Banks seem to throw logic out the window on occasion… of course these are also the organizations who loaned money to anyone that could fog a mirror a few years back.  Did you know mortgage brokers actually referred to some loan programs as “the liars loan?”  Ya, that didn’t have disaster written all over it.  Good news for buyers though due to all this foreclosure/short-sale turmoil.  Portland prices have dropped significantly, back to early 2005 or even 2004 in many cases!

Foreclosure and short sale prices lead the market with aggressive pricing.  It’s very difficult for average resale sellers to compete with someone who’s dumping a house next door due to financial difficulties.  Your neighbor owes more against the house than what current market will bear and is losing his shorts.  Hence, the term “short sale.”  Actually a better definition might be; A mortgage in excess of what’ll be netted out from the house sale, banks have to agree to take this loss.

A common selling situation:

Market analysis is done.  Looks like the property should sell for $500k based upon recent sales within the last 6 months.  Property is listed but no offers come in after 1 month so price drops $20k.  Still no offers, another month passes.  Price drops again, now list is $460k.  This pattern continues for several months until we get to the point at which the $500k property is now $380k.  Wow, what a deal!  Unfortunately, it’s now considered a short sale because seller still owes $450k against the property and doesn’t have any money to pay the shortage.  Multiple offers come in.  Best offer is $385k.

Listing agent goes back to the bank and asks for the rep’s blessing, approving such a sale.  Rep orders the BPO (broker price opinion)/Appraisal.  Appraiser looks at comps and the offer, comes up with a value of $425k.  Bank says NO SALE at $380k.  So, how do we get the place sold?

Ammunition to use against (il)logical banks

Here’s the compelling argument that can be used to leverage a lower sale price:  Show the bank RMLS history.  Your buyer’s agent can produce such.  Fact is that the property was listed for a higher price and didn’t sell.  Market value is determined by buyers, not appraisers, not sellers or real estate brokers.  Although a market analysis was done showing what theoretically a home is worth the bottom line is that buyers are not willing to pay such.  Real value is at $380k in the buyer’s eyes.

Bank representative must make a choice.  Go with the bird in hand, request a higher amount (forcing more market time/counter offer), or foreclose.  In a declining market which avenue is most cost effective for the bank?  You’d be amazed how many banks will accept this logic, some won’t.  But hey, “He who has the gold…”

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