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BPO Agents Beware

The world of short sales and REO's is not without its predators in Realtor's clothing.

Some of you, for example, may have had a short sale listing or sale blown out of the water because of an inflated BPO (Broker's Price Opinion) designed to negatively sway a lender's/negotiator's decision regarding offer(s) on the table. Often, these inflated BPO's are generated to gain an unethical financial or business advantage--generally to obtain a listing agreement from lenders and loan servicers.

When this practice occurs, it harms not only potential buyers, but also owners whose homes end up going to foreclosure, the buyers' and sellers' agents, and the lenders who entrust BPO's and property valuations to agents with ulterior motives.

It is an unethical practice that can have disastrous results for many.

But those who inflate BPO valuations in California could end up losing their real estate licenses.

Effective January 1, 2009, agents who inflate BPO's might have to forfeit or suspend their real estate licenses, courtesy of the California Department of Real Estate, "if the licensee generates an inaccurate opinion of value for a short sale of residential real property to manipulate the lender to reject the short sale or to acquire a financial or business advantage, such as obtaining a listing agreement," per SB 1737.

It's about time....

Posted by Roberta Murphy - Carlsbad Real Estate North County San Diego Realtor on 12/22/2008 02:48 PM

Comments (74)

BPO's, Mortgages, Refi in the Real Estate Investing Channel

bpo, reo, short sales, real estate agents, appraisals

Originally posted at: The Real View: BPO Agents Beware

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74 Comments on BPO Agents Beware

DEC

Good call by Californians. Give a valid BPO, that's all you need to do. Unfortunately, as the market continues to fall/slump we are seeing more and more agents "steal" business anyway they can.

Hi Roberta, Long time no see. Hope you are well and Happy. Merry Christmas. This is great but I would guess someone would have to complain to get the attention of the DRE. What they should do is actually require Broker evaluation to confirm the BPO was done correctly. A lot of work for little pay but as you say these are used for strategic advantage in securing the listing with the lenders. That should motivate for a quick Broker of Record review of at least the reasonableness of the comparables.

DEC

Roberta - definitely a good thing to be doing, but wonder how, and if, it will actually be policed? Will the banks take time to do so? Hmmm.

Jeff

Roberta, I see more BPO's come in low and when I look at the list price, I know those homes are going to go quick and they do. Most of the low ones come in from out of area Realtors who just don't know the Ann Arbor Area market.

Toby: Interrersting that you are seeing the same thing in Delaware.

William: I know you have been active the the San Diego Assn of Realtors and am wondering if you might consider some involvement on this issue? And while you are at it, how about creating some firm guidance as to when a listing goes pending in the MLS? Many REO and short sale listings are remaining active with Sandicor until closing:-(

Jeff: Banks and lenders can't expect what they don't inspect. They are sorely lacking in oversight and do little to insure that their assets are being sold in a timely fashion at something that approaches highest and best price. Regrettably for us all, they appear to have $12 an hour employees managing multi-million $ portflios. Lenders have also developed an expertise in hiring phantom agents who fail to return phone calls. Grrrr.....

Missy: Why lenders use out of area agents to handle listings baffles me. I have seen Los Angeles agents representing homes in San Diego--a fulll two (large) counties away. More oversight is definitely needed.

Roberta, yes it is about time! Between the banks choosing out of area Title Companies, being slow on the uptake to accept short sales while buyers finally walk and now BPO's being assigned to unscrupulous agents...this is downright disgusting.

The proof is what unfortunately will take time to produce and meanwhile the homeowner and buyers lose out during that process. Some agents will take the chance that they won't get caught nor have anyone follow-up. We need to have a fast paced jury in place so that this is NOT allowed to continue...in my opinion of course.

Gena: I failed to mention those lenders/servicers who choose out of area, hole-in-the-wall escrow companies who do as little as possible to successfully close transactions on a timely basis. Thanks for reminding me! We and the lender just lost a sale due to escrow not getting HOA docs and disclosures sent out in a timely fashion.

This is BIG.

Thanks for publishing it.

