months to the process.
2. Are loans types the same for a short sale as for a standard home purchase?
The type of loans a buyer can use are the same as for a standard real estate transaction. But if the property is not in good condition, a buyer may not be able to use a VA loan or a FHA loan; as the property may come back with conditions from the appraisal process; and most sellers in a short sale situation don’t have the funds to make the requested repairs. Most short sales are sold “as-is”.
3. What are some of the disadvantages of buying a short sale property?
It can often takes the seller’s lender(s) and lien holders a long time to respond to a offers, and a buyer can become frustrated and give up. Also, some Realtors accept offers from several buyers, and submit all of these offers to the lender(s). Read the rest of this entry »
Buying a short sale vs. a foreclosure, what’s the difference?
Every buyer wants a “deal” right now and I don’t blame them!
Here is El Paso County we have an 8 month supply of houses (compared to a 5-6 month “normal” supply) and at 
least 1 out of 10 of them are “distressed sales” (foreclosure, pre-foreclosure, etc.). Although these figures vary vastly on a neighborhood by neighborhood basis. As an example, the Southeast part of town has been hit particularly hard by foreclosures and short sales, while the Northwest part of town is fairly stable. Even though these numbers may sound bad, lots of areas have 8 out of 10 properties that are distressed; especially in cities like Phoenix and Las Vegas.
Buying a pre-foreclosure or a foreclosure can be very different experience, both from a “normal” sale and from each other. Here’s a quick synopsis of the differences:
Pre-Foreclosure (often a short sale)
A short sale occurs when a house is worth less than the mortgage, and the seller’s lender accepts less than what is owed on the mortgage.
As an example, a seller may have a mortgage of $250,000 on their home in Colorado Springs. The seller is taking a job in a new city and the house is now only worth $220,000. A buyer makes an offer on the house in the amount of $220,000 and the net proceeds to the bank is $205,000 by the time the owner pays the real estate commission and the seller’s closing costs. The buyer and seller sign the contract but the offer is subject to approval by the lender, as the bank than must agree to accept $205,000 vs. $250,000 to pay off the loan. Hence the term short sale.
Some statistics say that a lender typically loses about 19% of a mortgage’s Read the rest of this entry »
