The BPO, or Broker Price Option, is when the bank appraises your house through a hired third party. An integral part of the short sale process is getting your bank to accept a lower price for your house that consistent with other short sale prices in the neighborhood. Your bank will likely come back at you with a price you see as too high to attract buyers. In order to get an attractive, reduced short sale price, you may actually have to invest a little in your home. You need to establish a happy medium.
Broker price option indexes are elastic
Similar to that found in some foreclosures, there have been not a few reports of troubled homeowners abusing their homes to reduce the value—staining carpets, putting holes in the walls, otherwise neglecting their once valued home. In all fairness, this behavior is irresponsible and won’t likely dramatically reduce your bank’s valuation of your home. The bank sees broken shutters and dirty carpet as cosmetic fixes.
For instance, if you have a $120,000 home and you want to list it for 100,000 because it hasn’t been maintained properly, the bank will see through this. Be prepared for the bank to counteroffer for nearly the full listing price. Many homes need fresh paint and even new countertops. Unless your home is long overdue for a remodel, don’t expect the bank to readily agree to $20,000 off the market listing of your home.
Instead, come back at the bank with an offer to spruce up your home and explain that you are willing to take on extra financial burden in order to expedite the short sale process and bring in as much as possible. Be sure to point out other homes in your community that are similar to yours and at price points similar to yours. The bank may eventually agree to drop $10,000 instead of 20,000, but with the cosmetic fixes, you have made it more attractive to buyers.