Yesterday we chatted about existing market data and how we believe that the market will keep going down. So, we would like to talk about what occurs when there is a sharp rise in active inventory and a sharp decline in sold properties.
Having been in the short sale industry for three years, we have seen slight rises with tax credit extensions and additional programs. What we have seen is when inventory goes up and sales go downward, lenders do not respond to that information promptly. Generally, they pull in their facts for BPO’s and appraisals from as much as six months ago. The problem with this technique 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 aren’t taking into account that sales are going down and quantity of active listings are going up. When you see this happen, you will have to begin pricing your houses more aggresively. The market is dipping again but the lender is very slow to respond to that information. They don’t want to be the first to take action on the lower price. You can be expecting that they will counteroffer with other prices of properties sold months ago when the marketplace was not the same.
For example, we had a listing with an offer price of $245,000. We believed it was a strong offer because the market was going down. We received a counteroffer with the BPO figure at $265,000. We were given 24 hours to redo the offer or the file would be closed.
Kevin disagreed and had to show to the negotiator that the BPO price was sour. He found a comp that was the duplicate floor plan listed at $235,000. This was sent to the negotiator and along with a memo that explained the position. The alternative to the bank counter offer was to foreclose on the property and relist it in ninety days at a lower price than the proposal.
Be informed that there will be BPO disagreements in your future. With listings increasing and sold homes decreasing, you will have more disagreements on your hands to prevail over.
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