To BPO or not to BPO: In defense of the BPO's place in valuation, part 2

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

Once they actually start getting listings, most REO agents do not have time to do paid BPOs. That often leaves relatively inexperienced agents to do BPOs; and, of course, inexperience in any form presents danger. I do shudder each time one of my listings or pre-lists has to be scrutinized by a random BPO agent, because so many of them know little to nothing about the realities of the REO market. The prospect of a poorly done BPO also increases exponentially with the distance between the BPO agent's office and the subject property. (Then again, I could say exactly the same thing about many appraisers, who also tend to come from far away.)

TToo much price taghe fact is that BPOs were the entry point  into the world of REO for nearly all REO agents in the marketplace. That is not to say that a BPO agent has a reasonable chance of getting a listing each time he/she does a BPO. It's very rare for a paid BPO to net a listing for the BPO agent. It is, however, how I got my first REO listing; and there are still agents trying to break into REO by cranking out the BPOs.

An experienced REO agent is, presumably, the best person to do a BPO for an REO. As an REO agent, I have had occasion to suspect a competing REO agent of over-valuing one of my pre-lists in an attempt to inflate my listing price. His goal was to get the listing after it did not sell on my clock.

BPOs are often used to evaluate short sales, and short sale specialist Karl Falk makes the case that a conflict of interest could arise when the BPO agent is also an REO agent who might hope to gain a listing if the short sale goes down. His blog entry, BPO Lies and Videotape, can be found HERE.

Both of the afore-mentioned conflicts of interest could be completely avoided by an industry-wide understanding that doing a solicited BPO automatically disqualifies an agent from subsequently listing the property.

Some states have bowed to pressure from appraisers to put a stop to the practice of real estate agents doing BPOs. Because I believe that the agent perspective is distinctly different from that of an appraiser, I believe that it is a mistake to make laws against agents doing BPOs. It seems more logical to me to regulate how far afield an agent or an appraiser can go.

Andrea Swiedler's blog entry with the provacative title: When does a BPO constitute jail time? indicates clearly to me that the intent of the law in her state of Connecticut is to prevent BPO's ENTIRELY by anyone other than the actual listing agent. I'm confused about why such a law is even made, though, if there is obviously no intent to enforce it. It is interesting to me that Andrea's blog asserts that the BPO process drives DOWN the local listing prices.

To say, on the one hand, that a real estate agent knows enough to 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, a perspective that adds to the valuation process when done correctly, is completely illogical. If a third-party agent could not be paid to do a BPO, the system would lose that impartial perspective entirely.

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Thanks to Susan McCall who provided a link to an article by the Appraisal Institute that spells out the regulations for all 50 states. According to that article, the following is a summary of state requirements (info for each state is spelled out more specifically in the article):

Unlimited authority - There are no limitations on real estate brokers and sales persons performing price and/or valuation analyses, including appraisals in non-federally related transactions.

AK, IL, IN, IA, MT, NY, OK, SD, TX, VT, WI (11)

Broad authority - Real estate brokers and sales people may perform broker's price opinions, competitive market analysis, etc. as part of the listing process, and for other purposes. The broker or sales person may, or may not, be permitted to charge a fee for their services.

AR, AZ, CA, CO, FL, KS, LA, ME, MI, MN, MO, MS, NE, NH, NV, OH, SC, WA, VA (19)

Limited authority - A real estate broker or salesperson may only perform a broker's price opinion, competitive market analysis, etc. as part of the real estate listing process. In some cases, brokers and sales people are prohibited from charging a fee or receiving any form of compensation.

AL, CT, DE, GA, HI, ID, KY, MA, MD, NJ, NC, NM, ND, OR, PA, RI, TN, UT, WV, WY (20)

 

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Part 1 of this blog can be found HERE.

Posted by

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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.

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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)

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Rainmaker
180,327
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Thanks, Liz!  Writing this two post article must have taken some time and thought, but I really appreciate your insight into the process, not to mention the links to our own state requirements...

Jul 06, 2011 10:55 PM #1
Rainmaker
263,387
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Brenda~ I actually wrote both parts last week and decided to let them sit in draft for awhile. Because I started with BPOs before getting into REO, I do have much to say about BPOs and BPO only agents. Since I very rarely do paid BPOs now, I feel that I can defend the process. Since I did hundreds of them, I can critique the process.

I have Parts 3 and 4 in the back of my mind. Part 3: Why BPO only agents are a BAD idea. Part 4: Why $40 is too little to pay for a BPO.

I don't know if I will actually ever write the others, but I might...

Jul 06, 2011 11:13 PM #2
Rainmaker
579,958
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

If BPO companies want qualified agents and experienced opinions for their valuations they are going to have to pay more than $40 or $50. And these "new" CMAs for $25: Just send use 3 actives and 3 solds and pictures and drive-by it and gives a value, but this isn't a BPO so we are only paying $25.

I love it when I get a call for a BPO in "Podunk", OK for $50. I explain it is a small very rural area, limited to no comps, no MLS, 30-50 miles round trip and $50 won't cover it. Two days late $55, 3 more days $65, 6 more days $75.........They spend 30 days trying to get it done on the cheap. How much do they waste/pay trying to get it done for nothing?

Jul 07, 2011 10:42 AM #3
Rainmaker
263,387
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Than~ Of course, you are so right! (see my comment in #2). Only starving newbies or full-time BPOer would take one of the $25 assignments, which pretty much guarantees an assembly-line generic result or an unqualified result. I would not do a BPO within WALKING distance for $35 (my opinion is worth more), and I honestly cannot remember how long it has been since I did one for $40.

The BPO industry will fall in on itself if the prices remain so low, because the product will continue to grow more and more unreliable. Too many agents doing BPOs drives down the price and devalues the product. When the market rebounds and agents drift away from the low-pay BPO, the prices will come back up.

Jul 07, 2011 09:12 PM #4
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Judi K Barrett
Judi Barrett~Integrity Real Estate Services~Idabel, Oklahoma - Idabel, OK
Broker/Owner, Integrity Real Estate Services -IDAB

Liz, I don't do many paid BPOs.   I just really don't have the time to spend doing them..  enjoyed the read.. Thanks!

Jul 14, 2011 10:31 PM #5
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Happy Tuesday!

Jul 26, 2011 06:58 AM #6
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Rainmaker
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Liz Lockhart

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