BPO and Short Sale Tips

I got this in my mailbox today and wanted to pass it along . Great article on Agent Broker News

By Tim Harris

This isn't a Sellers market. This isn't even a Buyers market. This is an Agents market. Agents who have the new skills required by this market are thriving. Agents who do not - are failing.

The agents who are succeeding are the agents who have learned things that the other agents have not.

One of the most critical skills, which an agent must learn, is how to do short sales.

A short sale is when the lender is willing to accept less for a home than what is currently owed by the homeowner.

Across the country most real estate markets are feeling the pinch. Home values are dropping in some areas by as much as 40% with no bottom in site. Most sellers who find themselves in this scary position often think their only option is giving the property back to the bank and going into foreclosure.

The Short Sale is a far better option for the majority of sellers.

It is clear that demand is growing for agents who know how to do short sales. Yet, there are so few agents who actually know how to successfully list, negotiate, and close a short sale.

Here's why this is happening: There are five common mistakes that agents often make when trying to do short sales. When one of these mistakes is made, the home simply will not close, the seller will be forced into foreclosure, and the agent will have wasted countless hours.

These mistakes are easily avoided once you understand them.

Without any further delay here are the "Top 5 Mistakes Agents Make When Doing Short Sales."

Let's get started�

Short Sale Mistake #1: Not Knowing The Sellers Options...

It's very common to find sellers who owe too much on their homes. It is predicted that by this time next year up to 50% of all the homes for sale will be owned by sellers who owe more on their homes that true market value.

Sellers often make the mistake of thinking their only option is letting the house go into foreclosure. It's important to understand that the banks don't want to do foreclosures. Banks are in the lending business not the home owning business. It is extremely expensive for the lender to actually carry out a foreclosure.

Short sales are almost always the best option for both the lender and the seller. There are some negative effects on the sellers credit from doing a short sale. Granted a foreclosure is far worse than a short sale.

However, there is a little known technique that allows the sellers and the lender to sell the home...while preventing the seller from having any negative credit history. This is called a Work Out.

Here is how it works:

The seller owes $500,000 on a first mortgage and $30,000 on a second mortgage. The market value on the home is $500,000. In order to sell the home in this market the second mortgage holder will have to agree to take a total loss and lose $30,000. When that happens there could be legal and credit related issues that the seller will be stuck with.

But, if the seller would agree to pay all or part of the $30,000 back to the second mortgage lender as an unsecured line of credit. In exchange for the seller agreeing to pay all or part of the debt back-no negative credit will be reported and no legal issues will arise.

Short Sale Mistake #2: Not Understanding The Process...

Here is the bottom line. Short sales do take time. It is certainly possible to close a short sale in 30 to 60 days, however, it's not unusual for a short sale to take up to 90 days to close.

You have to manage the seller's expectations and the other agent's, not to mention the expectations of the buyers.

Lenders are not efficient at processing short sales. Each lender has slightly different ways of doing things.

By learning the actual process of doing short sales you can be in the driver's seat.

Short Sale Mistake #3: Not Submitting "The Package" Correctly...

Every lender will require that there is a completed 'Package' submitted before they will even glance at a short sale offer. Don't submit anything to the lender until you have all the paperwork correctly completed. I repeat, if you turn an incomplete �Package' into the lender they won't process it. They probably won't even call you back.

A partial list of what "The Package" must contain;

1. A completed purchase contract.


2. Estimate net sheet.


3. Complete financial disclosures from the seller.


4. A hardship letter stating why the seller can't make their payments.

Short Sale Mistake #4: Not Understanding The BPO...

The BPO is possibly the most important part of the short sale process. The BPO is the lenders way of determining if your offer is fair for them. Here is the rub. Often times the BPOs come in too high. When that happens your short sale offer to the lender will be rejected.

You must control the BPO.

Here's how. This is the process we teach our coaching clients. Always meet the agent who is doing the BPO at the property.

You need to show the BPO agent why the home is worth what your offer states it's worth. The most effective way to do this is to do an actual BPO for the agent. Give them your BPO. Assuming your BPO clearly states the case why the home is worth what you say it is, the BPO agent will use your BPO vs. doing his or her own. This means your short sale offer to the lender will flow through the acceptance process much more smoothly.

Short Sale Mistake #5: Giving Up Too Easily...

Realtors give up on short sales way too easily.

Because the process is different compared to a normal transaction its common that agents will give up even trying to do short sales.

That is a huge mistake.

Short sales follow a process that isn't that different than a normal sale. You don't need the 'secret decoder ring' to do short sales. It's simply a process.

Learning that process does take time and education.

The simple fact is that agents who have learned this process are going to be light years ahead of the agents who have not. In this market active agents come across sellers who need to do short sales every day.