Bank of America’s New Value Dispute on Short Sales

Bank of America seems to be the leader in announcing their short sale changes.  After announcing their commitment to streamline and shorten the short sale process, they announced their new policies for disputing values on BPOs (Broker Price Opinions) and appraisals.

If you have been involved in short sales for a while, you know that a BPO or appraisal result can make or break your deal.  Too often, the value comes in too high and your offer is declined or countered at a price that makes the buyer walk.  In the past, disputing a value was nearly impossible.

On May 1st, Bank of America announced their redefined policies for disputing property values.  We have yet to see how these new policies will actually affect short sale offers, but the initiative is a good one and the changes should interest you.

Independent third-party vendors are hired by the lenders to determine the BPO or appraised value.  In the case of short sales, the lender will order a BPO on a property after a short sale request is submitted and/or after a short sale offer is received.  After the lender receives the BPO results, the offer is compared to the BPO Agent’s determined ‘value.’  When an offer is declined or countered, there are occasions when the value needs to be contested.

If the listing agent thinks a value dispute is necessary to substantiate their offer, their opinion is not enough for the lender to comply.  The agent has to provide a compelling case that supports their list price and offer.  Bank of America wants to see recent sold comps for properties that sold within 90 days of the actual BPO/appraisal date.  These comps must be from properties in the same area or neighborhood.  If the property is in need of extensive repairs, an itemized repair estimate from a licensed contractor should be included.  This estimate should be on the contractor’s letterhead.  Additionally, property damage photos need to be included to justify and support the contractor’s estimate.

If the property has been on the market for a while and the agent has reduced the price a few times before an offer was obtained, the price reduction amendments and the showing history and buyer/agent feedback are also good pieces of evidence to support their dispute.  This information shows the price point at which the property gained interest and an offer was received.

The process to follow for disputing values with Bank of America short sales are:

1.  Tell the short sale specialist or negotiator that you would like the BPO/appraisal value reconsidered.

2.  The specialist will send you an investor-specific instruction form that specifies the requirements to dispute the value.

3.  Complete the form and attached any documentation that support your claim (i.e., contractor’s estimate, property damage photos, price reductions and showing/feedback history).

4.  Once the value dispute information has been received, it will be reviewed within 10 – 12 business days.  Be sure to follow up with your short sale specialist/negotiator for the results on your dispute.

Disputing values is not always easy, so if you are a listing agent for a short sale property, one of the things you can do to reduce the need for one, is to do your homework at the time you list the property.  The short sale lender wants to receive the best and highest offer possible to minimize their losses.  Therefore, the hired BPO agents are looking to compare the short sale property with retail comps in the area.  So know the neighborhood, do your own CMA and run your own comps.  If you realistically price the property per the market, it will minimize the need to dispute values.