APPRAISALS vs. BPOs: Can we please put an end to this insanity?

Real Estate Broker/Owner with BROKER of Green Realty Properties® - 954-667-7253 BK3175566


Today I want to address a question that I have long wondered about and have no good answer for, and that is why are BPOs ordered by lenders for short sales instead of appraisals?


Let’s think about this, and look at a few examples. When an investor, such as Fannie Mae, "invests" in a mortgage loan, they won’t accept a loan without an appraisal. Similarly, before a lender approves a loan, they don’t order a BPO, they order an appraisal. The most puzzling and irrational example is when the buyer and seller have the same lender...which is common with the larger lenders. I have seen the same lender, in the same transaction, order a BPO on the seller’s side, and then turn around and order an appraisal on the buyer’s side. Of course the BPO is always inflated, and somehow the same property has suddenly lost $50,000 in value in the weeks it took for that lender to approve the short sale. Why do BPOs even exist as the deciding factor on a short sale transaction?? Why can’t appraisals be ordered by all sides? Some can argue because they save time and money, but do they really?


For argument’s sake let’s say it costs $100 to hire a BPO agent to do a BPO, and roughly $400 to hire an appraiser to do a proper appraisal. It costs $100 to hire someone who isn’t necessarily licensed (and definitely not regulated), to spend less than 5 minutes in a house, and to not take into account all the factors an appraiser would. I have heard BPO agents say that they do 500-600 BPOs a month. That’s impossible for ONE person to do! We have all heard that some of these BPO agents hire (unlicensed) people to drive around and take pictures of the outside of the property, and I have actually seen BPO agents recruiting these drive-by photographers on Craigslist.


Now let’s juxtapose the BPO agent against the appraiser. An appraiser is a qualified professional who goes through serious training, and then is supervised for two years before being able to work on their own. Plus the appraiser’s sole objective is to appraise the property; they don’t do it in hopes of getting REO listings from the banks. Appraisers are qualified to appraise, take the time to take all factors into consideration, and generally speaking, give fair market values. They are regulated and are subject to consequences if they don’t do their job right.


Don’t get me wrong, I know that there are bad appraisers and great BPO agents, but that’s not the norm. We are in a serious mess and its being exacerbated for what? Lenders think that they are saving time and $300 per property, but in reality, thousands of hours are wasted disputing BPO values and getting nowhere. It takes time to dispute a bad BPO value on a file, months to resolve the issue with the lender… months that the property sits on the lender’s books, the sellers and buyers are left in limbo, while values continue to drop.


Can’t we put an end to this insanity? Please! Lenders/Investors are losing thousands and thousands of dollars on short sales and foreclosures, yet they are worried over a $400 appraisal? Am I the only one who is confused about this lack of common sense?





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Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®, GREEN, CFS, TRC, RSPS

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Comments (247)

House of Brokers Realty Inc. - Columbia, MO

Appraisals aren't worth much either, lately.

Aug 27, 2011 02:09 AM
Robert Kroon

Great comment Patty !

HUD does not go the BPO route for HUD acquired homes.  HUD orders an "as-is" appraisal.....HUD is very specific about this.....they MEAN  as-is where the property is today.  Then HUD bases the beginning selling price on this appraisal.  If the buyer is applying for  an FHA loan,  the lender can use this appraisal.  By doing so buyer and lender avoid issues over appraiser required "fix-ups" that must be done prior to COE.

Aug 30, 2011 06:42 AM
Elisa Uribe Realtor #01427070
Golden Gate Sotheby's International - Oakland, CA
Opening the Doors to California Homes -East Bay

I have a short sale with BofA and they are doing a full appraisal before deciding value versus a BPO...maybe there is progess in this area...we can only hope!

Aug 31, 2011 06:16 PM
Kari Battaglia, PA
RE/MAX Platinum Realty - Venice, FL
Love Where You Live

Patty excellent post.  I had to scroll down to the bottom as it was taking too long to read all the comments.  That alone should send a strong message to all lenders regarding the ongoing problem of overvalued BPO's.  I do many short sales and I would say this is by far the most stressful part of my job, wondering if I am going to get a fair valuation on my short sale property.  

Sep 20, 2011 03:17 AM

How interesting - I have a short sale listing - bank with the property appraised it at $58,000 Now the buyers appraisal a little over $70, 000 - yep appraisals sure can ace out a well done BPO on accuracy! Please get a clue - they are bothe an opinion of value - experience and dedication to a good work ethic is the only true difference -  that is the person doing it not the procedure used.

