The number of homeowners with adjustable mortagages is mind boggling. It will only get worse over the next several months as we see more and more homeowners begin their foreclosure process. What is unfortunate to the homeowner can be lucrative to the investor during the short sale period.
The short sale can be a win-win-win situation for all parties, if done properly. The homeowner gets out from under their debt, the bank stops the possiblity of more loss and the investor gets a great deal. Unfortunately, as most of you already know, the banks are not discounting all that much. They are trying to recoup as much money as possible. This is where you are going to use your secret weapon! Negotiating the BPO or Broker's Price Opinion.
The BPO order is similar to a comparative market analysis (CMA). When a bank is putting a property in short sale, the bank will either send out an appraiser or a BPO Agent to establish a market price. Generally, the bank will accept an offer between 82-95% of the value indicated by the BPO. You're probably saying, "So what. That's not a lucrative deal!" Here is where knowledge is power comes in.
The majority of banks are bleading money. Therefore, what ever corners they can cut they will. To save monies, banks are using drive-by appraisals. In addition, these appraisals are being done by Realtors. They pay these agents 1/3 of what they would pay a licensed appraiser. Do you think an agent is going to take the time to actually conduct a full walk through evaluation? No way, they're making $75 to $150 an appraisal plus writing a report. They drive up, snap a few shots of the house's exterior and write up their appraisal. That's why it's called a BPO and not an appraisal.
When you submit an offer on a short sale, the bank will immediately want a BPO Agent to go out to the property and do an inside inspection. Note: Sometimes banks will have a licensed appraiser, but in most cases, they will not. This is where your negotiating skills are going to come in. You want to make sure that you meet that BPO Agent at the property during inspection. If you can, you want to get the agent's name and do some research before meeting them. Find out of this agent has done BPO's in the past. Is this person a BPO expert or just an agent looking to make a few extra dollars? Is this a seaonsed agent in general, or a newbie? Do they know the market?
After you do your agent research, you're going to want to bring a few items to your BPO inspection. First, you want to bring a few comps of recently sold real estate. Try to find comps that are in a 1/2 mile radius with similar square footage and bedroom/bathrooms. The reason you're going to do this is because you want to make the agent's job as easy as possible. Remember, they're only making $75, so if they don't have to spend time looking on the computer for comps, they won't.
The second thing you're going to want to bring to the inspection is a RETAIL repair list. Banks don't care if you are going to repair the house yourself or use a contractor. By using your RETAIL repair prices you have more room to negotiate.
Finally, if you know an appraisal was done on the property earlier and the appraisal was low, bring that paperwork. Same thing with previous low-ball offers. You may need the help of a real estate agent for this information.
When you meet with the BPO Agent, establish a rapport. Find out if you can help the agent by sending them some referrals or contacts. Walk through the house with the agent and point out all the things wrong with the house. Give the agent your repair list and the comps you found. Before you leave, get the agent's email.
BPO agents have 2-3 days to get their report into the banks. As soon as you get back to your office, email the agent. Don't mention the appraisal, but make the email friendly. For example, if you discussed a good landscaper, email the informtation to the agent. This does 2 things: 1) your working on your rapport and 2) it gives you another reason to contact the agent again. The following day you can call the agent and ask "Hey Bob, I was just calling to see if you got that landscaper's name I sent through email? How are things? Oh yeah, what do you think the house is going to come in at?"
By taking these steps with a BPO agent, you will hopefully be able to influence that agent to seeing "your price" and not the bank's price. Remember, always offer low, so that you have room to negotiate with the bank. In addition, don't forget to make that connection with the agent. The agent's bread and butter comes from referrals and relationships, not BPO work. An agent will be much more inclined to help out a potential client, or friend, then a bank.
Good luck in your deals...
"For I know the plans I have for you... plans to prosper you and not to harm you, plans to give you hope and future." Jer. 29:11