Thursday, October 30, 2008

SHORT SALE BPOs - Teaching to the Test

One of the biggest hang-ups in selling Short Sales is dealing with BPO values. Frankly, I find BPO prices tend to swing just under list price. This is why I call it "teaching to the test". Except in this case, the BPO agent uses the list price as a guide, and usually discounts it a bit. (Not all BPO agents do this-- I know many are quite experienced.) But human nature would tend to make a rule-bound valuation method error-prone, because it does not allow for "big picture" analysis. For example, I have a Short Sale listing in Mary Esther Florida. The lender, Citi Mortgage, ordered a BPO in early September. At that time, the list price was $230,000. The BPO came in about $222,000. Well, guess what? It is now late October. The house has not sold. It backs up to a highway. The price has dropped to $199,000. An offer came in around $185,000. Yes, that is low, but the seller wanted to run it past Citi to see if they would accept it. Citi said "NO". The BPO value was $222,000 and that's what they will base any approval on. Of course, I explained the problem with the house backing up to the highway, the market decline, and the fact that every buyer who looks at the property has the same objection. Citi is steadfast. Thus, the list price has to be raised, or enough time has to pass so that Citi orders a new BPO. Regrettable.

We can see how human nature would dictate that an agent doing a BPO would use the current list price as a guide. But in a declining market, the "current" value is truly only the "very current" value. If the BPO value is good for six months or three months, it must be discounted accordingly. BPO guidelines are often too rigid to account for the rapidly declining market. Premier Asset Services (PAS), for example, asks for a recommended list price, and a "Quick Sale value that would result in contract within 30 days". Thinking that through, the "Quick Sale" price might likely be the ONLY recommended list price in a down market. Otherwise, pricing the property for perhaps a 120 -180 day sale (usually applicable only in a "normal" market) would require even greater discounting and projecting an even steeper rate of market decline. Further, PAS requires that sold comps be within 10% of likely sale price after making adjustments. I can see how BPO agents may not come in with true market value with these convoluted and sometimes seemingly arbitrary restrictions.

It's Wendy!
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.

Search Destin Florida real estate and vicinity.
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Wendy specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy sells houses, condos, townhomes and lots. Wendy Rulnick has been selling real estate for almost 20 years. She has won numerous awards, including the coveted ADDY award for advertising design. An expert marketer of real estate listings, she negotiates successfully to her clients' advantage. She is supported by a team of top buyer agents.

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All Rights Reserved. *SHORT SALE BPOs "Teaching to the Test"* Contact Wendy Rulnick regarding Destin Florida real estate and vicinity. Copyright © 2008 by Wendy Rulnick.
This site, Wendy Rulnick or Rulnick Realty, Inc. is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information.

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