So you’ve found a motivated seller and you know that you can easily find a buyer for the property. The question is, “How will you negotiate with the bank or the lender to have a healthy margin for your profits?”
The first thing to do is submit the offer. This, at the very least, will start the negotiation process. If you’re lucky, you might even see your initial offer accepted. However, don’t count on that. The truth is, you will never know if the bank will accept your offer or not. The important thing is that you submit an offer to the bank and see how the lender reacts.
However, you are not limited to submitting an offer to the lender. You must have a contingency plan to have the best chance of success. Before you can come up with an effective contingency plan, you must have a good idea of how the bank processes the offers it receives. The negotiation process will become almost painless if you do your homework before submitting an offer.
Your offer, also known as your short sale package, will be assigned to a loss mitigator. The loss mitigator will request a BPO. The BPO, or the broker’s price opinion, is important to you as an investor because it will be the basis of whether or not your offer will be acceptable to the lender. Your offer must be close to the BPO for the lender to accept it. Typically, an appraiser or real estate agent will do the BPO to determine the property’s value. Work should be done at this point.
You will need to contact the loss mitigator and gather as much information as you can. You will have to ask questions. You will need to have done a thorough research on comparable properties and come up with an accurate value after repair or ARV. The estimated cost of repair plays an important role in influencing the BPO. You will need to meet with the BPO agent at the property to provide as much information as possible to try to get you a low BPO. You will need the BPO to be as low as possible so that you have more “leeway”. A low BPO is advantageous for both the owner and you, the investor.
A few days after meeting with the BPO agent or appraiser, contact them to find out how the property was valued. Remember that your price offer will have to be close to the BPO for your offer to be accepted.
Finally, you are now ready to prepare and make your offer to the lender. Although not an exact science, bidding is not a guessing game, as you can see. There are tools you can use to make sure you hit your target whenever you make an offer to the bank. To get the profit you want, you need to buy from the bank at the lowest possible price. So, you can make that profit when you sell.
Yes, it can be challenging at first to bid close to the BPO and still make a reasonable profit. Negotiation is only secondary to identifying a good short sale property and doing your homework. When these two steps are done properly and completely, negotiating with the lender shouldn’t be a problem.