Oct 24, 2011 07:44 AM
I really appreciate your posting. BPOs are as important to the process as appraisals. While often times an appraisal is attempting to give a value to An assets in a lenders portfolio. The BPO asks the agent that's pretty much on the front lines day to day what he or she can sell the assets for. While the value may be one price the disposition value of a distressed asset is usually another. Some would argue 15 - 30% less in some submarkets. Also, there are some Real estate agents that will not accept listings at inflated prices because it wastes valuable time. Thanks
Oct 30, 2011 02:31 PM
Most lenders will have an appraisal done when they make the loan. Often times another will be done sometimes durring the process. However, the period from NOD to default can be years. In these instances it may be more practical to have a local agent ride by the particular asset take a few pictures and give the lender an update on recent market activity. Thanks again
Oct 30, 2011 02:43 PM
Elisa Uribe Realtor #01427070
Golden Gate Sotheby's International - Oakland, CA
Opening the Doors to California Homes -East Bay

I agree 100% and was pleasantly surprised when an appraiser called to appraise a short sale where I represented the sellers. It was with BofA. Maybe they have heard your plea.

Nov 04, 2011 05:44 PM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

WOW look at this post . . . what a topic!! 

I believe it's protocol . . . stupid and inane as it is.  The banks have their protocol set up and that's how it is.  The appraisals, IMHO should be done pre-short sale listing, IMHO.  The price would be based on current market value based on an unbiased appraisal.  The back and forth guessing on how much the seller can expect, and/or what the lender/s will accept would be solved if there was agreement early on based on appraised market value.  List the home with an appraised value and steamline.  But . . . they've got to do it this backasswards way and follow protocol.

Jan 19, 2012 07:57 AM
Pam Graham
All Real Estate Options - Jacksonville, FL
Jacksonville, Clay & St Johns Counties

My comment is going to be a little off topic. I use to do BPOs, not that many maybe 3-5 a week or so. They were time consuming but I did them just like I would if it was for a seller I was listing them for. This one BPO company, who contacts the agents to assign them the BPO, started telling me my values were too high and that I needed to look over them and adjust them. There were some I spent huge amount of time on and they kept rejecting them, because they said they were too high. Eventually I just would drop the price because arguing with them was wasting time and I was not getting paid much for them. I did not price them high to get the listing, I priced them at where I thought they could get the most money but not spend a huge amount of time on the market.

I started hearing rumors of agents doing BPOs being investigated by the FBI due to LOW BPOs and I started to get nervous, because I didn't want mine to be looked at like I was just low balling them just to low ball them. My BPO assignments were coming in fewer and farther between, I think it's because I would argue with them about the value. Well the last one I did, they were again saying my value was too high and I showed them my comps and I told them flat out that I was not going to lower my value, that this is what I would list it at and that I heard from our board of REALTORS's lawyer that agent's were getting hammered for low BPOs. Well they went with my value and I never heard from them again for an assignment. I kept the emails of them disputing the value just in case something ever came up.

Jan 19, 2012 08:34 AM
Carl Winters
Canyon Lake, TX
Jan 19, 2012 12:03 PM
Faye Y. Taylor
StepStone Realty, LLC - Floresville, TX
Homes for Sale Floresville, La Vernia &San Antonio


Great post with good info and lots of comments with good info.

I started doing BPOs for the extra money and the hopes of maybe getting a listing in the future.  My last BPO about 3 years ago was such a joke, I quit and have refused all begging requests since then. It took me around 4 hours to do a BPO correctly.

We only get paid about $50 per BPO in this area so the time involved is not WORTH it.  My last BPO was disputed twice and the last rep sent them the comps the other agent used.   What a laugh!  One of the comps was MY listing.   pier & beam on  2 acres in a run down rural subdivion;  compared to a house on a small town lot on a slab with a 2 garage.  The BPO company took her value over mine. When I told them the other BPO was not accurate they did not agree and wanted me to change mine. When I refused the girl said "You realize you won't get paid?"   To which I responded "Do you think I CARE?" 

Have not done another BPO since.  Waste of my time; they aren't looking for accuracy; just what they want.

Jan 20, 2012 06:33 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Patty,  Congrats on making the 2011 top 10 list which I did not know AR had.  That is not the point. I'm here to tell you why. It's because the still have not figured it all out yet ... and they are saving a few hundred that will cost them several thousands ... after all ... they are lenders ... that makes perfect sense ...what's wrong with you? (LOL)!!

Jan 20, 2012 02:21 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Patty, You are so right!  My broker and I have had this discussion many times.  We even talked a a rep of Fannie to let them know how foolish they are.

