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Melissa Zavala, I am contacting you to check if you are interested in doing a CMA in the following ZIP code…
The ZIP code was 100 miles from my office, so I politely declined.
But, this special request got me consider the sorry state of Broker Price Opinions. In the wild world of short sales, sometimes the BPOs come in very high, and other times they come in very low. It’s not surprising that the results are so disparate (yes, that’s a real word), especially if some yokel like me was doing the CMA for an area miles and miles from home.
When the BPO finally gets into the short sale lien holder’s hands, that’s when the bank makes their counter offer to the short sale buyer. Recently, I had an offer of over $300,000 and the bank made the counter offer at $195,000. I thought I was going crazy until I contacted bank supervisors and learned that the BPO came back at $195,000—despite the fact that the listing agent and buyers firmly believe that the property is worth over $300,000. Talk about a poor BPO.
Can you imagine the impact of this poor BPO and possible subsequent short sale closing on the local housing market in that area? How will it impact the comparables? How will it impact the neighbors’ ability to sell their homes at $300,000?
On the flip side of the coin, I’ve got three or four short sales under my auspices where I have had to submit value appeals because the BPOs came in too high. Again, this is likely due to the fact that the BPO agent was unfamiliar with the property or the surrounding area.
What can be done to resolve this problem?
Although it would be difficult to verify with certainty that the agent doing the BPO actually arrives at the property and makes a visual inspection, perhaps BPO agents could be required to upload signed and dated interior and exterior photos.
Second, banks ought to hire agents within a five-mile radius of the property in order to assure that the BPO agent actually has a clue about the real value of properties in the area.
Attending to those issues may go a long way towards assuring that our housing market be the best that it can be—even in these tough times. So, next time you are asked to do a BPO, consider the impact that your work will have on the future of the housing market.
Hi, Melissa! GREAT post! Have a "traditional" listing which has been sold twice; fell out the first time cause the buyer spent the escrow money on vacation; appraisal was for more than purchase price; second, time (3 months later) appraisal came in more than $10,000 lower than purchase price - appraiser only used foreclosed homes; no traditional listings or sales. Listing we have is completely remodeled with everything new; appraisal properties used were not rehabbed. Had sent the original appraisal to the lender who stated they only use one appraisal company. Send in our own CMA on property and tried to refute the appraisal to no avail. Mortgage denied; sale did not go through. Again, re appraisals, had another "traditional" sale (buyer's side this time) in the Phoenix, AZ, area to have the appraisal done by a company in Detroit, MI. Re BPO's, I was just asked to do a BPO in a town near the Grand Canyon.......a bit far from the Phoenix area! Thanks for the opportunity to vent!
So the bank is willing to give up $110k to save $300 in appraisal costs, way ta go!
I had this happen to me, just not as large a number but I was asked to reduce my client's offer due to a poor bpo. My client was happy, her neighbors probably not so happy.
I don't do many bpo's but I have been asked to do bpo's an hour from where I work, they have nor regard for the quality of work ,they are just ticking off boxes and getting a piece of paper to fill whatever requirements they have to process the short sale. Many bpo agents are gunning for the listing so they will give a high number, hoping to kill the short sale and get the listing after it forecloses, too bad about the homeonwer.
Reform is seriously needed, will it happen? Doubt it.
BPO's are a joke... Most agents doing them are taking no time to really evaluate the facts of what the comps mean... they are just pushing numbers. This is the banks fault. In pushing to lower the cost they get the bottom of the barrel for agents just looking for a paycheck with no regard for quality. The banks also do not want to be told the truth. I can not count how many times my BPO was rejected because the numbers were not in their curve. The numbers reflected the market and the actual price the home would sell for, but they did not want to hear it.
Great post that has generated interesting discussion! The solutions seem clear, but we don't seem to have any power to get things changed. Continued frustration ahead. Best and simplest ideas, I think, are to require that the agent doing the BPO be an active licensee in the correct MLS area, and to require that their broker sign off on it. After all, it's called a broker price opinion, not an agent price opinion, and this would at least provide some oversight for the inexperienced...
