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Do Agent's Low Ball BPO's To Get Listings? According To An Article In The Washing Post - They Might

Dear Ken,

I read your article. (Sunday, March 28, 2009 - The Washington Post Real Estate Section Page F1)

I will have to respectfully take exception to the comments regarding agents and the low-balling of BPO's.

As a full time Realtor in the Washington DC market who is pretty deeply involved in the foreclosure market, and who has completed quite a few BPO's in the last couple of years, I can tell you that low-balling BPO's would not and does not work.

Yes, banks do use BPO's in the valuation process, but it is only one piece of the pie. They also use appraisers, and from what I can tell, the banks almost always get at least three valuations. That is three separate opinions of a properties value. The bank, which is usually really not the owner of the property, but merely the entity that is servicing the property, then reviews all of the valuations and sets a price at which to market the property.

Please keep in mind that the person at the bank who sets this price is most likely like any other employee of a large company - meaning they probably have some level of accountability, certainly to the investors that really own the properties. If they set low-ball prices on properties based on one agents low-ball BPO, they would probably eventually get a pink colored piece of paper delivered to their desk.

So if I, the agent, did a BPO and low-balled it and submitted it, I have a much better chance of looking like an idiot than actually getting a listing from it.

Kevin McGrath

RE/MAX BRAVO

Fredericksburg VA

www.fredva.com

Posted by Kevin McGrath & Jane Wallace RE/MAX BRAVO on 03/28/2009 05:17 PM

Comments (34)

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34 Comments on Do Agent's Low Ball BPO's To Get Listings? According To An Article In The Washing Post - They Might

MAR

Hmmm, just a short time ago people were asking if BPO agents gave Higher price opinions to get the listings!!!

Having done well over 500 BPOS on myself I can tell you that trying to "low ball a BPO" does not work the banks can see it clearly and most times the agent doing the 1st BPO is not the agent that becomes the listing REO agent.

I have to agree with Karens comment, it wasn't very long ago that the concern was agents giving too high of prices on bpo's to get the listing.

As you stated, bpo's are just one slice of the pie.

Since when do agents value properties on the low side??? This is nonsense. First of all, the banks don't look for low valuation. They look for high valuations. Agents who give low valuations, if they were to be considered to list the property, would never get the listing. My experience is that agents who have a chance of getting a listing value on the high side, knowing that if it doesn't sell the bank will lower the price.

Reasons for low prices on short sales is because of the lack of standards, guidelines, communication, contract contingencies, repairs, and no way of knowing if the transaction will ever settle.

As long as the banks make buying short sales the next thing to having sharp things stuck under your fingernails, they have to be priced to low get any consumer or selling agent to even look at the properties.

I did send this to the author of the Post article - we shall see if he responds.

Great post, great info...

Great information. I have never done a BPO before. I am curious to find out if the author responds to your letter Kevin. Congratulations on the gold star.

I do BPOs and get REO listings. And I don't know how it works in other places, but I know up front before I do the BPO if it is my listing or not and if I am the second opinion on someone else's listing... I know this because I usually have to contact the listing agent to gain entry into the property. Sometimes I do preforeclosure BPOs and no one will ever get the listings, the owners may catch up payments. The bank may be more willing to work with a behind owner if the value isn't equal to the loan amount. But when I do a BPO I have NEVER been doing it to compete for a listing.

Kevin, After reading his article it strikes me that you can always find at least one person to support an indefensible position. The whole premise of the article makes no sense as a Realtor. Rich

Interesting point and conversation here. I think the better agents submitting the BPOs are giving their best opinion of valuation and going from there.

