Interesting.  I personally don't think that a BPO is worth my time, most banks only pay $50 to $75 for a very time consuming project.  I think that the difference between a BPO and an appraisal is that a real estate agent can only provide an "opinion" of value and should provide a range of probable market value instead of an exact amount.  What do you think the difference is?

Cheryl - I have done a few and the forms are very similar to actual appraisal forms.  Layout, terms, pictures, factors, etc.  Except BPOs - you don't have to measure.   There was a disclosure in one of the ones I did to the broker about liability to the lender.  It was kind of threatening in a way. 

I think you are dead on about the difference - the range of probable market value instead of an exact amount.  And the word "opinion".  Maybe the appraisers are wanting to protect their territory, I do not blame them, and they earn the money they make.  As far as I am concerned, the only reason to do that much work for $50 or so is to get the listing and that is not guaranteed.  It is minimum wage, really.

Hello again Virginia,  Since it's already a hot topic in other parts of the country, I'm sure that we'll begin hearing about the controversy in Charlotte NC area soon. It will be interesting to see what becomes of this issue. 

Call me a conspiracy theorist, but it sure feels like our hands are being tied, to keep us from doing our jobs, more and more.

I agree with Lisa completely.  I've said it many times, that as a Realtor, I feel like my hands are tied behind my back and I think in many cases it's a terrible disservice to our clients.  Also, "opinion" is the key and that should be made clear to a potential client, I think.  Correct me if I'm wrong, but I thought even an appraisal is really an estimate.  Opinion, estimate - key words.

Cheryl - I am keeping an "eye" out to see if the Nevada DRE actually prosecutes anyone.  It seems odd that they just released the above bulletin if they are not going to.  I worry about those who say that they "make their living doing BPOs".

Lisa - I agree with you completely.  How can you list a house, whether it be for a bank or a person, without giving your opinion of asking price?  Perhaps the appraisal section of DRE would like us to order an appraisal?  I may post this to an appraisal group and see if I get any "opinions" from them.

Donna - I just reread the release from Nevada DRE.  Their definition of appraisal:  "Appraisal means an analysis, opinion or conclusion, whether written or oral, relating to the nature, quality, value or use of a specified interest in, or aspect of, identified real estate for or with the expectation of receiving compensation".  That is so general that it could be interpreted any way.  Maybe the key word is not "opinion", but "compensation."

Hello Virginia - From what I've seen, a lot of companies hiring brokers for BPOs discourage licensed appraisers from applying, however I don't see a BPO as being any different than a desktop appraisal (different form, but about the same price).  Unless you are only looking for a general idea of what the value is (and are not too concerned what the inside of the property looks/smells/feels like), I wouldn't put too much faith in either a BPO or a desktop appraisal.

Donna - Yes, BPOs and appraisals are both opinions of value... which makes sense as you have no proof of value until you have a buyer and a sold sign in the lawn.

Oh... and I'd love to hear from someone who has bought into this program and earns $78k part-time ... or this one ... or this one...

Sara - I haven't heard the term "desktop appraisal".  I have only done drive-by BPOs.  Same thing without the photos?  I actually wasn't comfortable with the BPOs I did and put a strong note on the estimate of value that I had no idea what was inside the property.  I guess that was a moot point - it is called a "drive-by".  An agent from another state told me last week that he averages 10 a day and gets a few listings out of it.  It took me over 2 hours to complete one, of course I am not familiar with the forms.  I don't plan on doing any more.  Why would they discourage appraisers from doing them?

Virginia, great clarification on BPO's for your area. We do CMA's for informal values for prospects for a listing here in Texas or for sitting down and setting the price with a customer at a listing appointment. The term BPO here is meant more in conjunction with an appraisal for a bank owned property. Each state is different with their laws.

Hi Gary - We do CMA's for sellers, too.  BPOs are done for lenders,  but the issue in my blog was that the Nevada DRE, appraisal dept, is stating that only appraisers can do BPOs legally, and that agents may be in trouble if they are doing BPOs for pay without an appraiser's license unless they actually get the listing.  I have only done a few, but this bulletin kinda scared me a little.  I think Nevada agents should be wary.