Yet if the buyer turns around and resells the property for a profit, there would be an outcry of fraud being committed. Please! I am so sick of the banks playing around with taxpayer money, throwing millions away yet complaining and suing or prosecuting when savvy investors who are helping to rejuvenate neighborhoods to market value and repairing distressed properties are perceived as white collar criminals.
What's wrong with this country these days!
I think the BPO should be done by someone with in the same MLS area and a reasonable distance of 30 miles. In some areas, a 5 mile radius would leave some without the ability to even get a BPO done!
the only thing i can tell you is this: if you are listing a short sale, and the bank that had a bpo done on it sumbits a value to you that you feel is unreasonable, then tell your client to hire an appraiser to do a second opinion(even though it's actually a first).
I just want to point out in my area, most reo agents price houses in gary the price of an expensive car, and so I don't think anyone here wants to be it that situation, because a % is still a %.
Melissa, I think that the radius radius requirement where the agent is located vs the property is located is problematic, as I know a lot of agents who have offices in much different places where they actually work. But I do agree there needs to be better qualifying, as I know that you can have two homes 1/2 mile from each other, and because one is on the west side the street and the other is on the east side, their values can vary by $100,000 easy in some areas in Phoenix.
I checked back to see if you had any thing to comment , Melissa. It seems the high BPO values are the problem. You know NOT all BPOs are done on distressed properties. Some are people looking for a home equ line or a refi.
very frustrating for me too....BPO agents doing 10-12 per day are not likely to be accurate; agents out of teh immediate area and REO listing agents putting self serving/hign BPOs that kill a short sale
Thank you all for your comments. Certification, as suggested by Nevin, is a great idea.
For those who told me that low BPOs are great, I would agree that they are great for the buyer. However, just think that if your home was worth 300k and the house next door was also worth 300k, but sold in short sale because of a bad BPO of 195k. How would you feel then?
What we need (and will probably not get) is a fair and equitable representation of the housing market as demonstrated thru the property values. But, with everyone desperate to make a dollar, we will probably have to settle for what we have now.
Excellent post, Melissa. Admittedly I have very little experience in the short sale market and/or BPO's. However, it does not take a rocket science degree to see that in your example something is way off.
I would have been surprised if the bank did not immediately question the BPO given to them when an offer comes in over $100K of that number.granada
I only take ones that are in the area covered by an MLS of which I am a member - at this time, only my home county MLS. When I signed up with the companies, they asked for a list of zip codes covered. I consistently get requests for outside the county and zip code parameters, as they assign (and want to AUTO assign) based on proximity radius. Oh, well.
In our soft/sluggish market, considering that our county is large and much of it is rural with an odd mix of large and small homes from the late 1600s to present and on quite a variety of lot sizes and types, it can be frustrating and time consuming finding the most similar comps and adjusting for everything from desirability of style or location to condition (frequently 6-8 hours by the time I check public and county on-line records and attempt to figure out why the listing does not fully match up to those records in any number of areas). Why do I torture myself? Because too many times I've gotten clarification requests based on previous BPOs that were either significantly higher or lower than my estimates are showing - and the comps do not exist, the details for the subject are inaccurate (down to the property type!) or any number of other inaccuracies. There are so many folks saying BPOs are a gold mine of income and can be done in 20 minutes or less, who send others out to photo/examine the property (not allowed, by they do it anyway), who maintain a list of canned statements to copy and paste. That's the problem! Our local markets have enough problems, from consistent over-pricing to foreclosures dragging things down, to crazy inconsistent assessors and gross over taxation. As a glass half full person, I see the BPOs I do as a spot of sanity that may eventually help bring reason and stabilization back.