Lenn: Thank you.

This is very interesting.. In most cases when I get a BPO assignment, I have NO CLUE as to what the BPO is being used for. I have only seen one 2 weeks ago that even mentioned the purpose.

Great call on California's part. The competition is fierce here for REO properties and yet we are stagnant with inventory so why inflate the price just to sit on the inventory?!

Hi Roberta, Excellent, outstanding ! Lets hope this will act as a template for other states to follow. please do keep us informed.

Roberta,

This is great! I hope wish they would do that here. I showed a property this past weekend, on the Realtybiz auction site and also listed by an agent. The land was worth about $50K very small lot...the home has a tarp over the entire roof which has been there for quite some time. Mold on the ceilings, termites in the doors...We offered $70K. The listing was $119K when I pulled it up...counter offer came back at $108,500. I said, "When is the last time you looked at this house?" The guy said he hasn't been there for about a year...I said, "Well, I have pictures if you would like me to email them to you." Unbelievable! I asked him if he knew that one of the sliding doors were falling in? After all, I wonder if he knows the front window is boarded up?

Someone needs to take this issue and fix it!

Jeff Dowler has a good point as well though...who's going to monitor it....

I can't wait for our state to do something about it. I just listed an REO where bank had an agent do a BPO. That agent inflated the price by 300k...

Roland: Ditto. I also do BPO's--often with no clue for their purpose. However, I have never manipulated valuations to serve personal purposes.

Cat: I was pleasantly surprised with California's prpoactive stance on this issue.

It's astonishing to me how this seems to come so late in the timing of this market. Long overdue. As for who will monitor it - good questions - but at least their is an acknowledgement that it's happening and needs to be addressed.

As for the banking industries poor response to the short sale assets - it's inexcusable and one of the biggest factors for a delay in market improvement. Great post!

nothing surprises me. I am lucky that none of my short sales have been turned down yet.

We need a ;aw like that in Minnesota.

Roberta, we do bpo's, in part to get a good grip on the market. The interest became reality when exactly what you describe occurred with a short sale for a seller of ours- we were horrified when the price provided to the bank was 50k above anything remotely close in the way of comps. My assumption at the time was that it was an idiot that came up with the value; now, it's apparent that there are indeed those out there that are simply out to gain bank owned properties. It's disgusting.

Bill: I'll be following this closely and will report what I discover.

Karen: The examples you cite are further proof that lenders need to list with local, experienced and responsilve agents.

Nelya: Contact your Department of Real Estate and suggest they follow California's lead. Or perhaps your state Asssociation of Realtors can do something....

Linsey: Perhaps California can set up a hotline of sorts....

Michael: You are fortunate.

Teresa: I would like to see laws like this enacted and enforced everywhere!

Options: Why am I not surprised?

I lost a short sale closing because of an inflated BPO earlier this year, and they turned around and listed it for less than the BPO value and sold it for less than the offer we had.

Mike: We had this occur three times in this past year--and in all cases, the homes sold for less than the offers we had on the table.

I had ane experience where the "BPO" agent gave my $135,000 listing a value $15,000 high. I don't think he was trying to do anything unethical, I think he was just an idiot new agent who really had know idea how to determine market value. He really thought that my Logan Utah Real Estate market was appreciating.

In the end it worked out as another agent from his office ended up bringing us an offer. If it weren't for that fact, I don't think the BPO ever would have been lowered to a legitimate value, and the property would have foreclosed.

I agree with you 110% I myself have over 150 BPO's under my belt, and I CAN NOT tell you how many times my BPO would get "rejected" due to them not liking the price, I have even had some to go as far as to TELL me what comps to use, that is when I send it back AS IS with NO revisions and tell them take it or leave it, you will pay me for my work but if you dont like it then find another agent, I will NOT inflate a BPO just to please them. I just wont do it, it is not worth loosing my license!

