Sometimes banks just won’t budge. Obviously banks want to minimize their losses during a short sale, so they want top dollar. But there is a difference between a high price and a totally unrealistic price.
An “unrealistic” example: I was hired by a real estate agent to do an appraisal on a listing in Natomas. The bank wants $250,000 for this property, but there have been zero sales at that level over the past four years. I just talked about the power of trend graphs, and this graph below really “brings home the bacon” in that it helps illustrate how out-of-touch a price at $250,000 is for the neighborhood. However, if the bank was looking at sales with standard lot sizes instead of tiny lots like the subject, then I can see where they are hoping for $250,000. This underscores the importance of knowing a neighborhood market and how a glance at “comps” doesn’t always work out so well.
Should you hire an appraiser during a short sale? My advice is to negotiate with your bank first. Why spend money on an appraisal if your negotiations will work? However, if the bank is being unrealistic and will not budge on their price, it may be worth giving a local appraiser a call. You might even ask the bank if an appraisal would help. Keep in mind there is often a price difference between distressed sales and traditional sales. Additionally, the appraiser cannot be your advocate, but is instead a neutral third-party hired to render a value opinion.
I wish you the best. I know it’s not an easy process, and I do not take that lightly.
Questions: If you are an agent, are you finding banks to be in touch with the market for the most part? Any advice to give to home owners? If you are an owner, what has the short sale process been like for you?
If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook
Real Short Sale Scenario: The bank has stated they’ll accept a price for a Sacramento property at $200,000 based on a BPO. A “BPO” is a “Broker Price Opinion,” which is a valuation by a real estate agent (broker) of the subject property. This can be done from a desktop or a full interior or exterior inspection. In this case, I’m not sure what exactly was done or when the BPO was completed either, but the Listing Agent trying to sell this property ordered a full appraisal from my company to help show the bank what true market value looks like. The hope from the agent’s standpoint is that the bank will budge on their price. This particular agent orders appraisals from me regularly, so obviously this bank listens.
BPOs and Appraisals: Let’s back up for a second. Sometimes banks are ordering both appraisals and BPOs behind the scenes so they are equipped to make decisions about their inventory. The bank mentioned above is not ordering appraisals though, so each bank obviously has its own practices. Clearly banks want to minimize their losses, so they don’t want to accept an offer far below market value (well, you’d think). As an appraiser, I have banks hire me directly to help them decide on whether to accept an offer or not. In these cases my appraisal has nothing to do with the buyer or the buyer’s loan either, but it’s all about the current loan on the property (loss mitigation). On the other side, I do appraisals for real estate agents and home owners who are trying to doing a short sale. They hire me when the bank is seemingly out of touch with the market and only willing to accept offers far above real market value. Maybe the bank is relying on bad information for pricing or an outdated BPO or appraisal?
First off, make sure you are working with a local real estate agent. It’s nice that your cousin in San Diego is a Realtor, but does your cousin understand the local market in Sacramento? No offense to your cousin of course. 🙂