So, how to get the bank forms and requirements, as well as the companies that farm-out the reports to accept more accurate information? I don't know. Some lenders demand extreme local and 3-month comps, some do not. Many times adhering to strict parameters is not possible as there just are no comps within tolerances (don't the lenders get that every property is unique?). It also depends on the agent's interpretation of things like "distressed valuation". And, let's not forget that the lenders do not tell the owners a BPO has been ordered - they are understandably angry and apprehensive when someone stands in front of their home taking pictures. And still we are asked for evaluations of damage to foundations and roofs and such, and sometimes an extrapolation of interior repairs based on exterior observable condition.
There needs to be some better understanding of what can be asked of an agent and what can be asked of an appraiser hired at a grossly different price point and for an in-depth evaluation. And when each type of evaluation is necessary. And, then, localism must be considered.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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Look what was in my email inbox the other day:
Posted by 
;)
;)
;)
93 Comments on The Impact of a Bad Broker Price Opinion
Hi, Melissa! GREAT post! Have a "traditional" listing which has been sold twice; fell out the first time cause the buyer spent the escrow money on vacation; appraisal was for more than purchase price; second, time (3 months later) appraisal came in more than $10,000 lower than purchase price - appraiser only used foreclosed homes; no traditional listings or sales. Listing we have is completely remodeled with everything new; appraisal properties used were not rehabbed. Had sent the original appraisal to the lender who stated they only use one appraisal company. Send in our own CMA on property and tried to refute the appraisal to no avail. Mortgage denied; sale did not go through. Again, re appraisals, had another "traditional" sale (buyer's side this time) in the Phoenix, AZ, area to have the appraisal done by a company in Detroit, MI. Re BPO's, I was just asked to do a BPO in a town near the Grand Canyon.......a bit far from the Phoenix area! Thanks for the opportunity to vent!
So the bank is willing to give up $110k to save $300 in appraisal costs, way ta go!
I had this happen to me, just not as large a number but I was asked to reduce my client's offer due to a poor bpo. My client was happy, her neighbors probably not so happy.
I don't do many bpo's but I have been asked to do bpo's an hour from where I work, they have nor regard for the quality of work ,they are just ticking off boxes and getting a piece of paper to fill whatever requirements they have to process the short sale. Many bpo agents are gunning for the listing so they will give a high number, hoping to kill the short sale and get the listing after it forecloses, too bad about the homeonwer.
Reform is seriously needed, will it happen? Doubt it.
BPO's are a joke... Most agents doing them are taking no time to really evaluate the facts of what the comps mean... they are just pushing numbers. This is the banks fault. In pushing to lower the cost they get the bottom of the barrel for agents just looking for a paycheck with no regard for quality. The banks also do not want to be told the truth. I can not count how many times my BPO was rejected because the numbers were not in their curve. The numbers reflected the market and the actual price the home would sell for, but they did not want to hear it.
Great post that has generated interesting discussion! The solutions seem clear, but we don't seem to have any power to get things changed. Continued frustration ahead. Best and simplest ideas, I think, are to require that the agent doing the BPO be an active licensee in the correct MLS area, and to require that their broker sign off on it. After all, it's called a broker price opinion, not an agent price opinion, and this would at least provide some oversight for the inexperienced...
I get BPO requests for New Jersey. I am in New York.
I have had out of area BPOs turn a 4 month short sale into 9 month short sales. It is the weak link in a market sector rife with weak links.
I think the BPO should be done by someone with in the same MLS area and a reasonable distance of 30 miles. In some areas, a 5 mile radius would leave some without the ability to even get a BPO done!
Great Point Melissa
Inever really thought about it but you right on. These bad BPO's can and are impacting the whole Market...Brad
Most agents wouldn't turn down an offer to drive that far out of familiar territory.
well melissa,
the only thing i can tell you is this: if you are listing a short sale, and the bank that had a bpo done on it sumbits a value to you that you feel is unreasonable, then tell your client to hire an appraiser to do a second opinion(even though it's actually a first).
I just want to point out in my area, most reo agents price houses in gary the price of an expensive car, and so I don't think anyone here wants to be it that situation, because a % is still a %.
