Closing Short Sales In A Declining Market-Engage With The BPO Agents & Lenders!
For the past 2-3 months, Phoenix homes have been experiencing yet another downturn in values. In some areas, we have seen values drop as much as 10-15%. This drop in values has made the already-difficult task of closing an AZ short sale even tougher.
BPO agents are using closed listing values for homes that closed escrow over the past 3 months, as instructed by the lenders. For this reason, we are seeing BPO's coming in higher than they should be. What the lenders need to understand is that closed escrows from 3 months ago were probably negotiated 6-7 months ago, when values were higher (it is not unusual to get your BPO completed 1-2 months after executing a purchase contract).
So, how do you combat this? We use a two-pronged approach. When sending in our short sale package, we always include a current CMA and an explanation of the current downturn we are experiencing in the market. We stress that fact that in order to determine current values, you must look at not only closed escrows, but Active & Pending as well. Do they read it? Probably not, but if you include it in your package, you can always have them refer to it if/when your BPO comes in too high. We also stress the number of days our listing has been on the market.
The second part of the equation deals with interacting with the BPO agent. Unfortunately, lenders are giving them specific instructions in terms of what they can use for comps. In most cases, they require that they use only closed escrows (closed no more than 3 months prior) within 1 mile of the subject property (preferably the same subdivision/neighborhood). Your hope is that as a fellow real estate agent, they understand the recent decline in values, and use it as a consideration when conducting their BPO. Your job is to remind them of this, and, as with the lenders, stress the importance of considering active and pending listings in the immediate area. For both Active and Pendings, concentrate on only on the asking price, but the days on market as well. Call the agents with Pending listings, and try to get as much information from them as possible.
When speaking with the BPO agent, be tactful. Nobody likes to be told how to do their job, and chances are, they have been given specific instructions from the lender on how to conduct their BPO. One thing I almost always say is "Put yourself in the buyer's shoes. What would you be willing to pay for this home, in a declining market?"
As we all know, BPO agents get criticized often. In some cases, the criticism is justified. However, in most cases, their hands are tied by the lenders they work for. It is our job to educate them on what is truly going on in our market, and ask them to consider not only numbers, but trends as well.
Treat them with the same dignity and respect that you expect. In a declining market like Phoenix, they are critical to successfully closing your short sales, and can make or break your deals.
Summit Home Consultants
Copyright © By Bob Hertzog 2010 *Closing Short Sales In A Declining Market-Engage With The BPO Agents & Lenders!*