Hi, all. I’ve now had three failed short sale attempts because the loss mitigators were unwilling to go below the BPO value. Is there a trick to getting them to go below BPO or are short sales not such a great market now? TIA.
Bob
The market in many areas are good, except for the once
super hot ones. So banks pretty much know what they
will get if they take it to auction.
So long as these rates remain low, you will have fools
jump in to
a) Purchase a home neck deep in debt.
b) Purchase an investment by overbidding and sight
unseen.
The long term rates will need to go up.
Banks are over confident at times. Keep trying.
-Krish
I went to only one foreclosure auction and saw the few houses with any equity get bid way up in price, even above what the house wa worth. Won’t be going to any more of those unless I can figure out how those who bought at those prices can possibly make any money (unless they are just those fools you mention).
Bob
It truly does seem as though since so many people in the past couple of years have been jumping on the REI bandwagon that the lenders know that they will find some sucker out there to pay near full retail cost. I think many uninformed “investors” think that just because the property is bank owned that they must be getting a good deal. I’m right now looking at two bank owned properties that are only 5% less than what the original loan amount was for 1 year ago. These properties are in much worse condition then they were originally and the home values in the area are stagnant . But I’m sure some new “investor” will come along and think hes’ found the deal of the century and snap it right up. The “trick” is to influence the BPO in your favor.
Our jobs are to convince the agent or appraiser doing the BPO that the property is worth much less than what is owed. We do that by meeting the appraiser at the property and pointing out any and all flaws. Get repair estimates if you can. Get comps from similar sized properties that support your offering price. Point out how bad the neighborhood is and support it with crime stats. Point out how bad the school district is, again supported with stats. Check the state, county and city websites to see if there are any registered sex offenders in the immediate area. Are they planning building a landfill or other nuisance in the community? Try to find out these any any other relevant information and present it to the appraiser at the time of the inspection.
Does the above really work? I can’t say for sure as I am only on my second short sale. I should be able to tell you more within the next week after the BPO is submitted to the lender. The home I am dealing with has very few problems, less than $3k, and can sell for $90k-$95k. I offered $60k. Bad schools, bad neighborhood and comps supporting my offer. We’ll see…
Thanks for the advice, bovine. I’ve done numerous short sales and always do everything you just mentioned but this is not the answer to my question. As I said before, the problem is not the inability to influence the BPO (the BPO’s are coming in even lower than I ever hoped). The problem is getting the lenders to accept a discount from the BPO’s.
What you said is basically what all the “gurus” teach and this is important stuff to know. But what these “gurus” don’t teach is how to get the lenders to discount the BPO to as low as they claim they can get the lenders down to in order to make it a deal for you as the investor. For example, there is a short sale “guru” who claims she can typically get the lender to accept down to 50%-60% of the BPO. Not so! I’m finding that, at least for now, all lenders want 100% of the BPO as a gross payoff and Chase Mortgage even told me they need to NET 92% of the BPO, which pretty much means the gross is back up to 100% of the BPO. See the problem, and my question, now?
Bob
I would say keep hammering away with facts to support your case if its worth it to you. Send the LM pictures of all flaws with repair estimates. I find it hard to believe that someone is typically getting a 50% discount from the BPO, she must be selling something. To get a 50% discount you would have to point out some major flaws missed by the apprasier. I imagine that the lender would do another BPO before they would approve a discount that great. I’ve often read here that most short sales dont work out for whatever reason so just keep working on as many as possible.
You did not mention before that you were not having problems influencing the BPO. I have always read here that influencing the BPO is about the single most important thing you can do to get the price you want. If the BPO’s are coming in even less than you had hoped for is that still not enough of a discount to fit your strategy. Are the lenders telling you what the BPO’s are coming in at? My sister, a RE agent, was working a short sale with Chase where they said that they needed to net $194,834 for a place appraised, by her appraiser, at $210k-$215. She found a buyer at $180k and they did the deal. I would think most companies are different as to how much they discount based on the situation. In the end if the numbers do not work out for you move on. I’m lucky with my sister being an agent, any deal where the numbers do not work for me she can list the property on the mls where it might work out for someone else.
If their are any techniques/tricks for getting the LM to discount beyond the BPO please share.
bovinve, please accept my apologies for a curt response. I posted my question elsewhere and all I seem to get are the typical responses taught by short sale “gurus”. I’m not a newbie at this and it seems that others are trying to just show how much they know from what they hear from these “gurus” rather than by real-world experience. I’m tired of people posing as “experts” (really, bs’ers who need a life off of REI newsgroups) by parroting what the “gurus” teach without actually doing the deals themselves. To your credit, you admitted to only doing two short sales and I appreciate your honesty.
I’m batting 3 for 4 this year where the lenders want 100% of the BPO now. The 4th one has yet to be determined as I meet with the broker today and I ain’t got a good feeling about it.
Here’s another typical “guru” teaching: “Back up your offer with pictures and comps!”
