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Value Disputes and Bank of America Short Sales

by Melissa Zavala on May 22, 2012 · 3 comments

  

If you have completed more than a handful of short sales, then you have likely have been involved in a value dispute with the short sale lender.  During the course of the short sale, the short sale lender sends out another Broker to complete a Broker Price Opinion (BPO) for the short sale listing. The bank then, in most cases, bases their price on the value stipulated in the BPO. However, often times, there is a discrepancy between the value stipulated in the BPO (what the bank wants) and the offer amount (what the buyer wants to pay). In many cases, what comes next is a valuation dispute. And, at some lending institutions, this is much easier to complete than at others.

Bank of America has recently revised their process for addressing valuation disputes that arise during the short sale transaction.

Here is an outline of the new process (courtesy of our friends at bankofamerica.com/realestateagent):

  • Tell your short sale specialist that you would like a reconsideration of the value.
  • Receive an investor-specific, easy-to-complete form from your short sale specialist that specifies all requirements for a successful value dispute.
  • Fill out the form and attach specified evidence.
  • Stay in touch with your short sale specialist for results.
  • Expect a value dispute review within 10-12 business days once all required information has been received.

Here is the evidence you will need in order to support your valuation dispute:

Provide comparables that are recent, proximate (nearby) and similar to the property in question.

  • “Recent” means sold within 90 days of the actual value document date.
  • “Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate.
  • You will be able to provide additional notes to highlight characteristics of the comps.

When the dispute centers on property condition or hazards:

  • Provide an itemized estimate from a licensed contractor on the contractor’s letterhead.
  • Provide photos to illustrate the repair, condition issue or hazard you want to highlight.

If your valuation dispute relates to condition and significant repairs are required (which would lower the subject property’s value), it’s best to have multiple bids in order to support your position. Based on my experience, I can tell you that you should not expect the bank to pay for items such as new carpet because there is a small stain on the living room floor. Big stuff, legitimate supporting documents, and a strong will to succeed could lead to success in a short sale valuation dispute.

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{ 3 comments… read them below or add one }

Jason Grote May 22, 2012 at 11:25 am

Thanks Melissa!
My wife has recently become strictly a short sale agent and this is one of the issues that has been arising for her. Thanks for the info and please keep it going!

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RON GOODWIN September 7, 2012 at 1:21 pm

HERE IS MY FINDINGS ON BPO’S THAT ARE OVER PRICED IN KANSAS CITY AREA. THE BPO REP OVERPRICES HOME. GETS PAID FOR BPO AND THEN GETS TO LIST AS FORECLOSURE WHEN THE PRICE IS TOO HIGH FOR CONDITION OF HOME! THE GUY THAT DID MY BPO SAID HE DID 100 A MONTH WELL HES NOT DOING THEM RIGHT!!!!!!!!!!!!!! SOMEONE NEEDS TO CHECK THEESE PEOPLE OUT! I BELONG TO NAR THEESE PEOPLE DOING BPO’S DONT EVEN HAVE A REALTORS KEY????????? IF THIS LOOKS LIKE IAM SHOUTING!!!!!!!!!!!!!!! I SURE AM SOMEONE NEEDS TO LOOK INTO THIS????????????? YOU TALK ABOUT DEFRAUD AND YOU ARE HIRING THEM?

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Justin January 14, 2014 at 4:49 pm

I am just letting someone know who perhaps would be interested in violations of the Mortgage Settlement agreement filed April 4, 2012. I began working as a Temporary employee for Specialized Asset Management, a subsidiary of Specialized Loan Servicing, LLC which is a sub-servicer for various banks, one of which is Bank of America back in July of 2012. My job was fairly simple, I basically was a valuations analyst who performed quality control on BPOs or Broker Priced Opinions for loans that were in some stage of default. There were quite a few of us temps who were hired specifically because the company had an influx of orders from Bank of America due to this Settlement Agreement. Most of the temps had a background in real estate in one form or another. One of the stipulations for any of the quality control being done for what was called “DOJ” or “Department of Justice” orders was that the Real Estate Agents submitting the BPOs could not use distressed properties as comparables for coming up with valuations. Some of us voiced our concerns that this stipulation would not produce an accurate valuation of the property. We were told that this was part of the Settlement Agreement with the Department of Justice and that no distressed properties could be used as comparables for the valuations. Now in some neighborhoods this wasn’t a big deal, there were enough non-distressed properties in the area to come up with a pretty accurate valuation for the property, but in some neighborhoods, particularly those hard hit by foreclosures, the valuations produced were not even close to true market value. We were instructed to compare a property which had REO or short sale comps in the same neighborhood instead to properties 30 miles away. Some of the real estate agents complained, rightly so, stating these valuations were inaccurate, and always inaccurate on the high end, sometimes 25% to 50% and were informed to follow the standards. This was the verbiage we were told to use in communicating with them and it once again highlighted the fact that Specialized Asset Management and Bank of America were simply following the settlement agreement worked out with the federal government: “Our client has received very specific direction on what type of comps may be used in these reports. The directions have been handed down via lawsuit and consent orders involving the federal government, specifically the Department of Justice. As a Valuations provider, SAM is adhering to the requirements set forth in this lawsuit, and we expect our agents uphold the same. SAM and our client realize that these requirements may not result in the most accurate market value for these properties, but we are forced to follow these very specific instruction on every order without exception. If you are unable or unwilling to follow these instruction, we will be forced to reassign the order.”

Time went on and my temporary assignment ended and I worked as a temporary employee in various departments at Specialized Loan Servicing. I was eventually hired as a Foreclosure Associate and pretty much forgot about the valuations process. But during my time in various departments I saw a lot of packages of homeowners asking for modifications and whether or not this was granted was based on things like Net Present Value, Loan to Value etc. Now normally I don’t think Banks are under any obligation to agree to a short sale or modification unless it is in their best business interests, but with this particular portfolio that is part and parcel of a Settlement to relieve the bank of allegations of previous fraud, I would think they should be held to the standard of that agreement. There have been some recent news articles talking about the mortgage settlement and I decided I would see if I could find an actual copy of the agreement and consent order filed with the government and see if these valuations made a difference. Looking at the agreement, the only section I could find that mentioned BPO’s was actually in the section regarding stipulations for servicemen, but it states: “Before Servicer may rely on a BPO or desktop determination for purposes of this subsection, Servicer must first obtain DOJ approval that the methodology for the BPO or desktop determination results in property valuations reasonably consistent with a contemporaneous appraisal.”

I am fairly confident that the valuations used were not “consistent with a contemporaneous appraisal” and were used to create false NPV numbers etc. and to deny modifications and short-sale agreements. Perhaps I’m not reading the order correctly, but I don’t see anything in the agreement telling the servicer or sub-servicer to create valuations not consistent with true market values. Perhaps you’re interested in this perhaps not. Perhaps the banks are violating this agreement perhaps not.

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