As a member of an REO team over the past few years, I have done my fair share of Broker Price Opinions BPO’s in Scottsdale and Cave Creek and the surrounding market. But yesterday I ratcheted up my skills a notch by taking a six-hour BPO course, taught by Buy and Sell Smart real estate broker Desiree Montgomery.
What is a BPO, anyway?
A BPO is an opinion of what the home can be sold for based on the comparable properties in the area. A BPO is normally originated by mortgage servicers or asset management companies to give them a snapshot of the current market and property condition. A BPO is not an appraisal, but it is a lower-cost quicker alternative, only $45 - $100 for a BPO, rather than $350 - $450 for an appraisal.
A Homeowner Could Go to Foreclosure Based on the Results of a BPO
Because the results of a BPO could send a homeowner to foreclosure in a distressed market, it is extremely important that BPO’s be accurate. The BPO agent needs to be knowledgeable about the area and how to do a BPO correctly. Mortgage lien holders utilize the BPO’s to determine the course of action they will take on the property in regards to loan modifications, deed-in-lieu of foreclosure, short sales and foreclosure. Montgomery said that due to lax restrictions on BPO’s in 2007/2008 more homes went to foreclosure than necessary. There were no restrictions on an agent doing a BPO prior to foreclosure and then being given the property to list as a bank-owned property after foreclosure. Conflict of interest, anyone? There may be any number of BPO’s done while the borrower is in default on the loan to get an understanding on the changes in market value of the property.
The Different Kinds of BPO’s
Interior and exterior BPO’s are the two common types of BPO’s, the third is a rush BPO. An exterior BPO,commonly referred to as a “driveby,” would assess the exterior of the home, including the street and surrounding neighborhood, landscaping, windows, roof, paint/stucco/brick/siding and how the property compares to others in the neighborhood. An interior BPO is more commonly ordered when the lender has an offer to purchase the property, in a short sale, for instance. The BPO agent will be requested to get photos of all rooms and report any damage (not cosmetic) that appears to be in the home, including the appearance of mold or termites, missing fixtures and cabinets, damage to walls, flooring, windows, garage doors.
Cosmetic and Non-Cosmetic Damage – What is the Difference?
Basically, it boils down to if the house is habitable or not. An ugly green paint on the wall and minor cracks in the ceiling do not make the house inhabitable, but large holes in the walls, evidence of water damage to the ceiling and the appearance of termites just might prevent someone from living in that home.
Active and Sold Comparables and Adjustments for BPO’s
When doing the comparables for Active listings, it’s important to use the closest model match to the home as possible, i.e. size and floor plan. When doing comparables for the Sold listings, using the most recent sold comps (within 90 days in this market) within a 10% size range of the subject property is necessary. There are some adjustments that can be made, for example, if a comp backs to a busy street or commercial property - $3,000 - $5,000 adjustment downward. A 3-car garage might adjust $3,000 over a 2-car garage. And even though a homeowner may have paid $180,000 for his lot premium back in 2005, that same lot may not be worth over $10,000 - $20,000 over a non-golf lot in this distressed marketplace. An extra bedroom might bring $3500 more, and a pool would bring about $10,000 - $15,000 for a typical tract home. Those are just some examples of adjustments that might be made on a BPO in Scottsdale and Cave Creek and the surrounding areas.
I learned quite a bit more, too, and I’m excited about the new information and skills I learned yesterday, and look forward to doing the most accurate and correct BPO’s in Scottsdale and Cave Creek and the surrounding area!