Virginia- Why would any agent want to work for $40 to $80! It does not make any business sense to me. The time spent doing the BPO's is way to long to justify the price. I know they do them in hopes of getting a listing but there are so many better ways to get listings! What are the short sale lenders going to do if agents can not do the BPO for them? Katerina

Nestor & Katerina Gasset, Realtors Wellington Florida Luxury Homes

Hi Katerina!  I don't know too much about it.  I have only done a few - I was thinking of doing more and was researching the subject when this article caught my eye.  I think that appraisers will have to do them.  As Sara Goodwin said in her comment, they seem to be the same as a desktop appraisal, which I hadn't heard of either.  I have decided not to do any more of them.  1) Not many listings come from it,  2) I don't want any worry about recourse  3) Pays peanuts  4)  Not fun.

Thanks for stopping by! 

I guess the short sale lenders will just have to hire an appraiser. A Realtor doing a BPO for $40 to $80, that alot of work for peanuts. And what about the liability, Appraisers carry E&O insurance, I don't know if Realtors do and if so, will the insurance company cover you writing a BPO. Just something to think about.

Sara,

You think any of the those BPO companies are owned by Zaio?

Michael - Realtors do carry E & 0, and the BPO company asked if I have it on their application - but I don't know if it even is in effect for a BPO - it is by transaction - a question for my broker.  Thanks for pointing that out.

My favorites:

The broker sits in the office and never sees the property but sends out his brother's kid who takes pictures real good. That way the broker can write 20 or 30 of them BPO's a day.  Of course the photos don't record the stench, the walls out of plumb, and the floor that is sponge-like.

The broker that comes out to the property and does his inspection. Because the listing agent meets him on site, the BPO agent is aware that there are 3 offers for $300,000 to $330,000 after being on the market for 6 months. The BPO agent then comes in with a $375,000 BPO. Because the valuation is so high, the foreclosing lender denies the short sale proposal. Somehow the broker becomes the new listing agent for the lender and his new REO property. He lists the property for $330,000 and takes $270,000 about 6 months later.

That is called creating work for one's self.

I guess that is what you would call it if you were being nice!

Hi Virginia - I should retract my statement on companies bypassing appraisers for BPO work.  It might just be that I don't market in that direction or that this area can be a bit more complex due to mixed style, age, size of properties and terrain (etc.).  - A desktop appraisal is an appraisal that is done (like it sounds) at a desk... very likely from someone completely unfamiliar with the area that they are appraising... never setting foot near the property to obtain value.  Big banks love these when the equity far exceeds the loan amount.  I suppose they just pray the property didn't catch on fire prior to the desktop appraisal being done.

Michael - So far that I know, Zaio has only been purchasing AMCs... whether they hand out BPO work at those companies is beyond me (but why would they when they can get an appraiser to do a full appraisal at BPO prices?) -

Sara, Sad but true

Hi Virginia, that's a new one for me.  Yes we do BPO's, never thought twice about it.  In TX we have a # for legal advice with the Texas Real Estate Commission, if you have something like that in NV I would give them a call.  Most people always are over cautious, or maybe trying to get more readers by scare tactics.spreading love in the rain, Liz

Hi Liz - I think it is a Nevada thing right now.  I pointed my broker to these articles, he is doing some investigating for us with the Nevada Association attorneys.

How a BPO became known as a valuation tool, I have no idea. The difference in key words between an appraisal and a BPO is "Price" vs "Value". Somehow, over the course of the past few years a BPO has changed from an opinion of estimated sales price or asking price to an opinion of value.

Also consider there is a difference between "real estate" and "real property". An appraisal includes more than just a valuation of land and improvements, it also includes all inherent rights as well. Think about the value of the remainder of a life estate...

I looked up one of the BPO forms, and while there may be different forms available, the one I saw did not even specify the type of value. Was it market value, liquidation value, value in use? Pretty scary if you ask me. As an appraiser, there is no way that you could get me to put my name on one of those!

Ben - yes, it is scary to me.  The ones I did asked for Suggested Listing Price.  I gave them one, but wrote a disclaimer that I had never been inside and had no information as to condition, upgrades, appliances, etc.  The disclaimer was longer than my comments on the price.  I think that the proverbial ---- is going to hit the fan on BPOs, they are too vague and too much liability.  I am glad I only did a few.  My broker is not even sure that our E&O insurance covers them, since it is not a "transaction".  He is an attorney and is checking on it.  In the meantime, we are not doing them.  I am not ever going to do another.  Thanks for your input.

