How do you handle the BPO?
I’ve seen some interesting blog posts over the last few days that discuss how mortgage lenders participating in short sales determine the value of a property.
First off, so that it doesn’t seem like I am speaking a foreign tongue, I am going to provide a little dictionary definition for novice short sale agents. The bank determines the value of the property using something called a “B.P.O.” which stands for Broker Price Opinion.
To determine this value, the mortgage lender hires a licensed real estate agent. Agents are paid anywhere from $50 to $100 for this service. The service usually requires the agent to visit the property and to provide the lien holder with three ACTIVE and three SOLD listings (within the last 60-90 days) in order to determine the value of the subject property.
In contrast with the BPO, a buyer—when purchasing a property—obtains an appraisal from a licensed appraiser who does a significantly more complete and thorough analysis of the property and the comparable sold properties in the area. Because the appraisal is more thorough than the BPO and because it is completed by a licensed appraiser, the cost for this is greater—usually beginning at over $300.00.
In determining whether the short sale transaction will be approved, the results of the BPO are one of the most significant components of the short sale package—and the one over which the listing agent has the least control. After all, a listing agent can control what items are sent to the bank, when they are sent, and where they are sent. However, the listing agent cannot control the price determination made in the BPO.
If an agent comes from another area of the city in order to prepare the BPO, he or she may not have all the latest information about problems and issues that may be occurring with the subject property or in the subject neighborhood. Additionally, agents who make an appointment to view the property in order to prepare the BPO and are unable to obtain access probably get pretty darn frustrated. After all, if you drove 20 miles to view a property and the key was not in the lockbox or there was no one at the property to open the door, you would be frustrated as well!
Here’s what you need to do.
As short sale listing agents, I always say that our role is to be available to open the door for the BPO and to be available to answer any questions and provide any information as needed. This is a vital component of the short sale transaction. The BPO is ultimately returned to the bank and whether or not the short sale offer is accepted is based (in large part) on the results of that BPO.
So, if you are a lazy listing agent who has little interest in your deal closing successfully, that’s cool. Don’t go to meet the agent preparing the BPO. But, if you want to be a super successful short sale listing agent and see more closings than ever before, get out of bed and go meet the agent at the door!
It may be a little harder to get up early this week (because the time just changed), but if you attend the BPO, it’ll make your short sale transaction go sailing along quite smoothly.
I am going to add my 2 cents worth here (as I do BPO’s and have short sale listings) and say to agents who have short sale listings…COOPERATE with the BPO agent! If they cannot give you a specific time that they are going to be there (because maybe you are not their only BPO they have to do that day), then make sure that there is a lockbox on the door with a key in it. Make it super easy for the BPO agent. If there is Chinese drywall in the house, for example, make sure you have all your estimates and inspections regarding it and get it to them in an email or leave it at the property for them to have a copy of (I always upload those reports into the BPO so that the lender has a copy). Give them the community information that they would otherwise not know. I go out of my way to make sure that there is a lockbox on the door and tell the agent they can go anytime (including calling them into gated communities). Do not force the BPO agent to work around your schedule – so not cool! I have gotten more “thank you so much for making it easy for me” from BPO agents.
I m not sure why BPOs v appraisals are an issue. Oh yeah the appraisal community has been beat up by the HVCC, their income attacked, so now they take aim at BPOs and do a pretty darn good job with their anti BPO spin.
I was at a REOMAC conference and the question was asked how much weight the BPO has in front of Asset managers. I know how much weight they have with my asset managers and I see first hand with Short Sales how well the process is working. The answer: appraisals are getting the weight for the value not the BPO. Agents have a hard enough time taking pictures and properly describing the interior condition of home for the MLS. An interior BPO is not going to change much.
Appraisals not tied to a 1003 Loan Application are problematic. Every single one I have dealt with in the last three years has not been the paper it is written on.
So what do we do? Stop thinking that BPOs are appraisals or take the place of an appraisal. A BPO is just a snapshot, this is how asset managers veiw them and how loss mitigation views them. On the short sale it is a way for loss mitigation to make sure the property has not been placed on the market under area values.
95% of the BPOs I have been assigned in the last two years have been properties that are not listed for sale – Not Short Sales and this is not related to my REO account.
I have started a Video Blog series on this topic and I am working on my third installment.
http://homebuysblog.com/2010/0.....-villains/
http://homebuysblog.com/2010/0.....ions-bpos/
Great post again Melissa;
Speaking of BPO’s, I just saw this article on Housing Wire. Apparently there’s a bit of a scuffle between the National Association of Realtors (NAR) and the Appraisal Institute, with the appraisers saying BPO’s aren’t that accurate and then NAR defending against that accusation.
http://www.housingwire.com/201.....aluations/
We have been teaching about the influence of a BPO being the most important aspect of a short sale and it seemingly falls upon the deaf ears of lazy agents. I can’t tell you how much money we have made simply by controlling the BPO.
I have to disagree vehemently with the first commenter, NEVER would we allow a BPO agent to simply access the property by lockbox. Make an appointment and we’ll meet you. We’ll get there early and be waiting with bells on.
A BPO is show time for us! We make sure that every aspect of the property is seen. (gotta love disclosure rules).
We recently bought a property that had a $300,000 mortgage balanc eon it for $5,000.00. Not a misprint, I said $5,000.00! It helped that when the BPO agent showed up we asked her if she had a concealed weapons permit as there were some crackheads sleeping in the unsecured house.
She walked up and it was like a scene out of Silence of The Lambs…she could not wait to get out. She was there maybe 5 minutes…bank called the next day..bingo..cash money!
Hey, we’ll never put a dead dog in a house but if the dead dog is in there, we leave it there until the BPO has concluded. Now that’s influencing and controlling the process.
Cha ching!
Great article,
Barry Cunningham
Real Estate Radio USA
Nice information about BPO.