Short sale lender ordering BPO

10 Replies

The lender on my current short sale in dallas said top of this week to get title to send the preliminary hud for the price I offered. So I was thinking it was a go. Plus last week the lender said typically what they do is run the borrowers credit first and if it is under 550k they will approve a settlement price and my seller told me her credit is under 500 so I was feeling positive about it going through. Then agent called my agent an said he was hired by the lender to give them a BPO an he will go to the house sometime this weekend. Is that normal procedure? Or do they sometimes get a BPO, sometimes inspection, sometimes appraisal? My sellers payoff today is 95k Principal owed is 60k I offered 60k. My agent has gotten high as 80k offered. Tax value of the house 90k ARV 140k It needs all of 20k in repair&updates: foundation, roof, HVAC, water heater, trim, cosmetics So does it mean the brokers opinion will be closer to 80k ?

@Shella Sanders The BPO will be one of the main factors the bank will consider when approving the short sale. The agent representing the bank will pull comps to determine the BPO.I recommend you meet the BPO agent and point out all the issues with the property. If the BPO comes in too high, the bank won't approve it. You should also present the bids from contractors if there are major issues with the property (foundation, roof issues, etc). If you see water in the property, try getting a mold test and give the mold letter to the BPO agent. 

Bank will counter your offer at/closer to whatever the BPO value comes back at. If you feel the BPO comes in too high, submit repair estimates, color photos, comps, inspection, etc. anything that will help, back to the bank with your response to their counter. This is a negotiation, so if the bank says 80K that doesn’t mean that’s the final number - but the deal needs to make sense to the bank.

Loan balance is not a determining factor when approving an offer. The bank wants what the property is worth. The remainder that is left over is the deficiency balance - which should hopefully be waived so the seller does not owe anything else after closing.

A BPO is Always ordered. The “we will approve if seller credit score is below 500” is not totally true, but in any event it would mean they have determined the Borrower’s financial condition qualifies for the short sale, Not the price you offered.

You are obviously new to short sales, so one thing to make your agent knows....are there other junior liens/debts on the property? If so, You may need to kick some cash in to them, above the purchase price, to get the deal done.

@Wayne Brooks yes it is my first short sale.
And when the lender said to get title to send prelim hud for the 60k, we spoke to the seller an she said she is pretty sure she owes a few thousand to the city for mowin lawn an stuff in the last 3yrs. And my agent sent my sales contract with seller to title and they should hv it back by Tuesday. So I'm not sure how much exactly over the purchase price will be owed. But I'm hoping just a few thousand. I appreciate any advise thanks

BPO is standard practice.

One thing you have to remember about lenders is that their goal is to net as much as possible on the deal.  They have to determine which route will do that for them.  Sometimes it is a short sale.  Sometimes it is a trustee sale.  If they think they can get more for it at trustee sale, they will let the short sale fail.  On the other hand, they have holding costs that compound, so getting off of their books sooner than later is also a consideration for them.

So, if your offer is a low ball, they will get to the bottom of it, and will likely reject your offer if it is too far off of the BPO.  Good idea to send them detailed pictures or a home inspection report showing all of the deficiencies.  This helps them in determining whether it WOULD do better at trustee sale or reverted back to them to clean up and sell themselves.

well i already messed up then. because i had the house painted (so that i could wholesale it for more in case i didn't buy it) and i have a cash offer for 99k. so i expect the lender to come back between 60k and 95k (since 95k is the payoff now) so either way i should be able to make money on it? but when their broker goes to look at it, perhaps i shot myself in the foot since he may see more value cuz i painted it. costed me $600

@Shella Sanders yes I would have definitely left the home as-is until you own it. Or AT LEAST until the bank determined value.

The bank wants at/near appraised value. The principal balance isn’t as much of a factor.

Here in Florida the city/town can place liens for property maintenance so if we have to have work done prior to closing, we will definitely make sure the lender knows that the buyer is being proactive to avoid further liens but the bank won’t accept less or give you a better deal because you helped out and did something to the home.

Happy to set up a call or chat further if you have any specific questions about what is to be expected through the process. 

Good luck!

BTW, forgot to mention; the lender requires a closing statement (HUD) be submitted with the purchase contract so they can see their Net proceeds from closing, and review/approve/disapprove closing costs, commissions, deducts for junior liens, etc Before they order s BPO, SOP.

Originally posted by @Account Closed :

@Shella Sanders The BPO will be one of the main factors the bank will consider when approving the short sale. The agent representing the bank will pull comps to determine the BPO.I recommend you meet the BPO agent and point out all the issues with the property. If the BPO comes in too high, the bank won't approve it. You should also present the bids from contractors if there are major issues with the property (foundation, roof issues, etc). If you see water in the property, try getting a mold test and give the mold letter to the BPO agent. 

 There is no agent representing the bank. The bank is not a party to the transaction between the buyer and the seller. They are in interested 3rd party but not part of the transaction.