If you’re like many homeowners in Hawaii the past few years, you may have explored the idea of selling your house as a short sale. For the sake of discussion, a short sale is where your lender allows you sell your house for less than what you owe them (the bank takes a ‘short’ position on your debt). It allows you to get out from under a difficult mortgage and start fresh, while the bank avoids piling up legal fees and having to foreclose on a house they don’t really want to take back (they really don’t want to foreclose, despite all those nasty letters).
A short sale is just one option for a homeowner in these “preforeclosure” scenarios, of course, but they are frequently pursued when either
1) a loan modification has been unsuccessful, or
2) the homeowner just needs OUT.
However, short sales are not guaranteed. They have to go through a lengthy approval process. A critical stage of the short sale approval process is the BPO or Broker’s Price Opinion.
Why the BPO is Critical to Your Short Sale Success
Let’s first look at the general stages of a short sale:
1) Homeowner decides they need HELP and contacts a professional (like us!) for a free consultation
2) We have a licensed agent work with the owner to gather all the necessary documents, also called the “short sale package”
3) The bank processes the paper work and orders a BPO to gauge the present value of the house
4) Based on the BPO, the bank will negotiate with the potential buyer (ex. us) for a final agreed purchase price
5) The successful short sale is closed (or rejected by the bank)
Of course, the process is more detailed than that, but there you have the basic stages.
The BPO stage is where the bank will hire an independent local real estate professional to gauge the present value of the property. How do they do this? By looking at similar nearby home sales, local inventory and house condition among other things. They come up with a value and relay this number back to the bank.
So why is the BPO so critical? Because it gives the bank an estimate of the value of the house they’re considering taking a loss on. They know they’re going to take a loss but they don’t want to be taken for a ride, either. So the BPO provides the starting point for any price negotiation since the bank will compare this number to the offer amount.
As a homeowner in need of a short sale, you generally want this BPO to be low to help your buyers afford your house — and help you move on. If the BPO comes in too high, your buyers might get priced out and you may find yourself facing a foreclosure. So low is good!
So the next time you hear the phrase BPO, now you’ll know what we — and your agent — are talking about!
If you need free short sale assistance in Hawaii, then CLICK HERE NOW for your FREE CONSULTATION! Or call us at (808) 377-4379!