Imagine a scenario where you’ve seen a short sale property listed on the market, and you’ve gone into contract and received an accepted offer. But the bank comes back with a value higher than your offer and won’t sign off on the short sale. How do you convince the bank that your proposed purchase price accurately represents the true market value of the property, especially considering that you were the highest bidder? There are three very important things which you need to prepare before you present your argument to the bank. 

First, get an independent appraisal. This can back up your stance regarding the state of the local real estate market and demonstrate why your bid is in line with fair market values. 

Another impactful piece of evidence is a contractor’s estimate. A licensed and insured contractor can provide you with an itemized estimate of the cost of any and all repairs needed to rehabilitate the property. This is vital because the bank’s BPO (broker’s price opinion) professionals are experts in determining property values, but not in estimating construction costs. The contractor’s estimate will back up any claim you make that your purchase price is reduced due to the anticipated cost of repairs to the home. This is one of the greatest sources of the discrepancy between your bid on a property and the bank’s proposed value.

Finally, draft a concise, clear letter expressing to the bank or asset manager why your offer on the property is what it is. It should briefly summarize the following: 

• The state of the neighborhood
• The desirability of the school district
• Any outside factors which may negatively affect the property’s value, such as proximity to businesses (for example a gas station) or another less desirable location 

The letter should be brief, but clearly illustrate why these factors should be taken into consideration when determining the property’s true value (and why your bid is in line with it). 

With all this evidence compiled, you can make a compelling case to the lender that your offer is reasonable and likely to be the best way to minimize their losses.