I had a call last week from a buyer’s agent who was frustrated because the bank did not accept her buyer’s (very low) cash offer on a short sale. In fact, the bank did not even make a counter offer. The bank employee made it clear that the offer was significantly below the BPO value, and that they would not entertain the offer.
This agent was frustrated because her buyer’s offer is cash. Did the bank understand that the offer was cash? (Yes) Did the bank understand that the buyer could close in three business days? (Yes) Does the bank understand that the house needs paint and carpet? (Yes)
But, here’s what I was really thinking:
Yes, the bank understands that the offer is cash. In the eyes of the mortgage lender, all offers are cash, since the money received is cash in hand—even if the buyer obtains a loan.
The bank understands that the buyer can close quickly. However, it will take the bank approximately two weeks to generate a short sale approval letter, and it will take another ten days or so to obtain HOA documents and the other paperwork necessary to close this deal. So, the reality is it would be extremely unlikely that any buyer could close this deal in three days.
The bank believes that the property is being sold as-is. Unless homes are brand spanking new, all homes generally need a coat of paint and new flooring or a shampoo of the existing carpets. Banks generally consider those issues as cosmetic. Prove to me that there is a gaping hole in the roof and a cracked slab and I can get the bank to lower their price significantly.
The best way to get the bank to lower the value they require on a short sale is by providing a full appraisal (not comps and not a BPO). Banks take that full appraisal very seriously. It carries a lot more weight than a BPO done by a local agent.
So, if you want a low cash offer to be approved by the bank, the best way to get there is by submitting an appraisal.
Photo: flickr creative commons by Loimere