What Do You Do When that BPO on Your Short Sale Comes in Too High?

Whenever I list a short sale in the Sacramento area, I run the comparable sales two different ways. And I often get two different answers. When that happens, I know I might have a problem with the BPO. That's because it's tough to say which way of running the comps a BPO agent might use. I can tell you there is not enough money in doing a BPO for a BPO agent to run the comps more than one way.

So, the question is which do they use? You can't second-guess that. But if I were to guess, I'd say they take the path of least resistance. The easiest way to run the comps is to go to Realist and click on the button that says run the comps. You don't even have to delete homes if you're too lazy to remove the ones that don't belong in the neighborhood. You can just leave them all there and click "generate comps report."

The program will automatically pull the last 20 sales and average the per-square-foot cost based on the subject property. It's not the most ideal way to look at comparable sales, but it is one method. It's also fast. If you're lucky, you'll find homes on the same street and maybe even with the same square footage. You can hit pay dirt that way. But if you're not lucky, this down-and-dirty way to analyze the comps is crap. Or, a BPO agent can search within a 1/4- to 1/2-mile radius of the property, but that method can overlap neighborhoods and boundary lines.

A better way, of course, is to run a map search of the neighborhood and narrow the results. Look only at homes of similar size, condition and configuration. That type of analyzation will tell you how much a buyer is likely to pay. But it is unlikely to be the way the BPO agent will pull the comps. And therein lies the problem. So, what do you do when the BPO is out of whack?

A Sacramento short sale agent can disagree with the BPO agent and submit her own comps, along with an explanation. Sometimes, that's enough to get the bank to agree to consider the buyer's offer.

A buyer can increase her price slightly but not all the way to the amount the bank demands. Just so you know, banks don't always ask for the amount of the BPO. Sometimes, banks ask for more in the event of negotiation, and sometimes they ask for more just for the hell of it, so they can they show the investor they tried.

A buyer can pay for her own appraisal and submit it to the short sale bank. She might end up paying for two appraisals because her own bank will probably use a different appraiser.

Or, a buyer can agree to the bank's demands, wait for the short sale approval letter, and then take her chances with her own bank's appraiser. If that bank appraises the home for less, then the buyer can petition the short sale bank for a price reduction. The bank will agree because if it disagrees, and the home is sold to somebody else, that next buyer will probably get the same appraisal.

If you choose the last option to fight that over-inflated BPO, here's a tip: Study the pending sales. Those pending sales will become your comps. And remember, the old comps will go away if they sold more than 3 months ago. If you are near the end of the month when this happens, that time can be in your favor.