problems with BPOs for short sales - Posted by Brian_wa

Posted by michaela-CA on December 29, 2007 at 09:20:42:

Rick,

you’re right. And I didn’t persue things too much as it just really wasn’t what I wanted to do. But going through one of those houses with the BPO agent and being told that things like ‘trim not having been primed and every knot-hole bleeding through’ and lots of scuff marks on the walls and hardwood floors being scratched up and kitchen cabinet doors having paint splotches on them from someone being not careful when painting walls etc would not even be a consideration. That anything ‘cosmetic’ would not fall into the calculation and that in his opinion this is a newly renovated house and that’s what he would compare it with. And that was in a bad market in Atlanta.

Sure, it’s all numbers and BPOs or appraisals can be manipulated in any direction, espcially if it’s in a historic district (as this one was.). Because there you will easily find spreads of 100-150K difference between ‘rehabs’ just by the scope of renovation/restoration. But that’s also what enables all this dam* mortgage fraud, as it’s easy to come up with a ‘false’ number, if your tangibles are only based on sqf and bed/baths etc.

And maybe the few times that I did deal with potential short sales were exceptions. I just didn’t work that as it wasn’t very interesting to me. I’m weird, I have to really enjoy something to be good at it. If it’s just something that I look at because it may make money, then my efforts are half-a**ed at best - lol

Michaela

problems with BPOs for short sales - Posted by Brian_wa

Posted by Brian_wa on December 28, 2007 at 08:51:17:

With the market crashing day by day, it’s been an uphill battle trying to convince agents who conduct BPOs that the subject property is worth much less than the comps that they’re using. Any of you have any strategy to share to increase the chance of getting a lower and workable BPO?

Thank you

Re: problems with BPOs for short sales - Posted by Natalie-VA

Posted by Natalie-VA on December 30, 2007 at 07:15:08:

Hi Brian,

First off, make sure the comps used in the BPO are not REO sales or foreclosure transfers as Kristine mentioned. These are not arms length transactions. They are not good comps for appraisals and shouldn’t be used for BPOs either. If the agent insists on using them, make sure to point it out to the lender.

Secondly, most BPOs forms that I’ve seen have a section for active listings. It would make sense to me for the BPO agent to show the lowest active listings available. That will be the lender’s competition. If those listing prices aren’t lower than the comps, I don’t know how you could show that the market is declining.

Of course, a repair estimate from a retail priced contractor should also be presented to the BPO agent and the lender.

–Natalie

Re: problems with BPOs for short sales - Posted by Kristine-CA

Posted by Kristine-CA on December 28, 2007 at 10:23:15:

In my area REO comps are keeping the appraisals (and seller’s
expectations) higher for a longer period of time. I don’t know about
your area, but in mine, trustee’s sale transfers are included in most
comp data programs. Using a price that a lender takes a property back
at sale can really skew the FMV–it’s usually greater than the purchase
price was in 2005. Any good broker would take those out. But then
when the REOs sit for a long time and then sell for so much less, the
broker’s take is that the REO was “discounted.”

You may want to submit your own comps to the lender, highlighting
those properties that actually sold on the open market and pointing
out which ones were lender take backs. In my area, the agents that
specialize in REOs are definitely getting their clients to price
aggressively now. But there are many who still manage to get listings
and then do nothing to help their lender client get the property sold.
Kristine

Re: problems with BPOs for short sales - Posted by Kristine-CA

Posted by Kristine-CA on December 30, 2007 at 10:25:43:

Hi Natalie. I think you may have pegged Brian’s problem. I believe he is
in a market that isn’t declining as fast as some others, so showing the
lender the lowest active listings may not work in his favor, as they may
not be low enough. Especially if the subject property isn’t a total fixer
or doesn’t have some other major defect.

Re: problems with BPOs for short sales - Posted by michaela-CA

Posted by michaela-CA on December 28, 2007 at 10:45:01:

kristine,
the times that I tried to do short sales, the BPQ was done by the agent that was getting the listing, if the
short sale didn’t work. Subsequently, it was in the agents best interest to keep the BPO as high as possible, so that he would get another listing, as it would cut out the investor’s interest in a short sale.

michaela

Re: problems with BPOs for short sales - Posted by Kristine-CA

Posted by Kristine-CA on December 28, 2007 at 10:59:39:

This has totally changed in my area. The agents are all over the short
sales and want them to fly. They are not looking to get an REO listing
after foreclosure–they really want the investor to buy now. The pool
of buyers for the typical as-is REO is totally dried up where I am due to
the credit crunch. The mostly likely and most profitable way to get paid
is to for the agent to facilitate a short sale. The problem is that the
average short sale discount is no where near enough and many
investors won’t even look at short sale listings because of the time
sink. Unfortunately, the average agent thinks that a 20% discount of
the loan amount is a big deal. We are seeing many REOs being listed
after sale at 150-180K, when the purchase/loan amounts in 2005-
2006 were 250-280K. There’s a lot of waiting around on the part of
the investors right now. Kristine

Re: problems with BPOs for short sales - Posted by michaela-CA

Posted by michaela-CA on December 28, 2007 at 11:46:22:

Kristine,
it may also have changed in Atlanta. I just never was all the interested in wholesaling anyway, so it’s not something I kept up with. I was just surprised that the banks used the same agents for these 2 things as it seemed a conflict of interest.

michaela

Re: problems with BPOs for short sales - Posted by Rick, the Probate Guy

Posted by Rick, the Probate Guy on December 29, 2007 at 07:20:53:

Hi Michaela -

Unlike an appraisal, which is an opinion of a trained professional, who is a third party otherwise unrelated to the transaction and not a stakeholder, a Broker’s Price Opinion is just that: the opinion of a broker or agent, who may or may not have an interest in the sale or other transaction of the subject property.

Is there a conflict of interest when an agent or broker who prepares the report is also part of the deal? Absolutely.

Can the numbers be manipulated? Of course. Or, at least to some degree.

Is it in the broker or agent’s best interest to provide a report which favors a particular position? Probably not too often if they want to do much business with the REO manager.

So, in my experience, a BPO is seen as a cheaper report (at least in terms of being free or nearly free to the requestor) than an appraisal, but is typically viewed by mortgage professionals with a jaundiced eye as to it’s accuracy and value.

There are times when an appraisal just won’t do, especially when the property is non-standardized, in rural and/or mountain communities, or has substantial damage that is beyond the scope of the appraiser’s assignment. THis is another time when a BPO can be more valuable.

Overall, I think lenders (that’s my primary business) see the BPO’s place, which is generally a quick, inexpensive report which is also subject to more error and misrepresentation, but often satisfactory for the task at hand.