Wells Fargo unwilling to negotiate?

Question

This is my first short sale and I've been working on this short sale for a while now and finally got the "Approval to Participate". Originally, Wells Fargo told me that the sale contract was a part of the short sale package. No problem, I had planned to include it anyway, I had one for 60k. Now that' we've jumped through all their hoops, they say their BPO came in at $95k and no matter what I send in or counter, that's all they will accept. Are they serious? Anyone have experience with this?

Other details:
Mortgage is FHA
ATP states a requirement of a NET of 84k, though negotiator says they still won't take less than 95k

Justin S. · Answer

I agree with Scott, its hard to make a spread with an FHA loan.  You really need the BPO to come in low.  The only FHA one I could close was because the house was in such bad shape the bank did not want it.

The other one sold at auction for less than my offer.  Does not make sense sometimes.

Larry Moore · Answer

I have to agree with Scott.  Trying to influence an appraisal is much more difficult, if not impossible, than a BPO.  Don't forget, an appraiser does this for a living, a realtor does it as a sideline (although for some, it has become a big part of their income).  Appraisers also are paid a lot more for their analysis than an agent receives for a BPO, so they are willing to do a thorough job.  As a consequence, IMO, they seem to have a more professional demeanor that relays they are in charge, they know what they are doing, and they don't need your help.  Even if they are friendly and take your comps, they probably won't use them as their primary source, if at all.  That has been my experience, and one reason why I pass on a short sale if it is an FHA loan.

Justin H. · Answer

well, somewhat disappointing news. I'll continue anyway and see what happens since I got it this far.... Thanks guys for the info and I'll let you know how it goes, though it seems like they won't end well.

Scott Hubbard · Answer

If they ordered a BPO, then they were not an FHA insured loan.  FHA uses an FHA approved appraiser.  My experience is that the appriaser's tend to watch their P's and Q's more than others because having that FHA designation is like printing money these days.

The last FHA appraiser I met told me " you can't influence this appraisal". while I tried to hand him my hand picked comps.

I have an FHA short sale that I have been working on since March.  The property has no gas and has been vacant almost one year.  The appraisal came in at $109 per sq ft in a neighborhood where move in ready homes are getting $96.

I have been trying to get FHA to order a new appraisal for 3 months.  So, "beating up this BPO" will not work since it is an appraisal.

I get paid as an investor or as a negotiator by the listing agent.  So, the only time I do not get paid is if I cannot sell to a retail buyer in an investment scenario or in an A to C.

The only two homes where I recieved an approval and did not close were FHA.  The one above might be my third.

With two mortgages, the results work against you because FHA  will want to net 12 to 14% of the appraisal value.  Assuming the original 2nd mortgage payoff is $3K, then this decrease your spread.  In a nutshell, having two mortgages will decrease your odds.

You need to put this in perspective.  If it is a $100K property and you get a bad BPO, your margins will be 12% or worst.  If it is a $200K property, then the same same percentage creates a better spread.

If you have an FHA short sale, you need to realize that your success rate will be diminished. I would rather spend my time on conventional.

Corry Taie · Answer

I will talk to my negotiator. We have a bunch of Short Sales & we are getting them at great discounts. I am sure some are FHA loans. Also, I would suggest beating up the BPO a bit.

Alex Locklear · Answer

Do FHA and VA have the same guidelines when it comes to short sales? (i.e. they must net 88% of BPO?)

Justin H. · Answer

Damn, I have one other additional short sale going on that is FHA... I'd hate to give them up. I haven't seen anything at all about owner occupant requirements.

On this deal specifically, there is a buyer at 110k, Wells Fargo is pushing 95k but if they will take 90k, that's 20k to split between a partner and I.

On the other deal, there is 2 mortgages, totally about 120k on a house valued at about 75k. I offered 35k.

At what point should I drop these deals? Should I keep going until I reach an absolute dead end?

Larry Moore · Answer

One of the problems I have run across with FHA short sales is that they often require that the property be MLS listed at full appraised (not BPO) value first before they will consider discounting the appraisal.  They can accept 88% of appraisal for the first 30 days it is listed ( 88% of 95K is about 84K), but if the negotiator is a dick, I mean, aggressive, he will tell you that they don't have to accept it and that they want the property listed at full appraisal first.  You can try appealing it to a manager, but you are going to have to pay at least the 88%.

Justin H. · Answer

Hm, can it be listed at appraised price but listed as "in contract"? I can just keep submitting offers to keep it "in contract". That way no one else will submit offers.

Also, do you have anything to backup your statement that they can take 88%? I haven't seen that but that's somewhat good news and it does match the actual number they listed on their ATP. I'd take it at 88%, that leaves about 20k spread for me to split with a partner.

Wells Fargo unwilling to negotiate?

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