It is good to understand the general perspective of the agent conducting a BPO. Did you know the BPO Agent usually only makes $40-50 for each BPO the lender orders? Consider that for a moment. The BPO Agent has to drive out to property, spend 30 minutes or more inspecting it, take 10-20 pictures, drive back to their office (which many work from home), spend ANOTHER two-three hours putting together all the data they collected and uploading the pictures and information to company the lender used to order the BPO. All of that work for $40-50 buckos. The reality is the BPO Agents do not make any money if they have to spend A LOT OF TIME with one BPO. They have to burn thru as many BPO’s as possible to at least make a few hundred bucks every two weeks. This doesn’t mean they do not do a good job conducting one. In my opinion they are simply not motivated enough to spend the required time to produce an accurate value on the property every time. Hence, here is where investors can make more profit.

Many banks typically are not looking at just one property when they consider a short sale transaction. They are considering the entire portfolio and YOUR property may be .25% of a 50-100 million dollar portfolio. Banks for the most part do not make time or spend enough money to really care if they lose MORE on ONE house than what it is worth. They spend as little as possible to have some type of paper trail to present to their superiors and Senior Lender/Credit Officers, so they can sign off for compliance with standard operating procedures for the short sale approval. The incredible part of their story is this. Even though banks spend as little as possible to obtain a value on a property and short sale it when a Loss Mitigator writes a letter of recommendation. They still SAVE MORE MONEY by accepting short sales and not let their properties go into foreclosure and complete the auction process. Can you believe that? With all the mistakes and lack of due diligence on THEIR part…they STILL SAVE MONEY! That is astounding to me, but hey… it still makes great opportunities to profit in short sales. …so carry on with the bad habits banks….carry on.

Here are the basic factors that are considered in a BPO for the lender.

• What is the condition of the property?
• What have similar properties in the area sold for on the MLS?
• What does the home need to be sold in 90 days or less?

Serve One Another Better,

Caffeinated Content

Determining the short sale appraisal of property you have under contract is one of the most important aspects of the short sale business. Without knowing the short sale appraisal value of the property you are interested in, it’s impossible to formulate your offer to the short sale lender without knowing the home appraisal value of the property you are interested in. Knowing the appraisal value of the property is just as important to the loss mitigator at the bank.

So he has a baseline price for negotiation, the loss mitigator must establish an appraised value for the short sale property. The appraised value of the property determines how and for what price we negotiate the short sale price of the property.

An Example of Finding the Home’s Value

You may outsource the short sale appraisal needs of your short sale business to another company or a certified FHA appraiser.

The real estate investor will email the FHA appraiser, the address and owner’s name when a deal comes in and about 24 to 48 hours later the appraiser will send back a limited desktop appraisal with three comparison prices. These comparison prices are on other similar properties that have sold in the area and the market value that the appraiser has determined for the property. These appraisals may also include some additional information and a map.

You’ll get an idea of the market value of the property in comparison with other distressed properties in the area using this method. Don’t look for sales of well maintained properties when looking for compositions. Instead look for comparisons of other properties in foreclosure, REO properties, or corporate-owned properties.

Comparing Property Prices

Looking at the properties in the same area of the short sale property is the best way to determine the short sale appraisal value of a property. In the short sale business this is called using property comparisons (comps).

It’s easy to get the comps for your area with the following four services;

• Free comps services on the Internet
• Subscription programs (one is Haines, a subscription service on disc)
• Network with a realtor who can pull comps for you
• Multiple Listing Service (MLS) if you have access

We don’t recommend that you use the free market comparison services found on the Internet, since they are worth as much as you pay for them. Spending some money to get comps for your short sale business is a good thing. Paying for the comps means that someone is actually doing research behind the website or program.

Price Comparisons do Cost!

Short sale businesses pay for their comps because they want accurate, realistic market value comparisons. Remember to allocate funds to pay a company or a certified FHA appraiser for that home appraisal when you are figuring the budget for your short sale business.

It’s worth the cost to pay for a home appraisal so you can have accurate comps from third person parties or neutral parties. You’ll feel confident in presenting their appraisals as objective evidence to the bank in your short sale package.

Adding the Repair Costs

Just as important as comps in the short sale business is the physical condition of the property. You’ll want to make notes of what’s wrong, take photos, and get construction estimates for the cost of repairs, if there are any repairs to be made on the short sale property.

When you do your cost estimates remember that the short sale deal may include getting the bank to make the repairs, not you. Be sure to get cost estimates from a general contractor the bank would typically hire.

Hiring a certified home inspector is the best way to get cost estimates for your home appraisal. It’s easy to use the yellow pages to look one up.

You can also use an organization called the National Association of Home Inspectors (NAHI) to find a home inspector. This organization has high standards and is a good way of making sure you get a thorough inspection.

It takes about two and a half to three hours to complete the typical home inspection. This is because the inspector gets up on the roof, checks the crawlspace and goes over the home with a fine-toothed comb. On completion of the home inspection the inspector hands over a report that can be 20 pages with detailed information about the property defects. Home inspectors may also takes photos and provide detailed cost estimates.