I read the post and I read all of the comments. What I wanted to say was exactly what Sharon Fleming has said. I DO BPOs but I do NOT receive listings from them. I have done NUMEROUS BPOs and given a fair evaluation ONLY TO HAVE THEM REJECTED because the bank felt the price was too low. And, yes, I too, have actually been given the comps that they want me to use.

So, it isn't necessarily new agents, unethical agents or clueless agents - it is the actual BPO companies that are rejecting these BPOs because they are too low. I have walked away from many BPOs after submitting 4, 5 and 6 times - all that happens is the order is then put back out there until someone gives them what they want.

Quite honestly, the $50 generated from completing a BPO is barely worth my time AND you couldn't pay me ENOUGH to have an REO listing. Bless those of you that do!

I had a short sale contract fall apart earlier this year because the agent that did the BPO used sold comps from over a year ago.

We've done a handful of BPOs. We never have been told what the reason was. Once they asked for interior and the homeowner was following us around telling us how she's trying to get refinanced or something (she was in the mortgage business)... We completed the BPO as accurately as we could, I doubt she got the value she hoped for. We've never got a listing from doing them. I do know of a guy who joined some home investment 'club' that recruits people to be apprentices? He said he was taught how to influence BPOs! He kept asking me to go to a meeting - NO THANKS! If we ever invest in a home it'll be conventionally not with some ponzi scheme or subject to and/or assigns! I'm rambling here - too much coffee.

Brian

I'll tell you after I close on one of the three short sale deals I have going. Up to now I haven't had much luck getting them done. Usually because it takes the lender to long to respond.

Cornerstone: You are kind to give the agent the benefit of the doubt. Kudos!

Sharon: And I agree with you 150%.

Leesa: I am smiling.

Rich: That could only be because the lender had no oversight or someone vetting the BPO's. Grrr!

Brian and Marie: <taught how to influence BPOs> Isn't that a red warning flag for all?

Russ: Good luck in getting your short sale transaction closed.

I like the idea behind this, but it looks very difficult to enforce. Will be interesting to see what happens when the first violations are filed.

Wow, we dont do many short sales. This is good information to know. I need to check to see if we have a law like that here in Texas.

Just one more thing that keeps short sales the Headache Transactions that they are! Thanks for the "heads up" on this. . .I had never thought of someone pulling this angle. I just lost a short sale to foreclosure. . .last offer was $5K short of what the bank wanted to net and the buyer wouldn't come up. A real shame. Bank would not reveal what the BPO was.

In this type of market, I don't see any advantage to over pricing anything, let alone a BPO. Maybe someone should tell those agents that price their listings too high the market has changed.

John: I am waiting for a hotline....

Mindy and Jay: Texas? Probably not yet, but soon to follow.

Teri: And by the time the bank talllies foreclosure, sale and repair costs, the $5000 miss might seem like peanuts.

Larry: It is the BPO that is sometimes unfairly influencing the unwitting lender.

There must be a ton of "unwitting lenders" out there! Inflating the price of a bpo only means you have to eat crow when it doesn't sell. What's the point?

The lender should move on when it's time for a price reduction and not reward the agent who tried to manipulate them.

Kristal: Unofrtunately, I think lenders (who, imo, are largely represented by $12 per hour employees) pay no mind to those who manipulate them. It is chaos.

NICEEEEEEEEEE! I had a short sale that needed THREE DIFFERENT BPOS because the agents couldn't do them right. My client even said ONE SMELLED LIKE LIQUOR. Fabulous! After all my nice nudging (showing them area comps over and over) they sent a REAL appraiser out and it came out to be what it shoulda been! I avoid short sale BPOs for this reason (has to be a really good price tag to entice me, I never want to be accused of any wrong-doing.)

I HAVE NOTICED that the banks are sending real appraisers out on these things. It's about time for that also!

I can only hope this catches on in other states.

Well that's long overdue, wouldn't you say. I hope things change for the better.

Renee: Real appraisers with real liability would be a welcome addition to the short sale market.

Brian: Agreed!

Diane: Just hope it catches on in other states.

This could become a trend. Some of the ones I have done specifically request comps be from reo/ss/distressed properties even if there are none in the area. Other times I am advised to gain access thru someone other than an owner or agent.

