To BPO or not to BPO: In defense of the BPO's place in valuation

By
Real Estate Broker/Owner with Riverbend Realty, Cape Girardeau, MO 2004008944

The BPO has a distinct place in the valuation process. The perspective of a real estate agent is different than that of an appraiser. Appraisers, after all, never actually walk into a house with a prospective client, something agents do all the time (or at least, presumably, do).The agent, like the appraiser, uses facts to arrive at an opinion of value. Neither evaluator has a crystal ball or employs wizardry.

An appraisal's emphasis relies heavily wizard haton recently sold properties and physical value. When an agent prepares either a CMA or a BPO, comparables are pulled from both currently listed and recently sold properties. An agent is more likely to be influenced by the aesthetics of the property and its marketability, while the appraiser's value is more likely to be influenced by measurable aspects. In other words, an agent will more readily see the property through the eyes of a buyer.

 

In spite of the similarity of the two processes, one does not take the place of the other. They do, however, compliment each other very well; and the BPO is most valuable when it it used in tandem with an appraisal. The negativity that most appraisers feel toward BPOs seems to be at least partially based on a fear that agents are taking work away from appraisers. A bad BPO can wreak havoc on a listing price, but so can a bad appraisal. In fact, a bad appraisal is MORE LIKELY to result in a misguided listing price. That is a very strong argument in favor of using both methods in the valuation process.

 

 

It just does not make sense to me to say, on the one hand, that a real estate agent knows enough write contracts, to advise buyers and sellers, and to market and sell real estate--but then to turn around and say that the same agent cannot be compensated for their unique perspective.

More on this topic in To BPO or not to BPO part 2.

Posted by

* * * * * * * * * * * * * * *

If you are looking for a foreclosure in Cape Girardeau, Perry, N. Scott, or Bollinger counties, I am the region's most experienced REO agent. As the area's ONLY Fannie Mae direct listing agent, I list more foreclosure properties than any other agent in this MLS. I am among the few local agents approved to both list and sell HUD properties. Give me a call if you are looking for help with the purchase of a foreclosure property.

______________________________________________________

http://www.homepath.com/  for Fannie Mae properties

http://www.homesteps.com/  for Freddie Mac properties

http://www.hudhomestore.com/ for HUD properties (foreclosures that were FHA financed)

____________________________________________________________________________________________

If you want up-to-the-minute real estate information, the only way to get it is to have an agent set you up on auto-notify with immediate delivery. Your listing information will come directly from MLS only when it comes from an MLS member. You willl not have to wait for the information to roll to those other websites, and you will not have to check multiple sources. It's free, so why not give me a chance to help you in your search?


NO OTHER SOURCE is as complete or as fast as your local REALTOR®’s source. This is not just an advertisement for REALTORS®--it is information about how the system really works.

Click to email Liz   Call on Liz Lockhart for A Higher Degree of Excellence

©2015 Liz Lockhart (if you reblog, link back and leave copyright tag intact) Protected by Copyscape Originality Check

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Real Estate Market Trends
Location:
Missouri Cape Girardeau County Cape Girardeau Cape Girardeau
Groups:
REO
Almost Anything Goes
"Whacked"!!!
LATE NIGHT - EARLY MORNING AT ACTIVERAIN
Bananatude
Tags:
bpo valuation
liz lockhart cape girardeau mo real estate agent
should bpos be illegal
bpos and reo

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainer
287,282
John M. Scott
BRE # 01442690, Scott Keys Properties - San Francisco, CA
Broker / Owner San Francisco Bay Area

I agree Liz. I've done a lot of BPOs, and i usually have a gut feeling about a property when I first see it. Regardless of its statistics, once I start looking for comparable properties, it basically pretty easy for me to see where it fits in. Most lenders who request BPOs are so far removed from the original purchase, they don't even have a clue what the home looks like. A BPO moves them in to the right place, and then an appraisal fine tunes the value.

Jul 05, 2011 04:42 PM #1
Rainer
31,959
Karl Falk
Summit Mitigation Services - Monument, CO
Summit Mitigation Services

Liz, I guess you are saying that you are in support of BPOs and I assume you are a BPO agent yourself?  I agree that BPOs are important and prefer them over appraisals on Short Sales.  BECAUSE if its a good BPO agent they understand the market, the short sale situation and understand its not a normal transaction...where appraisals typically are not that "flexible".  I just hate when the banks put all of their eggs in them and stick to the highest one...which happens all the time. 

Would love your comments on a recent post I did on BPOs. 

http://activerain.com/blogsview/2380969/-bpo-lies-and-videotape-film-at-3

Jul 05, 2011 05:56 PM #2
Ambassador
1,041,270
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

I just wrote a few posts about this. Here in CT they are against the law unless you are doing one for a client, or are trying to get a listing.

I have a problem with them when the lenders send someone from out of the area. That is the only problem I have with them. Wait, no, I have another problem.

UNLESS someone goes inside, terrible mistakes can be made. Terrible.

 

Jul 06, 2011 12:24 AM #3
Rainmaker
303,659
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

John~ Banks often request a BPO when a borrower is behind in payments. The exterior BPO at least gives them some idea of how the house is being maintained.

I believe that the "gut feeling" only comes with experience. Doing BPOs really helps hone that gut feeling.

Jul 06, 2011 12:52 PM #4
Rainmaker
303,659
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Karl~ Though I do a ton of BPOs for my REO listings, I actually do very few paid BPOs anymore. I'm busy in REO. I will do a paid one every once in a while to just kind of stay in the game.

Yes, banks do tend to stick to the appraised price, and that has proven to be problematic in many ways. I believe that the BPO is a valuable counter-balance. The trick is getting a BPO from a qualified person. I am a qualified person, but I would not even give a verbal opinion (much less written proof of my research) for $40.

Jul 06, 2011 12:57 PM #5
Rainmaker
303,659
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Andrea~ It was your post that inspired me. Check out my PART 2.

Out of area BPO agents and out of area appraisers are both problems. Most major decisions are made based on an appraisal, though, rather than BPOs. That makes the out of area appraiser even more dangerous, in my opinion.

The drive-by BPO has very limited usefulness, but it does help the bank know how the exterior is being maintained and whether or not the property appears to have been abandoned. Since they require street view photos, the exterior BPO can give limited info about the neighborhood.

Jul 06, 2011 01:04 PM #6
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
303,659

Liz Lockhart

GRI, Cape Girardeau Real Estate
Ask me a question
*
*
*
*
Spam prevention

Additional Information