Clearly, someone that obviously has no clue about the housing market is writing about it. I also perform Broker Price opinions and List Foreclosures in my area. (Houston, Texas) The BPO's we perform are for valuation companies and do not lead to listings. They get at least three separate OPINIONS and will call you on it if you do not fall in range with the other two. Generally, I am asked not to include foreclosure properties as comparable properties. This would keep the value higher. Comps are considered actual listed and sold properties in the last six months within a mile of the property. It is hard enough to find that without trying to artificially deflate or inflate the property. It would just get your values thrown out, questioned, and not paid for. And by the way, this is what Realtors do everyday to estimate a value and recommend a list price for a property. It is not an appraisal and is never presented as one. Appraisers are making an issue and saying it is illegal, because they don't want to share a piece of the pie. You have to look at the motivation behind the statement.

I have done many, and have never low balled any of them....

We have done some and never even thought of low balling a BPO. Why on earth would we do that? ~Rita

Odd statements. For the BPO companies I have done work for, I've never received a listing. For the REO companies I have done work for, I've gotten the listing regardless of the number on the BPO. Sounds like someone is confused.

The one thing that kils me about real estate reportage is the astonishing level of cluelessness on the part of the writers. If an agent were "bidding" for a listing, they'd overvalue, not undervalue the property.

Some agents do low-ball some listings but it is sometimes big REO agents that do it now and then. Not all the time

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012501650.html

Sounds like an 180 degree turn from this previous article.

....(name witheld), an appraiser in the Richmond area and a critic of lender interference, said that much of the mortgage crisis can be attributed to "ill-trained, unprofessional appraisers who were willing to knuckle under" to demands by mortgage brokers and retail loan officers to inflate values.....

Now appraisers are blaming agents??

And no, I don't do BPO's

I have been the 2nd and 3rd agent doing a BPO on a property where the Listing Agent has already been assigned. Frustrating....

I see way more REOs that are priced too high... very few that are too low.

MAR

More often than not, you either are the agent who has already been assigned the listing by "babysitting" it for months prior to the BPOs or you are the second or third evaluation. Low-balling or setting the price too high does nothing for you. It only makes you look like an idiot to the asset management company.

I have to go a different way on this, not completely, but a bit. My team is involved in Short sales. We typically find an investor to buy thge property for rental. Investors need a price that is worth buying it for. Typically owner-occupant types don't have the patience to wait for time it takes. In Oklahoma our values are still holding and rising slightly. What I find is that many Realtors are signing up for those $45 BPO's, and could care less about a real value. They act like a Texas jackrabbit trying to just beat the car lights to get across the road. I pray that $45 is never that important to me. As someone who has had appraisal classes, first undertand why the BPO is being done, and two, know how to properly evaluate a value. I want to it to be like Goldilocks: Don't make the BPO too high or too low, just get it just right.

Kevin, I wonder if Ken openedthe flood gates with that post?

I can see that he trulydoes not understand that a short sale listing can NOT get assigned by a bank. It is still the homeowner who has to pick the listing agent of theirhome. He maybe should have done a bit research on Real Estate law and familiarized himself with that topic before writing about agents doing BPO's for a Bank to get a short sale listing.

I read this and laughed. What good does it do for a Realtor to low ball a BPO? From what I have seen neither "low balling/high balling" a property is going to get you that listing. Maybe the reporter should have done a little more investigation. If he does respond to you would you add it to the post? I would enjoy reading it.

I read his article and it is riddled with inaccuracy especially in regards to NV Law. He left off a bunch in regards to NV Law with the one half sentence. My BPO addendum is 10 paragraphs and contains all 7 points (including market reports and conditions) that is required by law. It is VERY clear in our BPOs that we DO NOT DETERMINE VALUE. We are determining list prices only.

Also - for the record - many companies will price WELL below what the BPOs come back at just to dispose the asset. They are also selling at WELL below (sometimes half of current market list prices) in trustee sales.

Normal sellers do NOT get appraisals done on a regular basis to list their home. They usually ask the opinion on where they should list the home of one more more agents. The low baller does not win. Never knew of a lowballer winning these listings. Insane strategy and conspiracy.

Thanks for taking the time to write him back. If I have time during my day I will do the same.