In one case the house was listed, vacant on lockbox & i got agents OK for access when given number did not respond within 4 hours. Did my inspections & photos,etc. House was in pretty good shape except for a few torn pool screens. Then the access person called me. He had an offer to buy himself on the table declaring the house a disaster and he wanted to be sure I knew that the house had ___ &___ &___ problems. all of which I knew were likely untrue. I even called a friend nearby and confirmed my findings.

I completed my report with my extra findings and noted his final contact & info, etc. I was a bit miffed at being put in that position especially when most specifically ask us not to get involved with the parties.

Pat: Times of chaos offer opportunities for the predators.

I guess I've been lucky on the BPOs I've had done. The values have been pretty reasonable.

Christine: Lucky You! Others have not been so fortunate.

DEC

I hope california has some ways to enforce it. For agents in other states that do shortsale, we just have to convince the bank to obtain another BPO. Some banks will actually listen.

That seems like a reckless thing to do. I guess some people will go to any level for business. it's sad.

Hi Roberta,
Well, I supposed better late than never. Why does it take so long to get these crucial decisions and rules mandated?

All the BPO's I've done were within my county, which is rural. I couldn't care less what numbers the lender would like to see, or what numbers would be most beneficial to anyone involved. I do the BPO based on comps and market condition. That's all there is to it! I've done one for a re-fi/LOC and ran into the owner when taking photos. He started telling me how badly he needs the additional line of credit to finish an addition to the home. Nice guy and I wanted to help him - it's just that the BPO didn't comp out in his favor. It just didn't!

Great post, Roberta! We have entered the BPO arena in the last few months and so we can appreciate this post. I honestly had not thought of people doing this, guess I like to think everyone is honest (ya, right!)

Roberta - this bugged me all night! So, I do the right thing and walk away and someone else comes along and gives them what they want? While I agree that there are some slimy agents out there that need to be monitored/reprimanded - what about the actual BPO companies that puts undo pressure on "regular" agents that are just trying to pick up a few bucks, hone their analysis skills and do the right thing? Hhhmmmmm......great post by the way and tons of great comments!

We do quite a bit in Short Sales and thankfully have not run into this "practice"....sometimes being a little slower to catch on to "trends" living in the midwest is a GOOD thing...every best wish for the happiest of holidays !

Key Property Advisors: How California enforces this will be something to watch--and report.

Remo: They will, and they do.

Cynthia: The wheels of government turn...slowly. This, from California surprised me, though.

Andrea: Pleas from the owner would make it a difficult task. Hats off to you!

Kris: I think many agents are not aware of this happening until a listing or sale is lost.

Leesa: If BPO comanies are putting pressure on agents to price a property outside the comparables, they deserve to lose the lender's business.

Sally and David:Thanks for the good wishes, and there is much to be said for Midwestern common sense. Greed, though, is universal.

Let's just hope enough of this gets enforced right off the bat so that agents will just think twice about inflating BPOs - it helps no one in the end!

Christine: I hope the first few "enforcements" in California generate lots of press. Fair warning to all.

I did a BPO where the BPO company assigned it to two different agents at the same time to get 2 opinions. Mine came in 30k than the other agent because the company let me know. The house needed alot of work done on the inside. The company wouldn't accept my value even though it was more realistic than the 30k higher. I don't know if the other agent was inflating their price to get the listing or just didn't know how the market is but I do know the BPO company wanted that higher price even though the house needed alot of work. (as shown in the many pictures I sent them)

Another example that should help bring up the professionalism within our ranks and hopefully improve our image with the public. We haven't seen that much of it here in Northern Virginia, but I would still like to see something similar here.

DEC

Super Job Roberta, you really hit a hot spot with this Broker Price Opinion situation. I like the way you write, you get right to the meat of the issue.

It sounds like you have been caught up in this type of situation more than once Roberta and know how it has an affect on someones real estate business.

Great Job,

Ed Justice

DEC

Thanks Roberta! I've got a foreclosure presentation coming up where I can utilize this info!