Here’s the reality: the lender will not assign a loss mitigator until I FAX in my offer package. They will not even give me an address to mail or overnight my offer package with pictures to them. Faxed pictures are worthless, they just show up as black blotches to the receiver. They will only accept faxed short sale offers (at least the lenders I’ve been dealing with: Chase Mortgage, Countrywide, Select Portfolio Servicing, and EMC). Also, the brokers they hire to do the BPO’s have their own comps and they completely disregard any of my own (I’m a licensed Realtor, so I pull them myself).
As an example, one of my offers was based on an ARV of $90,000 with $15,000 in repairs. The BPO came in at $54,500 which is well below what I ever expected. But with the ARV and repairs, I can only pay $48,000 at MOST without violating MAO (all are Ron LeGrand terms, if you aren’t familiar with them, please ask and I’ll explain). The lender wants $54,500 but I’m willing to pay only $48,000 total, and there are 2 state tax liens totalling $3600 as well as a judgment for $8000. And yet the lender is adamant on getting 100% of the BPo, i.e., $54,500. I can probably get the judgment reduced signficantly but the state tax liens aren’t going away.
I think it used to be that lenders would discount significantly from the BPO for short sales but not lately it seems. I’d like to know why and if there is a way to “beat the system” to get them to discount the BPO again.
Bob
I am not totally sure on this one. But I was thinking the information that the gurus are leaving out is… The bank normally will except 82% of the BPO. keeping that in mind… the BPO is lower than the appraised value and we know that most of the time. Now you put 10,000 into the house to fix it up, then get it reappraised for 10-20,000 more. This will create the 50,000 they are claiming to make everytime. You buy it right then make it better then get more out of it and add that to the original discount that the bank is giving you making a 30,000 discount a 50,000 now.
Is this going anywhere? What do you guys think? Sound kinda right?
oklahomaSS-
For all intents the BPO is the appraised value in the lenders eyes. The BPO is what the agent or appraiser feels the home is worth in its present condition.
rkim777-
No offence taken. I’m here to ask questions, learn and try to share any experiences that might be useful. I too would love to have some voodoo that would make those LM stamp “APPROVED” on my short sale proposals.
My personal dealings with Chase went like this. HO was way behind and lis pendens had been filed. On the first call I got the LM who was assigned the case. I got her fax number and faxed over an ATR. Called her back and she immediately gave me the run down of the numbers. I asked her if she could fax me the short sale requirments she said yes. That took her two days and two calls. During one of our conversations she gave me her mailing address and told me to submit my package by a certain date (within two weeks). After I had gathered up the required information including pictures of leaking roof, missing bricks and mold on the basement walls. I Fed-Exed my proposal. Of course she did not recieve it and asked me to resend it. I tracked it down with the help of Fed-Ex to the wrong office. I called that person who promissed to get it to the LM. The LM reviewed the proposal and ordered a BPO. Unfortunately no one informed me when the BPO was to occur even though I told the LM that I was the contact person. Anywho the BPO came in way over what I was willing to pay (went from $155k to $160k). The LM told me that the BPO came in at more than what was owed($205k). I tried to point out the water damage and mold but she was unimpressed. I ended the call with a thank you and good luck. I felt our numbers were to far apart to come to a meeting of the minds. Then two days later the HO calls me and says to contact the bank. The LM then tells me they did not see all of the mold damage and to resubmit my offer. I was feeling pretty high at this point. I put my new offer($160k) in and waited two days to call and see where they were. The LM then tells me that they had received a $210k contract and thank you for my time.
Well yes you are kinda right on the BPO and the Appraisal thing, but there is a difference. What I am meaning is the original BPO done on the property is the number they are working with before you get involved. And then the appraisal is the numbers that they come back with before they accept your offer. Before final approval an appraisal must be done by the mortgage company. The BPO is the price that they have from the start…you see what i’m saying??
It sounds like you are saying that the BPO is the price the property was originally sold for? Or is it that the lender sent someone out to give them a drive by price report.
My understanding is that the BPO was performed after someone submitted a short sale proposal to the lender or after the lender took possession of the property. With the SS I am working on now the HO contacted me two weeks after lis pendens was filed. Within three weeks the lender ordered an appraisal that was performed a couple of days ago.
Do the lenders normally tell you what the BPO/appraisal comes in at?
There is no hard and fast logic on what they will offer
as a discount from the BPO.
We did one this year with Citi.
BPO came in at low 120s. They took 110 and we bought
it. The comps today are around 140s for it.
On another one, the BPO came in at 140K. I disputed
it and got them to do an internal one. They said
the internal came in at 145K. I disputed that and sent
in contractor estimates.
They wanted 17K and did not take my final offer of 10K
on their 27K second lien.
Eventually, i sent them an offer of 15K and they took it.
That put the final price at 137K. Which is slightly below
the BPO. The property is worth in the high 150s. Hence
will work for us as a rental.
Lenders these days are hung up on getting close to
BPO offers. They always work with their REO dept to
figure what they can get from an auction.
These times will need to change to see larger
discounts.
