Tips on Ensuring a Successful Short Sale

by : Robert Lam

Convincing a real estate broker to set a low BPO

The key to a successful short sale rests on three letters: BPO. BPO stands for "broker price opinion." A BPO is an assessment of a property's value. The lender selects a real estate broker to evaluate the property and report back with an estimated value. Future negotiations for a sale price center around the BPO.

When the real estate broker is performing his evaluation, don't stand idly by. Your goal is to influence the real estate agent to set as low a BPO as possible. Be standing right there on the front steps with information in hand, ready to make your case.

Evidence to make your case

You should come equipped with two key pieces of evidence. The first is a comprehensive list of necessary repairs accompanied by contractor bids on making those repairs. Present the highest quotes in your report.

The second piece of information you need is a list of recently sold homes that are comparable to the home you're looking to purchase. These are called "comps." The agent may or may not want to use your comps, but odds are good that he'll be happy you lightened his workload. Obviously you want to select the lowest comps you find.

The walk-through

Introduce yourself to the realtor as the buyer who will be doing the short sale. Accompany the realtor as he does his walk-through. Along the way, point out all of the problems with the property and note repairs that need to be made. The nicer the house, the bigger the challenge you'll face in amassing a list of problems. That's why you have to do your homework long before the realtor shows up.

The next day

Follow up! Call the realtor the next day and ask him what price he quoted the lender. The realtor might not choose to divulge that information, but it can't hurt to ask. If the realtor won't give you the price, try calling the bank.

Educating the homeowner

Note that you should explain the BPO process to the homeowner in advance. It's best if the house is empty when the real estate broker performs the assessment. Also tell the homeowner to not clean or straighten up the house. Mess and dirt will bolster your opinion that the house has a low value.

Making your offer

As you gain more experience with short sales, you'll get better at predicting the BPO. There's no exact science to it, so your best bet is to start low with your offers. You never know ... you might get lucky and wind up with a BPO that's even lower than you expected. You can always go higher if your initial bid is out of line with the BPO.

VA and FHA loans

The type of loan the homeowner obtained to purchase the property affects the percentage of the BPO the lender will be willing to take. For example, lenders typically will not accept anything less than 82% of the BPO if it's a VA or FHA loan. Before you make your offer, crunch some numbers. Estimate the repaired value of the home. The BPO will likely be 80 to 90% of that value.

Keep negotiating

If you're unhappy with the BPO, don't give up. Lenders are eager to cut their losses, and you might convince the loss mitigation department to order a new BPO. If you're stuck with a BPO that's higher than you hoped for, keep negotiating. Don't be afraid to come right out and ask what the lender's bottom line is. Stay persistent and keep the lender up to date on further disrepair the property is facing.

Throughout the process, keep your eye on the prize: the lowest BPO possible. That's one of the essential elements to the short sale. Furthermore, one of the essential elements of successful foreclosure investing is to get the proper education such as the information in . Learn, apply and take action and you'll be well on your way to success!