I am back because I am still annoyed by this. I wish he would have brought up unfinancable properties get lower BPOs because of things like mold, kiteck plumbing, non permitted additions, etc. It's really sad that some head appraiser dude would complain about this when the signs are there such as CASH transactions. Those of us that are out selling this c-r-a-p all day long and doing BPOs know that this house is unfinancable or that house is nice, etc.

I see that once again our profession is being blamed for the fact that overall prices are lower than they were a year ago.

I do BPO's and I am amazed to see, when researching my comps, the prices that some properties sold for a couple of years ago. Sometimes the property that is the subject of the BPO was sold at a price that was so high I have to wonder what was going on when the loan was being processed.

I have done BPO's on properties where my research indicates that a fair market price is as much as 25% less than the last sales price at the time they were sold. It doesn't mean I am lowballing, what it means is that the previous price was way too high. Some of these properties have gone through the foreclosure process within 18 months of the last sale and they have been sitting on the market for a year or more.

The banks are in a tough position; they need to sell the asset and they need the best price. Often the properties have been thoroughly trashed, doors broken, walls kicked in all the appliances removed, basements flooded, carpets ripped up and worse. I did a BPO on one home that had had the granite counters removed from the custom built kitchen along with all the built in speakers and the bathroom fittings and all appliances as well as the three GDO's, and even the digital thermostats. This home was in a neighborhood where homes had been valued above $600k, the subject had sold for $675k only 15 months before I was doing the BPO. Would I be fair to the bank if I suggested a price close to the neighborhood average? No. The property was in need of a lot of work and there were several unfinished homes close by and a lot of homes for sale in 'move in condition' at prices which were obviously too high for the market.

My BPO indicated a price close to $500k. I was amazed to see it come to market a few weeks later at $435k, it sold after 3 months for $415.

Doing a BPO is no different than working with a home seller to set the price on the home they want to sell. Yes we can "buy the listing" by agreeing to market at a higher price than we believe it should be or we can be firm and honest with the seller and not take the listing if they don't agree with our recommended price, and I don't mean a lowball price but one that is consistent with the market and the subject property. Similarly when working with a buyer who wants to make an offer we use our knowledge of the current market to guide them to make an offer which will secure the property for them. It is our task to find prices that the market will bear. The ultimate test on whether the price is too high or too low is decided by our clients, the buyers and sellers. Nowhere does an appraiser show up in this process until the loan application.

The media has been beating up on Realtors for a long time. Here is another article which is one sided and misinformed. The sad part is that the public who read such drivel are led to believe that it is correct and once again we find ourselves having to defend what we do.

Ridiculous - lowballing a BPO thinking it would get the listing? Right up there with raising your commission to get the listing - DUH.

MAR

Good link to the article. Worth reading.

This stuff is really quite nuts. I have been doing BPO's for some time and not once have I been offered the listing. I do not believe it is due to the work up that I completed, but rather the order was to support the listing efforts of another agent. . . such as when the contact for an interior BPO is a well known office doing nothing but REO's. One firm I do BPO's for makes it very clear with regards to pricing. . . Price the property as if I were the agent listing it for sale. If priced to high it will certianly not sell and my reputation is lost for good. Too low and I would be suggesting that the lender (investor) loose money.

There is one advantage for low pricing. As Mike Cleaver indicated his BPO price was for $500K, but when it came to market it was listed for $435k and sold for $415K in 3 months. Not bad. The point is that the Market, not the BPO, determines final sale price. If you are doing a price opinion, do it as if you were the listing agent. knowing fare well that if you price the property too high, you will only likely loose the trust of the Asset Manager who will cancel the listing and reassign it to another agent who in turn will earn the commission for the sale.

Lets get it together folks.