-Krish
Krish1
When you say the second lien are you meaning the second position of the mortgage? They were owed 27k and accepted 15k from your company? I was hoping the discounts would be greater. I keep reading on this forum that once the first forecloses most of the time the second gets shafted. I am presently offering 1k for a 40K 2nd position. The comps do support my offer. Am I being unrealistic?
Actually, i started with 4K after having read in this forum
that Wilshire credit corp will no longer accept a payoff
below 3.5K. So 4K on the 27K second loan was declined.
Just a few days before the auction, i even raised the
offer from 4k to 5k to 6k to 9k. Still no go. They wanted
17K. I left it at that. After the auction, i called again and
said that they will be getting shafted. They stuck to their
guns. After a couple of weeks of the auction, i called and
by then their files were already closed. So they wanted
the entire SS package. So i sent it with the 15K offer.
This was then accepted.
I guess it all depends on the Investor and their
nerveousness on the financial health of their loan
portfolio in its entirety.
Wilshire is a go-inbetween i guess.
On another deal, HSBC wanted to start their negotiation
at 75% on a 65K second. Guess what, i walked away.
No one purchased the property from the first at
the courthouse steps, since it was close to tax value.
I offered 4K and HSBC rejected that offer in 15 minutes
of receiving the fax.
-Krish
Krish, it is my understanding that loss mitigators don’t get paid by how much money they save the banks but by how many files they get off their desks (how many deals they do as long as they don’t overtly keep doing bad ones) so they have no real incentive to do any deals that save the banks money. I’m guessing this is why they would not take “10 cents on the dollar” for your short payoff offer on the 2nd like the “gurus” loudly proclaim they will in all their short sale courses. Whenever I’ve had to deal with 2nds, they’ve been rude and uncooperative and have stuck to their guns by even letting the house go to sale. They didn’t care. Many banks seem to farm out their loss mitigation functions to 3rd party companies who have no vested interest in saving the banks money other than retaining their contracts with these banks to keep their jobs. Bottom line, saving the banks as much money as possible is not high on their list of priorities but doing just enough to keep their jobs is the main motivation. One loss mitigator told me “he sees 100 deals a day and he does 10”. The deal does have to make sense but I’ll bet the vast majority of those 100 deals he sees make sense but he then arbitrarily chooses 10 and calls it a day.
Banks have “actuaries”, kind of like insurance actuaries, who calculate the statistics of how many homeowners will go into default. The banks set aside money based on these statistics to account for this by assuming that so many loans will go into default. As long as they have enough money set aside, they don’t care if a house goes to sale or not, either. This is probably the main reason why I can’t get them to accept below 100% of the BPO at this time since they have not yet reached their limit on funds set aside to account for defaults. Now how to determine if/when they are nearing this limit so they will loosen up their standards? This is why I asked my original question, hoping that someone here knew. If you have any insights, please post them.
As a side note, did you see how few responses to my original question? Did you notice how they all came scurrying out of the woodwork when someone asked what a BPO is just so they could demonstrate their awesome knowledge of how well they learned from one of the short sale “gurus”? Wanna challenge my hunch that only 1 in 10 of these types ever did an actual short sale and all the others are wannabes who only parrot what the “gurus” teach without actually doing the deals? I’m not ridiculing the person who asked what a BPO is (I was once in that same position), I laugh at those who clam up when a real-world situation is posed such as our but who all come-a-runnin’ when a typical “guru” question is asked that they know the answer to because they have the courses, went to the boot camps, heard the teleconferences, ad nauseum. It’s only by actually doing the deals that you advance in knowledge and skill, not by reading about others supposedly doing them. I’ll leave out names but there are 3 big short sale “gurus” in particular who I’m questioning how successful they really are versus by how successful they claim to be. I saw one of them speak in Charlotte, NC and she was blatantly telling us things that directly contradicted what I’d been told by bankers and loss mitigators. Needless to say, I didn’t buy her courses or her boot camp even though she “significantly discounted them for us lucky ones who were there to see her speak”. Give me a fricken break!
Bob
Why payoff the second lien…that’s the prolbem…tell them they are going to get nothing if the 1st forecloses on it…then they will take around 1-2,000 for a 30,000 lien…lol…try this approach next time…they will take it everytime!
Doesn’t work that way. See my post just before yours. That “guru” stuff about 2nd lien holders taking hude discounts like you say doesn’t hold. Start doing some short sales with 2nd liens on them and you’ll see.
Bob
Your funny…lol…that is how it works…I do it everytime…seems like you just have bad customers…that’s not guru stuff either. I have never went to seminars or bought anything from anyone about short sales…I have done them everytime with 2end liens on them!!! How bout you start learning your stuff buddy…just try it is all i’m saying cause it will work for you!..that’s all
And just now reading your comments about the people and their guru comments…that’s not what you think of me? Only someone so mad at the fact other can help people too…writes something like you have written…THERE IS NO CERTAIN WAY TO GET SOMETHING DONE…BUT THEIR IS A RIGHT WAY…how many short sales have you done this past year and what was your closing rate of them??