Melissa, I think that the radius radius requirement where the agent is located vs the property is located is problematic, as I know a lot of agents who have offices in much different places where they actually work. But I do agree there needs to be better qualifying, as I know that you can have two homes 1/2 mile from each other, and because one is on the west side the street and the other is on the east side, their values can vary by $100,000 easy in some areas in Phoenix.
I checked back to see if you had any thing to comment , Melissa. It seems the high BPO values are the problem. You know NOT all BPOs are done on distressed properties. Some are people looking for a home equ line or a refi.
Some banks will have both an appraisal and a BPO to see how close they are or a cheap 2nd opinion
I have one where the banks value matches the Zestimate. I wonder if they even bothered with the BPO!
very frustrating for me too....BPO agents doing 10-12 per day are not likely to be accurate; agents out of teh immediate area and REO listing agents putting self serving/hign BPOs that kill a short sale
Thank you all for your comments. Certification, as suggested by Nevin, is a great idea.
For those who told me that low BPOs are great, I would agree that they are great for the buyer. However, just think that if your home was worth 300k and the house next door was also worth 300k, but sold in short sale because of a bad BPO of 195k. How would you feel then?
What we need (and will probably not get) is a fair and equitable representation of the housing market as demonstrated thru the property values. But, with everyone desperate to make a dollar, we will probably have to settle for what we have now.
Excellent post, Melissa. Admittedly I have very little experience in the short sale market and/or BPO's. However, it does not take a rocket science degree to see that in your example something is way off.
I would have been surprised if the bank did not immediately question the BPO given to them when an offer comes in over $100K of that number.granada
Melissa,
I couldn't agree with you more. They aren't helping in many cases. You've inspired me to write a post on my recent situation with a BPO!
I know, I know. I do BPOs.
I only take ones that are in the area covered by an MLS of which I am a member - at this time, only my home county MLS. When I signed up with the companies, they asked for a list of zip codes covered. I consistently get requests for outside the county and zip code parameters, as they assign (and want to AUTO assign) based on proximity radius. Oh, well.
In our soft/sluggish market, considering that our county is large and much of it is rural with an odd mix of large and small homes from the late 1600s to present and on quite a variety of lot sizes and types, it can be frustrating and time consuming finding the most similar comps and adjusting for everything from desirability of style or location to condition (frequently 6-8 hours by the time I check public and county on-line records and attempt to figure out why the listing does not fully match up to those records in any number of areas). Why do I torture myself? Because too many times I've gotten clarification requests based on previous BPOs that were either significantly higher or lower than my estimates are showing - and the comps do not exist, the details for the subject are inaccurate (down to the property type!) or any number of other inaccuracies. There are so many folks saying BPOs are a gold mine of income and can be done in 20 minutes or less, who send others out to photo/examine the property (not allowed, by they do it anyway), who maintain a list of canned statements to copy and paste. That's the problem! Our local markets have enough problems, from consistent over-pricing to foreclosures dragging things down, to crazy inconsistent assessors and gross over taxation. As a glass half full person, I see the BPOs I do as a spot of sanity that may eventually help bring reason and stabilization back.
So, how to get the bank forms and requirements, as well as the companies that farm-out the reports to accept more accurate information? I don't know. Some lenders demand extreme local and 3-month comps, some do not. Many times adhering to strict parameters is not possible as there just are no comps within tolerances (don't the lenders get that every property is unique?). It also depends on the agent's interpretation of things like "distressed valuation". And, let's not forget that the lenders do not tell the owners a BPO has been ordered - they are understandably angry and apprehensive when someone stands in front of their home taking pictures. And still we are asked for evaluations of damage to foundations and roofs and such, and sometimes an extrapolation of interior repairs based on exterior observable condition.
There needs to be some better understanding of what can be asked of an agent and what can be asked of an appraiser hired at a grossly different price point and for an in-depth evaluation. And when each type of evaluation is necessary. And, then, localism must be considered.
It's a conundrum.
Great post, I hope all the asset managers on AR read it. We all pay the price when an out of area agent handles the BPO or REO.
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