Replies to This Discussion

Permalink Reply by Janet Nation on December 1, 2010 at 5:18pm

This is such a common problem. I'm assuming that your real estate agent was not present and armed when BOA did the BPO to show what similar homes have been sold for. As a suggestion maybe the buyer is willing to do an appraisal to illustrate to another bank BOA what your house is really worth. Your agent should couple that appraisal with their own comps and make send an explanation about the the condition of your home or short sale rate in the town in which your reside if applicable.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on December 1, 2010 at 5:54pm

S Smith -

First, your REALTOR should be dealing with this issue. If, as you say, there was a brand new home that is a true COMP and sold at the price you indicated, your REALTOR should upload that comparable detail into Equator including the CLOSED info.

Second, it seems you are placing all of the blame with BofA - they are only the servicer. Your loan is actually owned by Fannie Mae and they are the ones making decisions on settling your debt for anything less than what you owe.

Many people think that just because the market has sunk and offers are few and far between, that the investor who owns a loan will have to take what they get and that's not the case. The investor can ask for cash at closing or a promisssory note (typically at 0% interest and over 10 years) -remember they are just settling the debt and releasing the note.

Best of luck,

Thom Colby
Broker,
Newport Beach CA

Permalink Reply by Jim Hale on December 1, 2010 at 10:58pm

Sometimes Fannie Mae has delegated approval authority to BofA. I don't know how to tell the difference without asking BofA staff. On some they really have to ask Fannie; on some they don't.
I don't know which is worst, actually dealing in-directly with the investor or dealing solely with the loan servicer that always has their own set of vested interests.
I am glad the person doing the BPO on one current short sale has been told to go through me to view the interior of the home before doing the report. That gives me a chance to present my comparables early - while on offense instead having to play defense later.

Permalink Reply by Esther M. Camarotte on December 2, 2010 at 12:40am

Should you need a little direction here I can give you a phone number to Fannie. I would highly suggest at this point you call Fannie. Not sure what you mean by out of attorney review? Your attorney? Would be happy to discuss and give you general help here not sure what state you are located in. My phone 703-672-0575. I am located in Northern Virginia. Licensed VA, MD, DC and GA.

Esther M. Kelly
Associate Broker
Keller Williams Realty - Vienna/Tyson's Corner

Permalink Reply by Ricky D. Ostrom on December 2, 2010 at 1:07am

Sounds like the current Appraisal/BPO was high. You need to send them better justification for the offer price.

1) Get some good COMPs that include surrounding REO/Foreclosure properties. Also find any houses sold at auctions.

2) Mention and price any repairs or problems with the house.

3) Show all the houses for sale that surround you in the market. Give them a visual of the problem. Google map a 5 mile radius, where the 2 mile scale should be showing in the lower left corner of your screen and check the tag in the upper right corner under MORE > REAL ESTATE. I put a title "Competing Houses in the Neighborhood" and a remark "These do not include For Sale by Owner and Private Listings"

4) You might even go a far as mentioning issues in the area like school closings, long term traffic delays due to road repairs, increase of crime, and other area news.

Good Luck!

Permalink Reply by Steve Early on December 2, 2010 at 1:35am

This is a VERY common problem. In a nutshell what has probably happened is the investor ran whatever financial models they run and came up with a net price they should get for your property. They then add Realtor commissions and other typical closing expenses they feel they will have to pay to the net and that is the price they want. This is exemplified by the fact that they came down from $260 to $250, but then added the requirement that you bring $10k to closing - this gives them the same net.

Why is the price higher than what people are willing to pay?

There could be a lot of reasons, most mentioned already.

- The listing agent did not attend the BPO
- S/he attended the BPO but did not justify the offer based on current market conditions
- They did attend, did try to justify the price and the BPO agent just didn't buy it
- The comps the servicer has are old, or are not properly reflecting the value of your property
- Your property has some 'defect' in the eyes of buyers (busy corner, smaller yard, steep driveway ... ) which the lender will NOT factor into their assessment of value
- Your property was listed at a a higher price, perhaps close to the amount the investor is looking for and the investor is factoring that into their assessment of value ("the Realtor listed it at $260 so even s/he thinks it is worth more") and if they are aware of the previous $260 offer, then this helps lock them in at that price
- We have seen situations where the investor has thrown out a BPO and informed us it was "too low" and stuck with the financial models they ran to come up with their net figure.
- We had one situation this year where the BPO was done on the wrong property - two adjacent towns both had a "42 Smith Street" and the agent went to the wrong town because the servicer had the wrong town on the mortgage statement. Obviously this could only happen if your agent did not attend the BPO.