A great way to calculate the short sale appraisal value for your property is by paying for a home inspector to get cost estimates.

An Example of Getting Cost Estimates

A member of NAHI is Dan Shields, a typical home inspector. He does all of the short sale appraisal evaluations and repair estimates for many investors.

He likes to start an inspection from the outside of the property to get a look at the house over all. He checks the;

• roofing,
• gutters,
• siding,
• windows,
• porches, and
• columns,

all to make sure they’re properly installed and flashed.

He then enters the home to document built-in amenities, appliances, and flooring. He next goes to the mechanical room and checks the heating/cooling package and plumbing. Lastly, he checks the attic and looks at the insulation factor of the property.

How the Broker’s Price Opinion figures in?

The loss mitigator will want to determine their own estimate of property value when you complete your short sale appraisal and submit the short sale package. In the short sale business, you’ll often find that two sides must each do their own evaluations before meeting in the middle.

The loss mitigator gets their property value by way of a broker’s price opinion (BPO) or market value. Sometimes this appraisal is done by a realtor or an appraiser.

It’s important that you do your best to influence the final BPO that the appraiser turns in on the property. Do this first by being the contact person that the appraiser goes through to get into that property. It’s very important that you meet the appraiser at the property. So you can convince him or her that your home appraisal value is close to the same as the BPO value.

Let the appraiser know that the property is in foreclosure and that you’ve been working with the seller to try to do a short sale when he or she drops by for the walk through.

This meeting is first impression time so be yourself but also stay calm and non-threatening. Let the appraiser do his or her job and talk shop for a few minutes before you start shoving your material on him.

The whole BPO process is much quicker than a traditional home inspection and it will probably take less than 15 minutes. So the appraiser is likely to miss a lot unless you point it out to him or her.

What Happens During the BPO?

To help yourself and your short sale business is sure to take three things to the BPO;

• a copy of the Real Estate Purchase Contract with your offer amount,
• your market value comparisons and
• a copy of your home inspector’s report.

Offer the material to the appraiser in a conversational tone. A professional appraiser will usually always want a copy of your inspector’s report. An appraiser will always take the property inspection report because it’s a good, neutral indication of property damage. If it’s a realtor doing the appraisal you can never tell what they’re going to take. Just ask and see what he or she will take from you.

Let the appraiser know that your Purchase Contract has been at least preliminarily accepted by the bank and that’s why he is appraising the market value. You’d be surprised how often the bank’s appraiser doesn’t even realize the property is in foreclosure.

Also try to share comps with the home appraiser. Usually appraisers have pulled comps before they go out to the property, so you may be able to share comps to get an idea of what their BPO will end up being. This knowledge definitely helps you in the negotiation process.

Chances are high that the bank’s BPO will come in close to your short sale appraisal value once you get these three documents into the hands of the bank’s home appraiser. When you get a good short sale appraisal value and cost estimates on that short sale property your short sale business will get off to a great start.

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The home mortgage crisis is affecting people all over the world. Every day, families are losing their homes due to defaults or foreclosures. Many times, families do not know what other choice they have other than foreclosure. It seems like the only option is to let the bank take back the house, as the payment is just too much to handle, especially in these times when the economic conditions are stormy and dangerous. Short sale services are only a step away, continue forward with this article:

Although, foreclosure may seem like the best choice, however, there could be a better option if you are getting suffocated under the loan(s) due to the ownership of your house.

If you do wish to foreclose on your home, then a short sale might be the right option for you. Basically, a short sale is when the outstanding obligations of loans against a property are larger than what the property can be sold for. If you choose to do a short sale, this is the way to save yourself from having to foreclose and be able to pay off the loan by settling with your lender(s). This article will show you how you should go about doing a short sale.

Get the value of your house assessed: If you decide to go through a real estate agent, then your agent will provide you with an estimate of what your property is worth. However, if you opt to sell on your own, you will have to do research on the market value of the area where you live and of your property.

Consider the costs involved: If you have an agent, they will provide you with an estimate of how much it will cost you to close. If you are selling your property yourself, you will need to call a local title company or a real estate attorney and ask what it will cost you as a seller to close.

Confirm the dues that you owe: This is the amount that is due against the property, which is the total of all loans against your home.

Do the math’s: Subtract the total amount of what you owe against your property from the estimated proceeds of the sale. Do not be alarmed if you get a negative number.

Get in touch with your lenders: Speak to a representative in customer service and explain your situation. They may transfer you to a particular department. If it is possible then ask to speak to a manager; they will have more authority and will be able to help you better.

Inquire about the formalities required to be done for a short sale. Some lenders will be more than happy to work with you by reducing the amount that you owe. Then there are others who will look into the agent that is involved(if one) and any other parties that stand to gain anything from the sale of the house and decide if they are willing to make any concessions to make the deal happen. However, there will be lenders that will tell you that your debt is your responsibility.

Short Sales

Short sale real estate is becoming a new trend for real estate investors everywhere. What is it? A short sale is when a bank agrees to accept less than what is owed on a property in order to liquidate their inventory and clear their books from non-performing assets. Here is what they consider for a short sale approval.

