Wells Fargo's BPO vs. Lender Appraisal
Hi Everyone!
I'm a prospective buyer, been lurking here for a couple of months waiting for word on a WF short sale. Here's what's happened so far:
We made an offer on a property that had been on the market nearly a year, with the seller gradually reducing the price over the course of the year. By the time we made the offer, the list price was $99,900. We offered the full list price with no contingencies. Wells sat on our offer for two months, and finally Wells told our agent that we should have our loan ready, because they were going to respond to our offer soon and would want to close in around two weeks! The next day, they countered at $140k! There is no way that house would sell for $140k or even $120k. You would think Wells would realize nobody would pay that for the house, since it was listed at a higher price for months with zero interest or offers. Similar houses on the same street are sitting on the market for years, or foreclosing for $85k.
Since Wells had given our agent a heads-up that they were going to respond to our offer soon, we had gotten the ball rolling and ordered an appraisal. The appraisal was FHA (though we aren't using FHA financing-long story) so it was very thorough, and the appraiser took lots of pictures of deferred maintenance, dangerous wiring, etc (we knew that going in--buying it as a fixer-upper). The appraised value was $100k even, with $6,000 worth of repairs deemed necessary to make it livable by HUD standards.
So, we countered at $100k, and included the appraisal and a new set of comps (declining market, new comps were even lower than the originals). My question is, what are the chances of Wells accepting $100k, since they apparently want $140k? Does a real appraisal carry more weight than the BPO? Will they just let it go into foreclosure instead? Finally, how long does it take them to respond to counter offers--as long as it took to respond to the offer?
Any advice/anecdotes would be appreciated. This is driving me crazy.
I'm a prospective buyer, been lurking here for a couple of months waiting for word on a WF short sale. Here's what's happened so far:
We made an offer on a property that had been on the market nearly a year, with the seller gradually reducing the price over the course of the year. By the time we made the offer, the list price was $99,900. We offered the full list price with no contingencies. Wells sat on our offer for two months, and finally Wells told our agent that we should have our loan ready, because they were going to respond to our offer soon and would want to close in around two weeks! The next day, they countered at $140k! There is no way that house would sell for $140k or even $120k. You would think Wells would realize nobody would pay that for the house, since it was listed at a higher price for months with zero interest or offers. Similar houses on the same street are sitting on the market for years, or foreclosing for $85k.
Since Wells had given our agent a heads-up that they were going to respond to our offer soon, we had gotten the ball rolling and ordered an appraisal. The appraisal was FHA (though we aren't using FHA financing-long story) so it was very thorough, and the appraiser took lots of pictures of deferred maintenance, dangerous wiring, etc (we knew that going in--buying it as a fixer-upper). The appraised value was $100k even, with $6,000 worth of repairs deemed necessary to make it livable by HUD standards.
So, we countered at $100k, and included the appraisal and a new set of comps (declining market, new comps were even lower than the originals). My question is, what are the chances of Wells accepting $100k, since they apparently want $140k? Does a real appraisal carry more weight than the BPO? Will they just let it go into foreclosure instead? Finally, how long does it take them to respond to counter offers--as long as it took to respond to the offer?
Any advice/anecdotes would be appreciated. This is driving me crazy.
Replies to This Discussion
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Permalink Reply by Karmann Ghia on
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My agent provided comps with the original offer, all from the neighborhood and around the list/offer price. The appraiser's comps were also from the neighborhood and he came up with the same number our agent's CMA did. How Wells managed to come back $40k higher than either the appraisal or the agent's CMA is beyond me, unless they just pulled the $140k figure out of their hat, or used comps that were nothing like/nowhere near this property.
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Permalink Reply by Ben Benita on
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too much to get into on here, BUT, the KEY to your situation, find out if there is mortgage insurance on teh property.....if so, you are likely best to let it go and look for another property.
Typically MI companies pay 10% to 30% o the mortgage balance to the investor on the note (WF is the "Servicer") the "investor" is who actually put up the cashola for the Seller to buy the property.
If moretgage insurance exists, and, the investor is going to get 30% of what they are owed PLUS any monies made at the foreclosure auction, you are likely in for an uphill battle (particularly if the agent doing the negotiations does not know what he/she is doing).
Example:
You say the home would go for $85k at foreclosure.
Let's assume the investor on the note is owed $150k (The Seller originally financed $150k to buy the home)
If you take 30% of the $150k, that is $45,000.