The big question is - OK, so now what do you do?

I think the best thing you can do is have an appraisal done to determine what the actual value is. We run into situations where a property will not appraise out for what the investor wants. Sometimes it changes their tune, and sometimes it does not.

The next best thing is have your agent get recent sold comps in front of the servicer/investor, and if you do this along with the appraisal, even better.

If you take the $260 price and back out commissions, tax stamps, lawyer fees, and all the other customary fees that the investor will pay for, this will tell you what the net is that they are looking for. You might have your agent try to do a cost analysis that shows that the current offer will net them 'x' and if they foreclose, they will probably net 'y' and make the case that the current offer is a far better deal.

The deficiency agreement they want you to sign basically says that you agree to repay the deficiency. If you sign it they may reconsider the current offer, but you are going to have to pay back at least part of the deficiency you owe. They may offer a promissory note, or give you the option of working it out with their Recovery Department after the fact.

On promissory notes: If an investor offers a $20,000 promissory note, you can typically get this reduced by about half if you agree to pay cash instead (which you have said you don't have). If they offer a note instead of cash, you can expect that the note will probably be double the cash contribution amount they are asking for. Personally, I think if they were going to offer a prom note they would have done so already.

Sometimes these strategies work and sometimes the investor just locks in on a price and won't budge.

Permalink Reply by S Smith on December 2, 2010 at 5:07am

Steve Early said:

This is a VERY common problem. In a nutshell what has probably happened is the investor ran whatever financial models they run and came up with a net price they should get for your property. They then add Realtor commissions and other typical closing expenses they feel they will have to pay to the net and that is the price they want. This is exemplified by the fact that they came down from $260 to $250, but then added the requirement that you bring $10k to closing - this gives them the same net.

Why is the price higher than what people are willing to pay?

There could be a lot of reasons, most mentioned already.

- The listing agent did not attend the BPO
- S/he attended the BPO but did not justify the offer based on current market conditions
- They did attend, did try to justify the price and the BPO agent just didn't buy it
- The comps the servicer has are old, or are not properly reflecting the value of your property
- Your property has some 'defect' in the eyes of buyers (busy corner, smaller yard, steep driveway ... ) which the lender will NOT factor into their assessment of value
- Your property was listed at a a higher price, perhaps close to the amount the investor is looking for and the investor is factoring that into their assessment of value ("the Realtor listed it at $260 so even s/he thinks it is worth more") and if they are aware of the previous $260 offer, then this helps lock them in at that price
- We have seen situations where the investor has thrown out a BPO and informed us it was "too low" and stuck with the financial models they ran to come up with their net figure.
- We had one situation this year where the BPO was done on the wrong property - two adjacent towns both had a "42 Smith Street" and the agent went to the wrong town because the servicer had the wrong town on the mortgage statement. Obviously this could only happen if your agent did not attend the BPO.

The big question is - OK, so now what do you do?

I think the best thing you can do is have an appraisal done to determine what the actual value is. We run into situations where a property will not appraise out for what the investor wants. Sometimes it changes their tune, and sometimes it does not.

The next best thing is have your agent get recent sold comps in front of the servicer/investor, and if you do this along with the appraisal, even better.

If you take the $260 price and back out commissions, tax stamps, lawyer fees, and all the other customary fees that the investor will pay for, this will tell you what the net is that they are looking for. You might have your agent try to do a cost analysis that shows that the current offer will net them 'x' and if they foreclose, they will probably net 'y' and make the case that the current offer is a far better deal.

The deficiency agreement they want you to sign basically says that you agree to repay the deficiency. If you sign it they may reconsider the current offer, but you are going to have to pay back at least part of the deficiency you owe. They may offer a promissory note, or give you the option of working it out with their Recovery Department after the fact.

On promissory notes: If an investor offers a $20,000 promissory note, you can typically get this reduced by about half if you agree to pay cash instead (which you have said you don't have). If they offer a note instead of cash, you can expect that the note will probably be double the cash contribution amount they are asking for. Personally, I think if they were going to offer a prom note they would have done so already.

Sometimes these strategies work and sometimes the investor just locks in on a price and won't budge.

Steve-
If we did a promissory note for 20k would this stay on for 10 years on credit report?What about taxes we owe? Do they figure in that or do they write off the cost of the taxes? Currently 3k owed.
Also an atty. is dealing with everything. Our realtor hires a law firm to do all of the short sale work so she doesn't do anything except come up with comparable values.

Thank you everyone for your help. My husband will give you a call Esther. Thank you very much