The following steps are to be used as a guideline to consider before submitting your property to a lender for a short sale. It is recommended that you consult a legal adviser before involving yourself in any real estate transactions.

All the steps you need to know:

1. Determine Fair Market Value (FMV)

2. Evaluate Sold Comps Systematically

3. Reveal the ARV (After Repair Value)

4. Figuring out the Lenders BPO

5. What is The House Type?

6. Learning the Loan Types

7. Memorizing the Percentages

8. How to Deal with Junior Lien Holders

9. In Closing

The FMV can be determined by evaluating sold, comparable properties in a similar or close proximity to the subject property. Realtors have access to what is called the MLS (Multiple Listing Service). This service provides an inventory of properties available, sold or pending a sale. This analysis will identify sold comparable properties with same square footage, bedrooms, baths, garage and other similar characteristics. Request the Realtors use a sold time frame within 6-12 months when pulling properties in the immediate or surrounding areas. Usually the short sale lender will not consider any sold comparables that are older than 12 months and that are further away than 2 miles from the location of the subject property.

2. Evaluate Sold Comparables Systematically

Contrary to popular and often misguided belief; you can use a formulaic system to work in your favor when determining what to offer on the short sale property. The way this works is like this

Let’s say you have eight sold comparables. You would take out the two highest comps and the two lowest ones and average the rest.

EXAMPLE:

You have a property you think is worth $145,000.

A Realtor pulls a CMA and you find eight sold comparable properties.

The MLS (Multi Listing Service) shows the following sold property values:

$159,000 $154,000 $153,000 $161,000 $148,000 $143,000 $146,000 $151,500

When you use the formulaic approach you would take the two highest sold comparables ($159,000 and $161,000). Take out the two lowest sold comparables which is ($143K and $146K). This would leave four others comps.

$154,000 $153,000 $148,000 $151,500 -

You would then take an average by simply adding up the sum of all the sold comparables and dividing them by the total number of properties left. In this case, that number would be four.

Total: $606,500 divided by 4 = $151,625

You can reasonably justify the house may sell for $151,625 instead of the $145,00 you originally estimated.

3. Reveal the ARV (After Repair Value)

This terminology is jargon or slang often used with real estate investors. FMV (Fair Market Value) is similar. The ARV is made up by the amount of repairs the investor thinks the property needs in order to sell quickly on the open market using FSBO (for sale by owner) techniques and not using the MLS.

It can be argued the ARV is more of a guess or suggested value derived by using sold comparables from houses that were NOT sold by a Realtor. One way to explain the difference is a Realtor will typically use a FMV (Fair Market Value) evaluation method. A real estate investor will consider an ARV (After Repair Value). An appraiser can use both value methods, but generally sticks to the ones that come from off the MLS. The ARV is a less accurate and dependable value than what come off the MLS. It doesn’t hurt to know both.

If you like this article, look for a new one on How to Get A Short Sale Approved – Part 2 of 3
Copyright (c) 2008 Cory Boatright

Kansieo.com

Before we discuss the pros and cons of foreclosure vs short sale, let’s briefly define the term “short sale”:

The “short” in short sale refers to the payoff amount agreed to in a sale transaction as being “shorter” than the mortgage balance owed on the property. In other words, there is more owed on the home than it will currently sell for. In a successful short sale, the lender agrees to accept that shorter payoff in order to facilitate a sale of the home and thus, avoid the costly process of foreclosure.

So why, you might ask, should I consider a short sale if I am facing possible foreclosure on my home?

The short answer is that a short sale is less damaging in terms of the long-term effects on your credit. Let’s take a look at some differences between foreclosure vs short sale:

Short Sale:

* negotiated settlement

* seller’s credit bruised

* no attorney fees

* peace of mind

* buy property again in two years

* liens negotiated

Foreclosure:

* court settlement

* seller’s credit ruined

* substantial attorney fees

* no peace of mind

* buy property again in 8-10 years

* all liens exhausted

Credit Score

The losses of credit points from a short sale transaction can be almost as severe as from a foreclosure. You may actually lose as many as 300 points. So, for example, if you have a FICO score of 700, you could be left with just 400. The importance of this is the fact that having a high credit score means you will enjoy lower interest rates when you take out a loan.

Credibility

When you sell your home through a short sale transaction, it will show on your credit report as “pre-foreclosure in redemption status”. Although that sounds better than a “foreclosure” entry, it is still a negative entry that can damage your financial reputation.

Waiting Period

This is perhaps the main disadvantage of a foreclosure vs short sale. Having a foreclosure on your record may mean waiting for as long as 8-10 years before you can qualify to buy another home at a reasonable interest rate. However, a short sale will likely only require a two year wait.

Tax Relief

One other important item to note: The Mortgage Forgiveness Debt Relief Act of 2007 provides help to some of those who did a short sale, deed-in-lieu or foreclosure on or after January 1, 2007 to December 31, 2009. Check with your attorney or CPA to see if you qualify for an exemption under this law. If not, you would have to pay income tax on the amount of debt forgiven by the lender.

Disclaimer

While every effort has been made here to provide a helpful overview of foreclosure vs. short sale, there is no substitute for competent legal advice.

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