Now, let's say the bank sticks to their RIDICULOUS valuation and the home goes to foreclosure, the NET result to the ivenstor is the money made at the foreclosure auction $85,000, PLUS $45,000 they get from teh mortgage insurer, for a total of roughly $130,000 in their pocket by taking the property to foreclosure......
If that is the case, why would they ever agree to anything less?
Does that make sense? There are occaisions where it makes sense for them to foreclose......you REALLY REALLY REALLY need to know what you are doing, what you are up against, and, have a GREAT negotiator on your team if you are buying a short sale.......I happen to be rather good at negotiations if I do say so myself (I am actually writing a book about short sale negotiations)........
:-)
Sincerely,
Ben Benita -
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Permalink Reply by Alan Remigio on
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You can request an appraisal from Wells Fargo as opposed to a BPO to support your data. Rarely does any lender give a lot of weight to BPOs or appraisals not ordered by them. However, an appraisal has more weight than a BPO, so your course of action should be to ask Wells Fargo to order an appraisal for verification. Also, ask your agent to do a Comparable Market Analysis (CMA) to support your appraisal. Send all in with a cover letter sharing your points. Keep pushing. You should have an agent going to bat for you here, as your agent will know when to eacalate, especially if the values are strong.
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Michael is correct...it is late....my math (and brain) are off.......
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Permalink Reply by Neddie B. on
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Great information on this thread. I am with Alan too, be proactive and defend your offer by providing the comps that support it. It's not going to hurt. Just make sure that you are comparing apples to apples and by that I mean take into account year built, size of the home, type and style and anything else that you feel affects the value such as condition, location within the neighborhood and current market trends so your comps are adequate to support your offer.
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Thanks for the responses, everyone! We're still waiting (no surpise, it's only been four days). There's no PMI, and we're in a state where foreclosures have to go through the courts and cost the bank around $50k on average to do, so I can't imagine they'd come out ahead foreclosing. The investor is Fannie Mae, and I've read on here that they've been coming back with some crazy counters, so at least I'm not alone! We have a whole team of people on our side, realtors, lawyers, and negotiators that do nothing but short sales, so I feel I'm in good hands. They sent WF a new set of comps with our counter, and the comps definitely supported our offer. The frustrating thing is that our original offer, the list price, and our realtor's CMA were all within $1000 of each other, and within $1000 of the appraisal. The appraiser used many of the same comps as our realtor, and came to the same conclusions.
All we can guess is that the bank's BPO used comps based on the size of the house and nothing else. We included the full appraisal with the counter, and we're hoping someone actually takes a look at it and realizes this is a 100+ year old home in town, not a new McMansion with an eight-car garage in a gated community. All of the houses in town are old, and the most expensive one to sell in town in the past six months sold for $150k and was a freaking Victorian mansion that would be on HGTV if it were in a better neighborhood. They must be pulling comps from the suburbs, or else they just made up the $140k number.
So, without PMI in the equation and considering our agent has supplied them with comps and the appraisal, anyone had success getting Wells/Fannie to agree to the appraisal price? My realtor seems fairly confident they will, but of course he's worried we're going to give up on the deal so he's not going to be negative. -
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Permalink Reply by Elva Branson-Lee on
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I'm waiting to hear back from a negotiator at Wells, too. The Approval to Participate letter came back with a list price ot $72K. We'd already put the property on the market for a fair market value of $70 based on comps. The offer we submitted was for $65K and the buyers' lender moved forward with an FHA appraisal that came back at $68K.
That will remain the FHA valuation for at least 3 months, am I right? So that's as much as any buyer using FHA can pay for the property, right? I sent the FHA appraisal to the negotiator but have heard nothing since, and no response to my inquiries -- it's been more than a week.
Anyone else have a situation like this? -
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Not a realtor or a lawyer, but a seller who has sold one house VA and trying to buy one USDA. It's my understanding that an FHA appraisal has a specific HUD number that will come up when anyone using FHA/VA/USDA financing tries to get financing on the property, and that original FHA appraisal is binding for several months (I heard six, but who knows?). So in my case, it's my understanding that nobody with FHA/VA/USDA financing would be able to buy this house for over the appraised price of $100k for six months. Eliminating those three programs would pretty much kill any chance of a sale around here, so I'm hoping Wells realizes that and decides to just sell it to us! Good luck with your transaction, too!
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