What is a BPO, and why is it used?

Real Estate Broker/Owner

What’s a BPO, and why is it used?

Common questions I receive as a real estate broker surround short sales, and more specifically, the steps taken to complete the short sale process.  A BPO is a very important step in the short sale process because it gives the lender an idea as to whether the offer that’s been made by the prospective buyer is a fair one.  What’s a BPO, and why is it used?  A BPO is a “Broker’s Price Opinion,” and it’s used by the existing lender, or lender’s, to determine a fair market value for the home that’s being sold.  Let’s say that your lender is located in Pennsylvania or Maine, but your home is located in Glen Ellen, Ca. or maybe even Miami, Fl.  It’s not realistic to expect an asset manager or negotiator from the bank to know and understand the intricacies of your particular real estate market so they’ll hire a third party to offer his/her opinion of value.  This is of great benefit because computer valuation models are only as good as the data they have to draw off of and sometimes the data used to determine true market value isn’t something that can be harvested from a database.  The lender doesn’t want to take back a home via foreclosure, but seeing as how they could potentially be writing off 100’s of thousands of dollars they want to make sure they’re getting a fair shake.  After a homeowner requests a short sale from the existing lenders, and typically after an offer has been made and accepted, the lender will send out notification to real estate broker’s and/or appraisers that an order is ready.  Broker’s and appraisers have found it valuable to sign up with the different lending agencies and their short sale and REO(lender owned real estate) departments to be informed of when these orders are available to be taken.  BPO agents don’t usually get paid a lot of money for the BPO reports they write up but there is an upside to performing this needed task.  The benefit for the BPO agent is that if the home in question doesn’t close escrow via the short sale process and gets taken back by the lender via foreclosure then the BPO agent will have a greater opportunity to receive the listing.  It doesn’t always work out this way, but a hard working agent will always leap at the possibility for new business.   

Posted by

Jesse Gonzalez, Broker



Comments (1)

Edward & Celia Maddox
The Celtic Connection Realty - Queen Creek, AZ

Good article on Short Sale BPOs.  Thanks for sharing your blog and good luck.

Nov 16, 2011 02:24 AM