Yesterday we talked about existing market statistics and how we think that the market will continue going down. So, we would like to talk about what happens when there is a steep rise in active inventory and a steep decrease in sold homes.
Having been in the short sale industry for 3 years, we have seen little rises with tax credit extensions and additional programs. What we have watched is when inventory goes up and sales go downward, lenders do not respond to that data instantly. In general, they pull their facts for BPO’s and appraisals from as much as 6 months ago. The problem with this procedure is that the BPO is greatly weighted on sold costs. So when you draw sales from contracts that were written in January, February and March, the tax credits impacted the marketplace. Those comps are not taking into account that sales are going down and number of active listings are going up. When you see this occur, you will have to begin pricing your houses more aggresively. The market is sinking again but the bank is very slow to respond to that information. They do not want to be the first to act on the lower price. You can presume that they will counteroffer with other prices of houses sold months ago when the marketplace was not the same.
For illustration, we had a listing with an offer price of $245,000. We felt it was a solid offer because the market was going down. We received a counteroffer with the BPO value at $265,000. We were given a day to recreate the bid or the folder would be closed.
Kevin disagreed and had to prove to the negotiator that the BPO price was sour. He discovered a comp that was the identical floor plan listed at $235,000. This was sent to the negotiator and along with a memo that explained the situation. The alternative to the lender counter offer was to foreclose on the property and relist it in 90 days at a lesser price than the proposal.
Be informed that there will be BPO disagreements in your future. With listings growing and sold houses declining, you will have added disputes on your hands to conquer.
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