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Commercial Valuation; BPO or BOV

By
Commercial Real Estate Agent with KW Commercial

Commercial Building by ernestbonAs the market shifts, I have been commissioned by many owners, lenders and asset managers to place a value on their commercial property.  I am quick to point out that I am not an appraiser, however, a commercial real estate agent can create a Broker Price Opinion or Broker Opinion of Value.  It is a relatively quick assessment (usually 3 to 5 hours) of the property's value in the current market. 

My most recent BPO was for a client wanting to know the property's value to assess their real estate portfolio.  What an eye opener for the owner.  In the BPO, one of the ways I was able to support the value was by using the current net operating income (NOI).  I was also able to demonstrate the value once the NOI had been adjusted by lowering the expenses.  I was able to do this by pointing out that the facts of the P/L statement.  Baby Boomers will remember Joe Friday from the 1950's TV show Dragnet.  Joe Friday was a detective and when working a case he would remind a witness to stayed focused to what they saw or heard.  He'd say, "the facts please, nothing but the facts."  So the fact of the matter, this apartment complex had +50 plus units and expenses that approached 70% of the gross income.  Sale comps supported expenses of about 45% which falls in line with industrystandards. The difference in the property value using actual numbers from the P/L and from a proforma with 45% expenses was over $1,000,000.  The difference in taxable income after debt service was significant as well, enough to send a child or grandchild to an Ivy League school.  In this case, the power of the BPO gives the owner substance when addressing expenses with the property management.  The property owner has a course of action; at the top of the list is to ask some direct questions to the PM on each line item of the expense ledger.  I also suggest interviewing other PM's and what steps they would take on reducing expenses. 

Posted by

Joe Sosky is the Managing Director for KW Commercial in Vancouver, Washington, as well as a developer of NNN leased properties.  Give me a call if you have a client who may want to buy, sell or lease a Commercial or Investment property.  Each month we teach people how to become a Millionare Real Estate Investor.  Our Workshops are held in Downtown Vancouver on the 3rd Tuesday of each month!  Email info@jtsinvesting for more information!

Joe Sosky; Commercial Real Estate Associate Broker and Investment Specialist
KW Commercial
360-816-9652
joe@kwcommercial.com

 

Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

I know a lot of people who own commercial property owners are worried about 2011 and 2012 when their mortgages reset and they have to refinance on properties that aren't as worth as much as they were 5 years ago.

Mar 09, 2010 10:26 AM
Rob Henry
www.bporeo.org - Akron Canton Region Airport, OH

Interesting stuff Joe - I know with the way the market is shifting, there will be more & more commercial bpo requests coming.  I've never done one myself.  Did the lender/asset manager provide you with the operating income statements?  Or did you have to dig them up yourself from the current owner/Property Manager?

Mar 28, 2010 04:18 PM
Leona Greenlow-Turner
Keller Williams Realty, Danville - Antioch, CA

I would like to do more commerical bov's where should I start looking?  I do them on occasion for two different companies.

Jun 03, 2010 05:26 PM
Joe Sosky
KW Commercial - Vancouver, WA
Commercial Real Estate Broker - (360) 816-9652

Rob, I was able to get income and expense statements from the property manager for the apartment complex.  However, on other properties, I am directed to do the best I can with marginal information. In that case, I find supporting lease rates, sale comps, cap rates and cost per SF.  I take the attitude that I may need to defend my values so I gather as much supporting evidence as I can. 

Leona,  I have been contacted by several banks, asset managers, a couple of KW Commercial agents in other cities with ties to lenders and asset managers.  I've also been hired by property owners and have received several referrals from KW residential agents in our market center with ties to local lenders and bankruptcy attorneys. We have several residential agents deep into the distressed property market and they have created many tight relationships with people in decision making authority.  I am happy to take referrals or agree to work side by side with the residential agent to get the assignment, knowing that in the long run it will be bring more brokerage business to me.  I have not formalized any system to "cold call" lenders which would probably increase my BPO workload. 

Jun 04, 2010 02:31 PM
Anonymous
Michael A'Hearn

I too would like to find more opportunities to do more BOV's or BPO"s In southern California.  I have been in commercial real estate for 14yrs as a broker and asset manager.  I hold the CCIM designation and would like to bring value to owners who would like a detailed look at their current assets.  If you have any questions please feel free to call me at (949) 212-4136.

Mike A'Hearn, CCIM, American Pacific Real Estate

Mar 07, 2011 09:38 AM
#5
Leila Mortaz
Homestretch Properties - Los Gatos, CA
Leila Mortaz

You can also contact the Asset Managers at the commercial lender with a LIST of Commercial Pre-Forelcosures in your State for that specific bank.  You would be surprised that in most territories they don't have a vendor for their BOVs.  

Residential BPOs are a differnet animal now and with the exception of very few banks, they have all been outsourced to Asset Management companies who assign the BPOs to agents in their pool.  They typicall blast them out, but some companies auto-assign them to us since we have a long established relationship with them.  

Keep in mind that there is very little connection between getting a residential BPO and the REO assignment for that specific property!  We have NEVER seen an REO assignment from a BPO that we have done for the same asset.  

Good luck.  

Jul 15, 2011 07:18 AM
Anonymous
Edmund Adams/ PCVMurcor

Hello Brokers and Agents,

 

Our company PCVMurcor  is Currently searching for Qualified Commercial Broker/Agent to Preform Bpo/BOV's. PCV Murcor has been providing the most accurate, highest quality appraisals and BPO's to lenders and servicers for almost 30 years.  Our Nationwide Commercial BOV business is growing and in need of increased qualified professionals. Our goal is to extend our company to you. We currently have a network of hundreds of Commercial Brokers accross the United States. If you would like to have an oppertunity to become a vendor on our panel. Please contact me Edmund Adams Via Email at Commercialbpo@pcvmurcor.com.

 

Apr 11, 2012 07:11 AM
#7
Anonymous
Diana Kissling

I'm currently working for a Commercial Brokerage in Southern California.   I'd like to do more BPO / BOV's.  Any suggestions how I can find more companies to sign up with?    d.kissling7@gmail.com

May 10, 2012 05:10 AM
#8