UPDATE:  My broker consulted with GLVAR legal dept.  We are now to put a statement within any BPO that we do stating that "I am doing this BPO as a suggested listing price, based on drive-by and with no knowledge of interior condition, in anticipation of listing the property."  Also, our E & O insurance would cover the work.

Appraisers can't do BPO's. Appraisers can only do appraisals due to the higher law standards known as USPAP. The banks need BPO's for pre-foreclosure properties. They need to know if they should go forward with the foreclosure sale or offer a short sale solution to a client in default prior to listing the property with a real estate agent. The reason this issue is in the spot light now is because appraisers are begging for work and want to get it from anywhere they can. Sales are at an all time low. BUT remember appraisers can't do a BPO. If caught they could lose their appraisal license. The banks need BPO information prior to foreclosure. You tell me what person in their right mind is going to allow an appraiser into their house to do an appraisal while they are in foreclosure. I guess they might do that right before they steal all the appliances and graffiti the walls. Most people in foreclosure are not happy campers. I think appraisers need to stop complaining about BPO's they can't even complete and let the Nevada Realtor's do their jobs. As long as your not doing a BPO for REFINANCING or LINE OF CREDIT reasons I think we should be allowed to complete them. One more thing to point out is why is it okay to do a BPO for free and not for compensation? IT'S STILL A BPO PERIOD!!!! IT'S STILL AN OPINION OF VALUE PERIOD!!! It should be all or nothing PERIOD!!! Also A BPO IS NOT AN APPRAISAL! It's an opinion of value. And now they are saying that you can't use the word "value!" You have to say listing "price." Value and price are the same thing. Definition of value -An amount, as of goods, services, or money, considered to be a fair and suitable equivalent for something else; a fair price or return. Notice the word "price."  The definition of price- The amount as of money or goods, asked for or given in exchange for something else. Value or worth. Notice the word "value." Nevada is so behind the times. I think I need to move back to California where Realtors are allowed to be Realtors and appraisers allow Realtor's to do their job. Eventually the market will return to normal and appraisers will completely over worked and they will stop complaining about BPO's because they don't want to do them. BPO'S ARE NOT APPRAISAL'S. A BPO can't be used to finalize the sale of real property nor can it be used for refinancing your home. An appraisal must be completed by federal law for these types of transactions. BPO's are just a tool to help an institution and or potential client get a feel for current marketing conditions. Appraiser's have NO IDEA about marketing conditions!!!! It's sad that this is an issue and it really needs to stop. I wish I knew a good lobbyist that could fight for our rights as Realtor's to complete BPO's as we all have for decades.

Anonymous NV Realtor - and I wish you were an Active Rain member so that you could post a blog on our site.  This comment would be a great blog that would be found and read by many who will not see it as just a comment on my blog.  I invite you to join Active Rain.

I do a comperative market analysis for my clients, but do not sell them as a service to banks or anyone for thsat matter.  I get regular calls from lenders wanting me to do BPOs, but made a business decision not to do them.

Virginia - I actually view this as a positive thing for professional agents.  I understand the viewpoint of your state completely and have to agree with them.  You wouldn't want someone getting paid $2,000 for helping a FSBO do paperwork so that they can avoid using a Realtor.  If you are determining value on a property for a seller or buyer, that's one thing.  If you get paid to do it but have no commitment that you will be the agent listing the property, then you crossed the line into the appraisal departments territory and may have violated the state statuates.

HERE'S the GREAT NEWS:  If Realtors can push this to be enforced in your states, banks will have to list the property with you when you do the BPO and the value is accepted by the bank as a potential market value.  This could also be a huge feather in your cap if you were able to include large lending institutions as your client base.

I don't think any agent wants to run around town doing BPO's for $50.00 - $150.00 for brownie points to potentially get listings.  Agents do BPO's for the opportunity to form a relationship.  If the state steps up and says that the banks are not allowed to hire anyone but an appraiser for a compensated estimate of value, and the appraisers can't do it because of their standards and guidelines, banks will be forced to list properties with the BPO performer and ultimately, The agent wins!

