How to Contest a Fannie Mae BPO for a Short Sale

Contesting a Fannie Mae BPO for a short sale is easy.

Agents in Sacramento often come to my website for answers on short sales, and finding out how to contest a Fannie Mae BPO for a short sale is no different than anything else. Buyers and sellers use my website for the same information. What I don’t do, however, is interfere in another real estate agent’s short sale transaction — especially when their clients run to other websites desperately searching for information and beg other agents to answer their questions, just because we may happen to participate in online discussions. Consumers don’t know the difference between being in escrow and asking other agents for advice versus being unrepresented, and some agents don’t either.

Being a Sacramento REALTOR means I must adhere to the Code of Ethics. Any snot-nosed agents complaining that a high profile Sacramento Realtor interfered in their transaction could land anyone of us before an arbitration hearing — simply out of spite or jealousy — so I don’t give those jerks the ammunition. Despite that, I hate to see buyers twisting in the wind because their agents don’t have the answers, so I often offer to speak with their agents if the clients will ask their agents to call me.

A buyer in escrow and posting on Zillow last week asked the question of whether she could contest a Fannie Mae BPO for a short sale. I wanted to answer her question, but instead suggested she ask her agent to get in touch with me. I’m not going down that path of giving advice to somebody else’s client. There are plenty of other agents who a) don’t care about the Code of Ethics and b) give lousy advice, anyway. Unfortunately, her agent never called me and she apparently did not contest the Fannie Mae BPO, so she lost the opportunity to challenge.

I’ve worked on Fannie Mae short sales for years, and they’ve always been the same. Overvalued BPOs. Some homes may eventually even appraise by the buyer’s lender, which is probably why they do it, but some don’t. I guess Fannie Mae takes its chances. But the fact that has not changed is that the Fannie BPO is rarely reflective of value nor is it the appraisal. This is the thing that people confuse. They think that the BPO is the appraisal, and it is not.

I verified my bogus BPO value suspicion when the Fannie Mae appraiser called for access to a short sale in West Sacramento. I let it pass in conversation that I do not hold him responsible for the over-inflated value that Fannie Mae will most likely inflict on this home, and that I realize his appraisal will be less and reflect the true market value. He collaborated that statement. Replied, yes, agents get angry with him and believe he gave Fannie Mae the wrong value when he did not.

Sure enough, Fannie Mae came back and asked for 15% more than the sales price. Unlike the poor buyer on Zillow, we did not rollover. I contested it because it was wrong. I submitted an invoice from a licensed contractor detailing all of the work that was needed to bring this home up to the standards of homes that were selling for a higher price. The home reeks of pet urine. I submitted comparable sales and in detail explained why adjustments were necessary to some of the higher priced, turnkey homes, which this home was not. I asked the buyer’s agent to prepare an addendum and state his opinions right on the addendum so Fannie Mae could see it.

I did this not so much because I represent the buyer because I do not represent the buyer, this Sacramento Realtor represents the seller. I did this because once the short sale is approved and the buyer’s appraiser gets her hands on the value, I’d have to do it again anyway.

As a result, Fannie Mae backed down on its demand and reduced the inflation by about 10%. Now we could come to an agreement and move forward with the short sale.