Appraisal VS. BPO

By
Real Estate Agent with Troop Real Estate Inc.

Pricing of REO properties is critical if the bank is seriously trying to get it sold in 30 days. This statement may seem obvious to those of us in the business but it's not as easy as one might think. When a Lender assigns a property, one of the first tasks to perform is a  Broker Price Opinion or BPO. This requires pulling comps in the area of both listed and sold properties and coming up with an opinion of value. This is a full BPO with interior and exterior photos. The agents need to take into account any repairs the property may need and come up with an "as is" price and an "after repairs" price. The lender also sends out an independent appraiser to evaluate the subject property. If the agent's BPO value and the appraiser's value show too large of a discrepancy the lender will hire another local agent to perform another BPO as a "second opinion". The lender will make the final decision as to what the listing price will be. We as agents have a great deal of influence as to the outcome of this price point, but the appraisal seems to hold equal weight. I've been told by an asset manager that if the appraisal is higher than the BPO, but not too different, they will sometimes split the difference, which might overprice the property. Overpricing problems seem to occur because of a difference between agents and appraisers of how the opinion of value is arrived at. Agents know the market. We look at the history of a property, how many days was it on the market before it sold, what is the mindset of the buyers in the local area, and what financing options are available. It seems emotion plays into it. Appraisers measure the exterior of the building, and count the number of rooms,(actually there's a lot more to it), but it seems more mechanical. Now I'm not blaming appraisers for the difference of opinion. Quite the contrary. For years we as agents have been pounding appraisers to come up with a higher number to satisfy lenders, especially in a rising market. I think appraisers have been conditioned to produce a "lending based" opinion of value. There are other types of opinions depending on the purpose of the appraisal. What about an appraisal for taxation value, for a divorce settlement, for a business opportunity that includes real property. How about  a "REO based" appraisal in a down market, taking all factors into account, including the fact that the subject property may not be listed for two months after the appraisal is completed. I know appraisers aren't supposed to try and predict  market trends, or assign a future value to a property, but I think if agents and appraisers were able to communicate we might see more aggressive pricing, quicker sales, and eventually a faster return to a "normal" market.

Rudy Detgen

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Groups:
REO EXCHANGE
REO REALTORS
Tags:
reo
bank owned
foreclosures
listings
market conditions

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Rainer
30,185
Rudy Detgen
Realtor, Real Estate Agent, Homes, REO - Moorpark, Simi Valley
Troop Real Estate Inc.

Hi Eric,

Thanks for posting the link to bpoagentswanted. I registered with them a couple of months ago. I'm certain others reading this post will check them out as well. I haven't received any work from them yet, but who knows. If you don't register you can bet you won't see any work from them either. You have the right strategy, register with as many as you can and when you start getting assignments, do it fast and good and you'll get more work.

Rudy

 

October 13, 2008 07:25 PM
Rainer
3,290
Pam Brown
Leconte Real Estate, Llc

Rudy,

 

Yes, this market is a tough one. I have just recently started doing BPOs and listing these properties. It is amazing with only a minimal amount of time, and listing with some top comanies I have received multiple BPO orders, and many listings. It is definitely what is happening right now in the economy. I have a full time assistant to help with the paperwork & tracking of these properties. I guess we have to do what makes us the $$$, but I hope things get back to normal. Real Estate in my area (The Smoky Mountains in TN) used to be like taking an order at a restaurant we are that busy! I loved it, and now we are all just having to work a lot harder. Hang in there. Lets just give each other support and we will get through this.......

October 21, 2008 10:54 AM
Anonymous #16
Anonymous
suzanne

I have a question that maybe you can help.  I have an offer in on a house since 12/30/08.  The offer was in at $330,000.  The BPO came in at $300,000 and the appraisal came in at $330,000.  Should I be able to lower my offer.  I have been waiting for this short sale to go through for over 5 months now...

June 02, 2009 11:01 PM
Rainer
30,185
Rudy Detgen
Realtor, Real Estate Agent, Homes, REO - Moorpark, Simi Valley
Troop Real Estate Inc.

Hi Suzanne,

Anything is negotiable but it's really hard to say based on the information you have given me.

The lender may or may not accept your offer even at $330,000. It depends on what their loss will be and whether or not they might be better off foreclosing on the property.

The buyer's lender, if there is financing involved,  will base their loan on the appraised value.

 

June 03, 2009 12:42 AM
Anonymous #18
Anonymous
Swalker

My husbana and I bidded on a short sale on Nov. 29, 2009.  On Jan. 11, 2010 a BPO was done.  We have not heard anything from the sellers agency,  What could possible be going on?  I am scared to death that we will wait several months and never hear anything else or get turned down, 

January 24, 2010 04:24 PM
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Rainer
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Rudy Detgen

Realtor, Real Estate Agent, Homes, REO - Moorpark, Simi Valley
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