NV Realtor -

By literal definition you are correct, a BPO is not an appraisal, however a desktop or drive-by 2055 is an appraisal and equivalent to a BPO (and done by an appraiser) - An appraiser can write a range of values on a blank sheet of paper, sign it and call it an appraisal.  As long as USPAP is followed and we disclose everything accordingly, a report can be written on a BPO form.

When I think of the word (acronym) BPO, I amalgamate desktops and drive-bys into the same definition.  With new rules taking effect 01/01/2009 (or should I say being enforced) it is likely that this whole conversation is a moot point as all of these times of opinions will not be accepted by Frannie Mae or Freddie Mac.

Also, by literal definition an appraisal is (also) an opinion of value.

Hi Mark, you Macarena!  BETTER NEWS!  I quit doing BPOs.  I did a few for $50 each, not $150.  I hated the work, it took 2 hours each, I would rather spend the time on Active Rain reading your blogs.  I didn't even get paid on any of them.  "The check is is the mail".

I think you are right - if this gets enforced, it will benefit Realtors in the long run.  However, I have enough business that I don't need to list properties for the banks.  (I guess I shouldn't say that out loud)

I posted this because I was concerned about agents doing BPOs "for a living", some do 10 or 15 a day.  I think they should worry or at least be quiet about it.

Hi Sara!  Thanks for stepping in to answer Anonymous NV Realtor.  Maybe NAR should step in and define BPO - I have gotten conflicting definitions.  It is just too much gray area and interpretation.

Virginia - When agents have asked me how to get REO listings, I tell them that they should worry about dual agency issues and that REO listings will work well, if you're willing to sell out.  Once again, in my opinion, the best agents out there are agents that know how to build relationships with clients and simultaneously teach the client why they are worth hiring before the hiring point ever arises.  When doing BPO's, is it possible that an agent doing 10 to 15 per day is fostering a lose-lose situation?

If they do a BPO and state an amount based upon comparables, the bank will be happier than if they did a BPO based upon what the market would pay.  In order to avoid problems, we actually have buyers targeting short sale transactions primarily.  They write offers on properties that have seconds because that second will just get thrown aside.  They only write offers on properties where the first mortgage amount is considerably lower than comparables knowing that the bank will be more interested in protecting their interest rather than getting an amount based on what it is worth.  I'll shut up now as I have exceeded my limit on comment length.

Mark - I think I am missing your point.  What is it?

I think that the agent doing 10 to 15 BPOs is either only doing BPOs and nothing else and is basically working for a wage, or the agent is having his assistant or kid brother do the BPOs for a wage in his name while he is out selling real estate.  Are you saying that the agent doing BPOs and coming in at top dollar is not going to get the listing, just get more BPOs or not going to be able to find buyers at that price?

The short sale buyer who is targeting properties that have seconds is a smart buyer.  Are you saying that a good agent will teach the buyers how to do that?  If so, I agree that a buyer's agent should do so.

Who is selling out to whom?  Get out the crayolas and explain this to me.

(one more sentence and a picture would have been a blog)

Virginia, sorry for not being more efficient at communicating.  We all know that this is a fault of mine.

An agent that does 10-15 BPO's per month is someone that has sold themselves out to the ordering institution.  It's a lose-lose situation that extends beyond them and the bank.  If they state "true" market value, they may not be called upon again because their BPO is too low.  If they state a higher amount, they will get called on again for their $50.00 scooby-snack and may even get the listing (that is what the BPO sell-out is usually for) but then, they diesel to sell.  (The listing will get so stale and fossilize and sit so long that you can burn it in your tank)

So, to sum up the BPO part, high BPO = potential for overpriced listings along with additional hits of BPO crack.  Low BPO equals no repeat business unless you step up and give the lender the beat down, which most will not do.

Closing out this topic, push for Nevada to only let appraisers determine value.  This will provide liquidity in the market at consumer friendly real estate prices.

Okay, next one:  Yes, a buyer should protect themselves against further market decline by targeting properties with low first mortgage positions.  Our market is flooded with short sales.  If you pay too much as a buyer, you just set the new high point of the market.  Instead, rather than "time" the low point, attempt to set the low point in an effort to reduce downside risk.