Jan 22, 2012 09:54 PM
Robin Dahlstrom
Re/Max Westside Properties - Marina del Rey, CA

And so this fight continues on. I think I spend more time addressing the issues of bad BPO's with these lenders than anything else. This week alone I had one show up that couldn't even pronounce the name of the town she was doing the BPO in, not to mention that she brought her 7 yr old daughter who kept distracting her mother. Then I had a 18 yr old kid show up to do another one. I rolled my eyes and whispered 'not again' when he got out of his car that was blaring house music and fumbled with his phone as he attempted to pull up his pants that were practically down arounf his thighs.

...and we love our job WHY?

Jan 27, 2012 03:23 AM
Matt Robinson
Professional Investors Guild - Pensacola, FL

It's a very good point.  I specialize in short sales, and have done well over 100, and I have seen lenders leave thousands of dollars on the table because of a poorly done BPO, when an appraisal would have given them a much better picture of value.

Feb 06, 2012 04:22 AM
Nancy Neville
Commerce Township, MI
The Landlord's Bookkeeper

I just finished taking my continuing education for this year and it was on BPO's.  The only problem with an appraiser being hired over an agent doing a BPO, is that the appraiser, most times than not, are not familiar with the location.  Agents are and can give a better evaluation in this regard.

The class I took was very adamant about being accurate and doing your job well.

I have to agree though.  All the while I'm studying, I'm thinking that this isn't fair to the appraiser who has to be licensed and know his stuff.  And I have seen on Craigslist and have been approaced as well, by brokers or agents wanting people to take photo's and do various jobs regarding the BPO for them.

But then again, I've seen agents that are so corrupt that it will make your head spin, and that was and is very disappointing to me.  Not too many people who take pride in what they do any more.  Shameful!

Nov 03, 2012 09:40 PM
Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker

Nancy, I've actually had a BPO agent ccome down from Orlando, which is 3.5 hours away from us to do a value on one of our properties. What kind of sense does that make? You clearly take pride in what you do and aren't corrupt, but unfortunately I've had more than my fair share of run-ins with unknowledgeable and corrupt agents trying to value our listings.

Nov 05, 2012 12:10 AM
Violetta Polyakov
Florida Home Consulting - Мы Говорим По Русски - Boynton Beach, FL

Patty, you would be less wrong if you said that there was a sun in the sky at night. Lenders need to step away from appraisals, at least residential appraisals, and completely switch to BPOs. In 18 years in business I have NEVER seen an appraisal provide correct market value. If it is an appraisal performed for lender they will skew the value for lender and if it’s done for seller/buyer they will change value according to who is paying. I have an appraisal education, as well as BPO education, and I have completed myriads of classes, training and certifications in both. Appraisal has no value and no meaning in my opinion. BPO performed by local agent with expertise in local market is 100% more valuable than appraisal. I have seen appraisers come from 300 miles away, could not find community, complete report for single family instead of a townhome, use 3 bd 2 bath value in the house that has 5 bedrooms and 4 baths, use comps from equestrian community with horse stables attached to homes but appraiser did not know about horses or stables, so he used stables as garages, I can write a book about appraisals gone wrong. I complete BPOs, not 500 a week, but 20 a week which keeps me up to date and very familiar with my area, all new listings, sale prices and new trends. It would be much better if lenders stopped using middle man and third parties and work with BPO agents directly.  This way they would not need to pay $150 to the third party for BPO out of which agent gets $30 r $40.  And if you are interested in facts, you need to read  Here is the quote from Appraisal InstituteWith the implementation of Dodd-Frank, Fair Housing standards have changed, and reduction in fees to appraisers was set up to 50 percent, which did not result in any savings for homebuyers because the appraisal management firms have not reduced fees charged to lenders and passed on to borrowers. Instead the quality and reliabilityof appraisals is being degraded and many competent appraisers are leaving the profession.”


Dec 04, 2012 12:10 PM
Richard D. Ferris - Clermont, FL
Florida State Certified (FHA) Appraiser

Violetta, I am sad to hear that in 18 years of experience, you have not yet dealt with ethical appraisers who simply report the market.   When you wrote " In 18 years in business I have NEVER seen an appraisal provide correct market value. If it is an appraisal performed for lender they will skew the value for lender and if it’s done for seller/buyer they will change value according to who is paying.", that is not shocking to me.  Sad, but not shocking.

Being a reviewer of many appraisals here in Central Florida - I have seen the scenario you wrote about.  But I also know a lot of well trained appraisers who dig into the numbers, and report an unbiased market value.

The value you are putting on a BPO, is the experience and expertise of a local agent.  Do you also know agents though, who skew their BPO results to favor getting the listing?  The bias comes from some other factor - and being unbiased, is a result of ethics and sticking to the process, not trying to please a party in the transaction.

Dec 05, 2012 12:37 AM