“You Mean, the Bank Can RAISE The Price After the Seller Has Signed the Purchase Agreement?!?” (Yup, That’s What I Mean)
After a couple HUGE years for short sales, they’re now receding as a factor in today’s housing market.
According to City Lakes’ resident short sale expert, Jim Kantorowicz, there are two reasons for that:
One. Several years of rising housing prices mean that fewer homeowners are underwater.
So, someone whose home might have been worth $180k a few years ago, and who then owed $200k, might now have a home that’s worth $220k against a $190k mortgage (due to principal amortization).
Voila!
No more short sale.
Two. Banks’ expectations are rising along with appreciating home prices.
Vetoed by the Bank(s)
The way short sales work, only once the Buyer and (underwater) homeowner have agreed to a sales price does the deal advance to the lender(s) for their approval.
The bank’s first step: ordering what’s called a “BPO” (“Broker Price Opinion”) to determine the home’s fair market value.
According to Jim, more BPO’s are now coming in above the home’s selling price.
Result: the bank goes back to the Buyer, and says they’ll only agree to the deal at a higher price — like $10k or even $50k(!) higher (it depends on the BPO and the home’s price point).
Yup . . . the bank(s) can do that.
A Buyer confronted with such a dilemma can either agree to the higher price; try to counter it with something lower; or, flush the four-plus months (average) they’ve spent waiting for the short sale to be approved.
Which is why Buyers should sign up for short sales only once they’ve been fully apprised of the risks.
