As you negotiate with any bank you will inevitably come up against the argument of value. The bank says it is worth ‘X’ but you have a buyer’s appraisal stating it is worth ‘Y’. This of course assumes that you have required your buyer get the appraisal in the beginning so you have this very important negotiating tool.When a bank pushes a value higher than the sales/appraised value it is time to prove your value as a negotiator. Here are some of the points I would touch on when defending the Buyer’s Appraised Value to the Bank’s perceived value from the BPO.
- BPO’s – (completed by Realtors) Realtors are not certified appraisers and typically select the highest values or impose their local market trends on the property being valued even if it is not in their local market.
- Buyer’s Appraisal – Completed by a certified appraiser and held to strict guidelines the BPO Realtor is not.
- BPO’s – (completed by an Appraiser for the bank). This is always completed as a conventional loan appraisal.
- Buyer’s Appraisal – If the buyer’s appraisal is also a conventional loan and it is lower than the BPO Appraisal then you may have to challenge with a request for a new BPO Appraisal.
- Buyer’s Appraisal – If your Buyer’s appraisal is a FHA/VA then your appraiser holds a special certification. The requirements for these loans are MUCH stricter than a conventional appraisal. So if you have a FHA and they have a Conventional loan as a BPO/Appraisal I would take the stance that your appraiser is following the strict FHA/VA guidelines that their appraiser is not following. State that your appraisal is in fact the best representation of market value. In addition this FHA/VA appraisal will stick with the property for 120-days. So if they don’t take this offer the next offer will likely be the same loan type. As such it will automatically get the same value. So take this offer now and close or wait and close at this price in 3 months.
Most often for us we end up escalating these conflicts to a supervisor to argue our case. It is important to know that many times the negotiators are assuming/hoping you are not able to understand these subtle differences and that you will be unable to argue the case of value intelligently. If you cannot then chances are your seller or buyer will have to bring more money.
Learning how to detail this can help get you through some sticking points on value. For us this is the fun part of negotiating. When you know your value then stick to it and don’t let them push you around. It may add some time to the negotiations but it’s better that having the deal fall through.