At some point in your short sale process the bank will want to know what the property is worth. They do this by ordering an appraisal, Broker Price Opinion (BPO) or both.
Whether the bank sends out an appraiser or a broker to do a BPO the result of their evaluation will make or break your short sales success. Most banks won’t consider selling the property for less than 85% of the appraised value, some will ask for 90% or above. With that said, it’s critical that the appraisal or BPO comes in at a price that a buyer is willing to pay.
There are a few things that you can do to make sure the appraiser does not give an inflated opinion of value. First meet the appraiser at the property, and walk through the property. This gives you an opportunity to talk to the appraiser and point out any defects of the property. It is also a good idea to bring a few comparable properties they can use for their appraisal. This will save them work and will make sure that they are using realistic comparable properties.
You should also provide the appraiser with a copy of the purchase agreement. Appraisers are used to working backwards. Most appraisals are done for purchases or refinancing, in both of these instances the appraiser will have a target number, they then try and prove that the property is worth that amount. This is why most appraisals come in at the purchase price or very close to it, even if the property is worth more. With that said, the appraiser is more likely to value the property close to the short sale offer if they are aware of the offer.
The most important thing is communicate with whoever is doing the evaluation. Your short sale is almost sure to fail if the bank gets an appraisal much higher than your offer.
The President has signed into law legislation that will allow HUD’s Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA’s existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program will be implemented on October 1, 2008.