MAR

I have done over 250 BPO's in the past few months in PHOENIX. I had to go back and review several because I was the 2nd agent or 3rd agent to submit one for the same property; and have found that same agents used comps that were not comps at all... Custom homes on a mountain side neighborhoos in the the same pot with tract homes at the base of the mountain .... sometimes a real mess. I had to be the one looking bad and redo or explain. I always stick to my guns. I think BPO's should be paid more and the agents selected to perform them should have a min of 5 years ( full time ) experience in sales. homes that sold over 1.5 mill were comp at 400 K. the market has not gone down that much .... some of these agents that do BPO's really have to wake up and do a better job.

Some were way too high agent clearly ignored the REO's when 70 % of sales are REO's and short sales....

I ALWAYS WRITE IN : MARKET DRIVEN BY REO'S AND SHORT SALES. SAME ZIP CODES OR SUBDIVISIONS THERE IS NOTHING ELSE THAT CAN BE USED

and the 3rd party vendors need to pay more than $ 35 FOR outside BPO (WHEN SO MUCH IS RIDING ON THE VALUE SUBMITTED.) What do they expect for $ 35 ?????? I do not do any BPO's for less than $ 50 to 65 ( outside ) or 80 to 100 ( interior ).

AZ IS A NON DEFICIENCY STATE : MEANING THE LENDER CAN'T GO AFTER THE FORMER OWNER TO RECUPERATE ANY MONEY AFTER THE SALE ( IN MOST CASES ) IT IS A VERY EXPENSIVE PROPOSITION TO FORECLOSE IN AZ. LOSS MIT DEPT NEED TO GET A BIG BANNER THAT SPELLS OUT : VERY EXPENSIVE TO FORECLOSE IN AZ !!! ACCEPT THE SHORT SALE OFFER AS IT IT THE BEST YOU WILL GET. THEN THEY NEED TO LET BUYERS KNOW THEY WILL RESPOND PROMPTLY AND MINIMIZE THE LOSS AND THE POSSIBILITY OF THE PROPERTY GETTING TRASHED OUT AFTER MOVE OUT .

My 2 cents.

HAD TO COME BACK AND WRITE MORE ON THE SUBJECT.

I HAVE HAD VALUATION COMPANIES TELL ME SEVERAL TIMES MY PRICE IS TOO HIGH !!!! VALUATION COMPANIES WANT THE BPO PRICES LOWER IN MOST INSTANCES. SO JUST AS IN THE PAST THE APPRAISERS WERE PERSUADED TO OVER INFLATE , AGENTS ARE NOW PRESSURED TO LOWER. !!! LOL I ALWAYS TRY TO DO MY BEST SO I CAN SLEEP AT NIGHT AND HAVE STOPPED DOING BPO'S FOR A FEW COMPANIES THAT WERE IN MY OPINION NOT VERY PROFESSIONAL.

THIS IS WHAT I WROTE ON THE SUBJECT SEVERAL MONTHS AGO !

I am sorry for "yelling" on your post but wanted to have the asset managers/ loss mitigation hopefully read and pay attention to what is going on.

JUN

Kevin, good post. There are several things that Mr. Ken does not understand, and try to put something on the news paper. I think that is a clear case of misuse of public media. I can not believe that Washington Post even will publish it.

1. Ken will need to follow someone to complete at least one BPO working process to qualify himself to write his opinion. 2. Ken must has some knowledge about the free market system of our country. If the property is on the market, MARKET determines the price, not BPOs, nor real estate agents, nor the banks. If a property is price too low, then the market will produce multiple offers and the comtetition will drive the price to the market price. 3. Ken should learn the process vs try to please certain Associations. 3. Ken should learn the decision making process of all the interesting parties, the investors, the banks, the 3rd party for listings, the 3rd party for BPOs, the agents.

Ken's artical has no depth. I recommend that Ken should learn about the process and write a revision article to rebuild public opinion on Washington Post and himself.

Thank you for reading. Terry Tung

JUL

I've done hundreds of BPO's. A few have been kicked back from QC requesting 30 day value be lowered. I haven't received any listings from these BPO's either.

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