How Can Learning To Do BPO's Help A Real Estate Agent in Milpitas CA

How can learning to do BPO’s help a real estate agent in Milpitas CA?

Learning to do BPO’s has helped me tremendously in valuing property.  The tighter appraisal criteria used for BPO’s result in more realistic property values.  

The most important criterion is finding comparables in close proximity to the subject property.  Today most MLS’s have map search.  This allows the agent to search for comps within a given radius.  The closer the comp to the subject property the better its “comparability” as its value is more indicative of the values of the subject property.  I usually do a .5 mile proximity using my subject property as the axis of the search.  It is acceptable to expand your search to 1 mile.  For non urban areas, proximity parameters can be expanded to beyond 5 miles.

The next criterion in the search should be square footage or GLA (Gross Living Area).  Do a search that has a range of +/- 10% of your subject property’s square footage.  An example would be, if subject is 1000 s.f., your search criteria would be a range from 900-1100 sf.  If you cannot find comps within +/- 10%, broaden your search to +/- 15% or more.   In the past I used to consider # of bedrooms and baths. No longer. 

Another important criterion is Lot Size.  Again, do a search that has a range of +/- 10% of your subject property, expanded to 15% if necessary. 

Condition if the property is another criterion that helps to determine property values.  Here are criteria from Asset Valuation and Marketing you can use to determine property condition:

Excellent –Less than 3 years old with known upgrades/amenities. 

As Is Value = Repaired Value

Good – Well maintained, no deferred maintenance, rehabbed.

As Is Value = Repaired Value

Fair – Minimal deferred maintenance, but obvious wear, somewhat outdated, several minor cosmetic repairs needed (e.g. holes in walls, broken windows, needs new roof).

As Is Value < Repaired Value

Poor – Suffers from deferred maintenance and in need of repair, some broken mechanical systems, overly worn cosmetic items or severely dated and more expensive repairs/updates.

As Is Value < Repaired Value

Damaged – Significant deferred maintenance or damage (boarded, fire damaged, etc), generally uninhabitable, could be tear down.

As Is Value < Repaired Value

The Age of a home is another important criterion to consider in property valuation.  Do a search using a +/- 10% age range to find comps that are compatible in age with your subject property.  Expand to 15% if necessary.

Other criteria such as location, view, #of garages, swimming pool, upgrades, etc., also play roles in property valuation.   Learning to use them will help you arrive at a truer value of your subject property.

Use (3) Active or Sale Pending and (3) Sold comps to determine property values.  When using sold comps, look for comps that have sold 3 months or less.  If comps are unavailable at that range, expand the range to 6 months then 1 year.  Using recent sold comps result in more accurate updated property values.

It is rare that 2 properties are alike in all the above criteria.  So, to arrive at a true value for your subject property, make dollar adjustments to the differences in GLA, Lot Size, Condition, Age, Upgrades, # of Garages, view, etc., between your subject property and your comps.  Use these dollar values to adjust (within reason) the difference between the subject’s and comps criteria. Ask your favorite appraiser for the dollar value used in your locale to make difference adjustments for each criterion used for property valuation. 

Why is it important to value properties properly?  Well, if you want REO assignments, doing BPO’s well is essential.  When you go out on listing presentations, your knowledge of the property’s value will give you the confidence to inform the seller that you can sell the property.  After all, it is ultimately the correct “market” price that is the major determinant of the salability of real estate.

If you have questions about property valuation, call me at (408) 316-0793.