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In Part 1, I describe how the Broker’s Price Opinion (BPO) is evaluated and submitted to the lender as part of the short sale process.We are assuming that in most cases the BPO has not taken full account of the property’s true physical condition. The BPO will undoubtedly reflect a broker/realtor’s wish to sell for as high a price as possible.
What can you do at this point to correct an inflated BPO, so the lender will approve your purchase at the below-market price you need for a successful project as a flip, wholesale or rental investment?
Since you’ve done your homework on short sales and anticipated an inflated BPO, you have your own price analysis already prepared so it can be submitted immediately after the BPO is known. Don’t let the BPO cool off on the lender’s desk before you send in your own price evaluation package!
Here are some primary areas to cover in your price evaluation:
o Ideally these sales occurred in the last 30 days. The properties are as similar as possible regarding location, age, size, school district, and proximity to parks, shopping, dining and schools.
o Document the appearance of the comparables with photos and descriptions.
o Ideally you’ll use below-market comparables. In any case,point out the features of each sale, such as “newly remodeled”, on a bigger lot, or in other ways why higher-priced comparables are much more attractive and sellable than the short sale property.
o Start with the appearance from the curb, and thenclearly explain all areas of disrepair. Highlight those that require major work, such as the foundation or roof.
o Include appliances, if any, and major systems such as central air and heat, hot water, electrical and plumbing.
o Don’t forget lot problems such as drainage, corner of a major thoroughfare, etc.
o Poorly maintained neighborhood homes.
o Proximity to industrial and/or commercial districts.
o Declining prices in the area.
Once you’ve submitted your price evaluation package, you may still be in a long negotiation with the lender before they will accept your offer and agree to a sale. Patience, fortitude and a good understanding of your profit incentive will help keep you going!
Short sales can be a LOT of work. It can takea long time to close a purchase! Succeeding with short sales requires diligent follow-up, thoroughness, accuracy, negotiation skills and a strong aptitude for paperwork.
Make sure you know the purchase price that will make this worthwhile – and if the opportunity is right, go for it!
Do you think you can stick with the paperwork and negotiation process with enough diligence to purchase a short sale at a great below-market price?
Want to earn money with little or no investment of your own? Keep an eye on my new ebook “STREETWISE PROPERTY INVESTING WHOLESALE BLUEPRINT” explaining wholesaling and how to make it work for you!
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Real Estate and investing have been my passion for over 15 years. I love transforming a broken down distressed property into something that is fresh, updated and modern. My real estate investing career began in foreclosures, but I have also built new, worked direct with sellers, apartments, condo conversions, rentals, wholesale, commercial etc.
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