JAN

A suggestion for you doing short sales: as your negotiator the DATE of the BPO. I recently had one where the BPO was from June of 2008. The negotiator said she had no idea our market at continued to decline (guess she doesn't read the paper or watch the news?) I sent her a CMA and asked for another BPO. After 2 weeks, the other BPO was done and, of course, at the lower value.

Hope this helps.

JAN

I've lost a couple of short sales thanks to bogus inflated BPOs in an attempt to gain the listing after it goes REO. Then after they were listed, they sold for LESS than what I had legitimate offers for, and it took them a year! I'm going to find out which agent(s) did them and turn them into the DRE! Here's a WARNING to those in the Sacramento area doing BPOs, if you inflate the BPO on a listing of mine you will be turned in!

JAN

I never really considered this before Roberta. Thanks for the post. Most of the BPO's we have had in the Dallas, TX area seem to be reasonably fair, but I've certainly had a few that were out there. This sheds some light on what may have occurred.

JAN

Influencing a BPO is a bad idea for an agent, BPO company, or lender. Being dishonest never helps anyone and an overpriced listing will just end up creating more costs for all involved.

Pam: Grrrr ....

Al & Jodee: Should I be surprised that Northern Virginia is so far removed from California in these practices?

Ed: Thank you.

Kent: Good luck!

Juli: Timing of the BPO can make all the difference in the world!

Jason: Just do it! Fair waning.

Brad and Traci: Best wishes! Do not think Dallas is immune from these practices....

JAN

Roberta, Good for California- now we need it to move east as just about everything does. Incidentally, I just left RE/MAX after 25 years with the same franchise - support was no longer there as far as I was concerned. My husband and I have been a real estate team for 33 years - we like to respond to other married teams - it was ararity when we started, Karen

JAN

Roberta, I am hungry for another great article from you :) And Thank YOU!

FEB

Just popping by to say hello...need some more food for thought.

MAY

Just a comment....I have been doing BPOs for years, I probably did over a thousand last year alone. And I have never, ever, not even ONCE gotten a listing because I came in with a "higher" BPO on a short sale. It just doesn't work that way. Banks work with their preferred REO agents and they don't typically give short sale BPO assignements to those agents. Usually the only time I am asked to do a BPO for an REO is AFTER it has been assigned to me.

Also, I am very often pressured by agents to come in ridiculously low on short sale BPOs. I had one several months ago hand me 10 comps that were in a totally different neighborhood from the subject, 40 years older, and every one of them was a trashed out HUD home. The subject was in a really choice little enclave in a hip neighborhood and had just been completely renovated. The comps he pushed on me weren't even in the same city or zip code. I valued the home at fair market at $225,000, a quick sale or short sale price around $199,000. He must have called me five or six times trying to talk me down on the valuation. Well, the deal fell through because the offer on the house was $82,000! I know because the idiot sent me a copy of the contract trying to further influence me. Not only that, but I could tell from the contract that the guy was in an illegal dual agency agreement with the buyer. Well, guess what? I got a call this week from an attorney asking me to testify at an evidentiary FRAUD investigation on this broker.

I guess what I'm saying is that it seems to be a common belief that BPO agents regularly ruin short sale deals by coming in high on BPOs, and maybe in some places they do, but at least in my market there would be nothing to be gained by doing so, and a lot of credibility to be lost. And as someone who does a fair number of short sales herself, it appears to me that most of these deals aren't really ruined by a high BPO so much as they are ruined by the bank being unwilling to come into reality. I had one short sale listing where I had an offer on the table for $550,000, two BPOs came back just a tiny bit higher than that but the bank turned it down. It went into foreclosure and now after fiddling around for more than a year they have it finally listed. They've already dropped the price twice in 30 days and it's down to $360,000 and I doubt they'll see that much. It wasn't the fault of the BPO agents, it was the bank itself.

MAY

I have never heard of that..but there are all kinds...when I first got into this business, I was so amazed at some of the squirrely people I met..

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