I met with a couple tonight. Wanted to buy a home for $260,000.  They couldn't qualify.  I told them specifically to find a neighborhood in the $280's that they liked.  When they do, I will tell them which homes will be foreclosed on or go short.  They will buy a home for $210,000 in this neighborhood with a 6% seller concession as long as the market doesn't suddenly turn around.  The only thing that will turn it around is an interest rate in the 5% to 5.25% range.  This will not happen any time soon.  I will post, with their permission after they contract in the next 10 days or so.  They are in a rental now and had no thought of purchasing until this past Sunday.  If they can steal a home, they will do it.

Hi Mark - Agreed on both points.

I always enjoy reading your blogs - You are a creative thinker and prove your points when questioned.  I think you should prove them before you are questioned and instead of a detailed comment, make a simple comment and then expound on a blog.  That way you would be sharing your insight with more people who might not be following this blog but would benefit from your expertise.

Thank you for not only your comments, but for your well written explanations of your confusing (to me) comments.

Update on "breaking the law": Broker Price Opinions - Play it Safe!

Broker Price Opinion Misconceptions Clarified:

http://www.nvar.org/index.php?option=com_remository&Itemid=140&func=startdown&id=238

Nevada Realtor -

Thanks for the input, I did read the clarification article and posted the following about it:

http://activerain.com/blogsview/428553/Broker-Price-Opinions-Play

Looks as if our liability just continues to grow everyday....have a good attorney on retainer..the flood of lawsuits are on there way.  When the market was good it was not a worry..everyone was happy....now everyone looking to blame someone else or secure thier territory.

Kristi - Yes, no one want to think they made a mistake, it must be some one else's fault!

Hi Virginia -  This just arrived in our appraiser's board newsletter today (http://www.oregonaclb.org/) ... sorry the formatting didn't paste correctly...

The Real Estate Agency had been

asked for guidance in performing

Broker Price Opinions (BPO). The

following services can be provided by

a real estate licensee without first

being licensed as a real estate

appraiser. Analysis of an interest in real

property can be performed for ownership

or collateral purposes for

estate licensee can analyze real estate

for purposes of a lending collateral

analysis. A real estate licensee can

also perform a default collateral analysis

when performed for internal use

of a financial institution.

Real estate licensees may perform

these services under an exemption to

the appraiser licensing law (ORS

674.100(3)(a)), but only if the service

is provided for a financial institution (or

its affiliate) which is defined in the

statute (ORS 674.010(7)) as "an

insured depository institution as

defined in section 3 of the Federal

Deposit Insurance Act or an insured

credit union as defined in section 101

of the Federal Credit Union Act.

Each individual licensee has the

responsibility to verify that the request

to perform a BPO, for a lending or

default collateral analysis, qualifies as

an exemption from the statutory

requirement to hold an appraiser

license. Otherwise, the licensee could

be subject to penalties for unlicensed

appraisal activity which are (up to)

$500 for the first offense and $1,000

for the second and each subsequent

offense.

Counsel provided the following

definitions: A "lending collateral

analysis" involves a real estate

licensee preparing or assisting in the

preparation of a real property analysis

when the purpose of the analysis is

for use by a lending institution in

support of a loan application. A "default

collateral analysis" involves a real

estate licensee preparing or assisting

in the preparation of a real property

analysis when the purpose of the

analysis is for use by a lending institution

in considering its actions with

respect to a loan in default.

The Real Estate Agency recommends

that licensees performing these

services require a written statement

from the client, who is requesting the

service, verifying that the BPO

requested:

· is being performed for a financial

institution as defined in ORS

674.010(7),

· do not constitute a real estate

appraisal,

· are either for the purposes of a

lending or default collateral

analysis,

· are for the internal use only of the

financial institution; and

· are for a loan transaction which is

valued at less than $250,000. 􀂄

Hi Sara, Thank you for following up with me!  They really clarified it there.  It sounds like Oregon is getting pretty strict, too, or has it always been?  I think that is a good thing.

I discussed the issue with my broker and he made some calls to the Nevada Association of Realtor attorneys and they came back with a clarfification, too.  I would hate to think of anyone being penalized or fined for doing a BPO when they can avoid it by using the correct disclaimer.  Some agents rely on them for income in this slow market.  I posted it as an update to this post.    Broker Price Opinions -Play it Safe.