Real Estate Terms explained: BPO|
by Al Susoeff
When a bank has to take a home back in a foreclosure, they will want to know what the house is “basically” worth. Many real estate agents and brokers supplement their commission income by doing BPOs, or Broker Price Opinions. Though the income from an individual BPO may only be between $50 and $150, these brokers do well by streamlining their procedures and forms. Many companies allow the completion of BPO forms online, and typically the broker will send some newbie agent out to do the job, and take a “split” of whatever the pay is for the BPO.
There are two major categories of BPOs, the Drive By BPO and the Internal BPO. The name "Drive By" implies the extent of this BPO, but the task and form requirements can vary for this BPO type. Of course, in general the drive by BPO will not require the broker to get out of their vehicle nor go into the home. Needless to say, I think even a total moron can figure out what this information is worth.
Don't believe how silly and useless these documents are? Perhaps you should hear it from an expert. I read an atrticle recently by a realtor in Oklahoma by the name of Joe Pryor. Here is an excerpt from his article:
"The BPO is a Brokers Price Opinion. Here is the main qualifications. First, you are a Realtor. Second, you sign up to do BPO's. Third, you have the fastest finger in the west. What? Yes this is correct. When the order is sent out it is sent to many and it is first come, first served. You may have only made two sales in your life, and you qualify. You are paid very little and often it is reflected in the work. One example was in a neighborhood that was new in 2004 and only one builder. The 2005 house was sold originally at $99 SF. Current 2009 houses were selling at $103 SF by the same builder with the same features. The BPO came in at $105 SF. Great work wasn't it. Three months later we closed it after protesting and getting another opinion. Meanwhile the seller was hanging in the wind. This year we have a house totally destroyed in the interior, and sold at $120K and that was amazing to get that. The BPO agent did not make an appointment, did a drive by, and came in at $170K. I could go on but on to the next nightmare.
A RMV is a Real Market Value. This has been explained to me without detail by a person at Well Fargo as their "staff appraisers" who have never been to Oklahoma to compare their value to the BPO, or as I like to say, the blind leading the blind. No one will tell me the exact process, but I believe it can involve looking at Zillow, or going by the taxable amount of the property. First, places like Zillow can be 30% off either way, or on the money. They do not have the time nor money to go into a detailed evaluation. Taxes are an equitable distribution of the neighborhood or area assessment. This is not a value to depend on, and some areas in the last few years vary widely on how they are dealing with this in a volitile market.
This has got to stop. There are some really good BPO agents out there, but honestly a busy Realtor doesn't want to take the time for say $45 to do a first class job. The RMV should become more transparent and I wonder if lenders really want for us to see the man behind the curtain pretending to be the Wizard of Oz. I know that appraisers aren't perfect, but pay them a decent amount, and we will get closer to the truth. Short sales require a patient buyer willing to gamble on a long term process that may risk losing a lower interest rate on a quicker close. A seller of a short sale can even lose a job over a foreclosure in some cases. Both parties deserve better than what they are getting with the current system of BPO's and RMV's and change is necessary."
The Internal BPO can also vary in tasks and form requirements. It is definitely more involved, and there are usually more photos required. This type of BPO can require contact with a homeowner in foreclosure, or with a tenant who isn't aware of the situation. Can you imagine walking up to a tenant and trying got explain that his landlord is about to lose the house and he faces getting kicked out with little or no recourse?
The good news here, is that as an investor you can pay just about ZERO attention to a BPO, but it doesn’t hurt for you to know what it is.
Al Susoeff, Jr. is a Real Estate Investor, Trainer, Coach, Author and Civil Engineer from Central Arkansas. You can read more of his articles at www.ASusoeff.com