Ok, so you've received the Raleigh short sales requirements from the lender and you've made friends with the loss mitigation's rep that's assigned to your potential deal. Next, you are now ready for the lender to order a BPO on the property. Notice that I emphasize "you", this is because I don't want you to miss out on a key opportunity to influence the overall outcome of your Raleigh short sale.
Although many investors are aware of the benefits of influencing the BPO, few know exactly how it's done. The BPO is the single most influential component that the lender considers when deciding how much they are willing to accept as a reasonable short sale offer. If your offer is not in the ballpark of the BPO it will most likely be rejected. Many investors give up at this point and assume that the lender is not willing to accept Raleigh short sales. It's not that the lender is not willing to accept a short sale, it's that the short sale offer does not come close to the amount of the BPO. It's just that simple. There is a big difference between a lender not accepting a short sale and a lender not accepting the offer.
What Exactly Is a BPO?
BPO stands for Broker's Price Opinion. All this means is that Raleigh real estate agents or Raleigh Realtors will assess the property and give their professional opinion of it's value to the lender. The closer that number is to your offer the better. You want the BPO to be as low as possible. Listed below is a snap shot of a BPO requirement.
1.) Run comps and take pictures of the surrounding neighborhood, subdivision, or area.
2.) Inspect the overall condition of the home and estimate the cost of repair. Take pictures.
3.) Formulate their "opinion" of the property's value based on the information that was gathered.
4.) Submit a detailed report of their research to the lender.
Here Are 5 Necessary Steps to Influence the Broker's Price Opinion (BPO)
Step 1:
Before your package is submitted ask your loss mitigation's rep to order the BPO. Let them know that there is not a lockbox on the door and you have the only key. Give them the best number to reach you and have the agent doing the BPO call to set up an appointment. You must be present for the BPO.
Note: There are two types of BPO's:
1.) Full BPO - The agent does a full inspection of the home.
2.) Drive-By BPO - The agent only takes pictures of the outside and other homes in area.
Always request a full BPO. If a drive-by BPO is done, you will not have any one-on-one time with the agent, therefore eliminating any possibility of influencing the outcome.
Step 2:
Compile comps, estimated costs of repair, and any other relevant information that will justify a discount. If possible, visit the property prior to the BPO or at the least a half hour before the agent arrives. Make two lists for repair costs. One with all of the obvious repairs such as wall damage, carpet, paint, etc. The first list will be mostly cosmetic repairs. Make a second list of all repairs that the agent will not see with their naked eye (i.e.: roof and water damage, faulty plumbing or electrical fixtures, pests, mold, etc. This list will contain more serious problems. Be sure to have an itemized breakdown of the costs involved. Bring this information with you to the BPO appointment. Be prepared to explain in detail how you came up with your estimates.
Step 3:
Make sure if the house is occupied that the homeowner is not present during the BPO. You do not want the agent asking the homeowner any questions about the property or offering any unwanted information. All communication must be between you and the agent. Follow this rule each time and you will maintain leverage during your negotiation.
Step 4:
On the day of the appointment shadow the Raleigh real estate agents as he/she does their assessment. Bring a camera and take pictures of every room in the house. The Raleigh Realtor will only take a limited amount of pictures and may miss something important. As you are walking throughout the house, point out the most important repairs only. Take notes and make them aware of other homes in the area that are comparable to your offer. Share with the agent the information about the house that you've compiled. Doing these things will help establish you as a well-prepared professional and help you earn respect with the agent.
Step 5:
Before the BPO is complete, ask the Raleigh real estate agent if they have a ballpark estimate in their head. They will most likely tell you that the numbers will be determined once they complete their report. At this time, ask when they will be finished and if you can give them a call at a specific time to get their final numbers. Note: The agent works for the lender and more than likely they will inform you that their report is proprietary to the lender. You have to feel that person out and see if they may be willing to share that information with you. It doesn't hurt to ask more than once if necessary.
Let the Raleigh Realtors know that you are very familiar with the neighborhood and tell them what you think the property is worth. The agent doing the BPO knows only what they have researched and what they discover once they actually see the property. You will be surprised as to how much your opinion matters. I like to call it YPO (Your Price Opinion). If the agent views you as someone who is educated about the property and the activity in the neighborhood, your opinion will be valued and taken into consideration when they make their report to the lender. Hopefully, I've helped shed some light on this most important area of short sale negotiations and that you are able to apply what you've read to your next deal.
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