Real Estate Bpo Form
A Broker Price Opinion, or BPO, is the evaluation and estimation of a property that is typically performed by a local real estate broker. A BPO is more accurate than an AVM (Automated Value Model), which requires no on site visit but provides a value based on historical price, market conditions, and comparables. The BPO value estimate is not as thorough as a full appraisal but is cheaper than hiring an appraiser to do this work. The BPO value is the key to whether or not your short sale transaction gets approved or rejected.
A lender typically orders the BPO when a short sale is being considered. If a lender has ordered an appraisal, then this is good news as they have deemed your short sale file as a qualified candidate. The value that is provided by the BPO inspection is provided to the lender to compare if the current short sale offer is reasonable. If there is a huge discrepancy with the BPO value and the short sale offer, they would question the validity of the short sale offer and will reject the short sale offer. Bank of America has been known to do this with their short sale transaction. Once a value is grossly underestimated based on the BPO, the file will be closed almost immediately, unless you jump in and negotiate with reason and facts as to why your offer is an accurate representation of the market value.
The problem: The person performing the BPO is hired by the lender, which is usually a local real estate agent, and may not know the market of the subject property. In one of our short sale files, we had a subject property that was on the border of a neighborhood that clearly had a 50-100K difference in value. The real estate agent lumped properties from both neighborhoods and came in with an incorrect BPO. We had to make past years comps to prove that the difference in values from both neighborhoods and once this was presented to the lender’s investors, they finally approved the short sale.
Keep in mind he BPO is just an estimate and if the BPO value is not in line with the offer you submitted, you will have a problem. If the BPO value is higher than your offer, they will think you are low balling them and if the BPO value is lower than your offer, they may approve the loan. Yes, that’s right, they MAY approve it. We had a scenario when a lender asked us to lower our purchase offer to keep in line with the BPO value. We were quite surprised.
There are two type of BPOs ordered by the lender. A drive by and a physical on site inspection. We always push for a on site inspection as it greatly increases the accuracy of the BPO value. It is always suggested to meet the real estate agent performing the BPO to validate that they are valuating the subject property correctly. It has been reported that lenders try to get a BPO that is in their favor. No official word on this as no one want to admit this is happening, but it does. Many real estate agents doing these BPOs don’t want to meet with you because they always think you are there to influence their decision on the value.
What are the duties of the real estate agent performing the BPO?
1. Pull recent comparables
2. Photograph the property and the surrounding area
3. Estimate any repair costs
4. Provide an opinion of the market value of the property
5. Create a report and send it to the lender
Note: Use a guideline of 90% of the BPO to be an acceptable offer by the lender. If the BPO is 200K, your offer should be at least 180K. A BPO higher than your offer will almost always kill your deal so you must be prepared to fight and request another BPO, which some lenders will do, or provide material data to prove them wrong.
How you can help get a correct BPO value?
1. Do your own research – Do not expect the BPO to be accurate. Do your own research and include any facts that would affect the market value of the subject property, such as needed repairs. If the BPO is found to be incorrect, all your research can be used to prove thm wrong.
2. Be there for the BPO – If you can arrange to be present at the BPO, make sure you note any points that the real estate agent may not be aware of so that they come in with an accurate appraisal.
3. Show the property as-is – There is no need to clean up the property or do any fixes. If there are damages that may not be obvious, point them out, i.e. termite damage or foundation issues.
4. Compare notes – After the BPO inspection is done, ensure that you have clearly mentioned anything that will help the real estate agent form an accurate opinion of the market value. Do not push to make it seem you are trying to influence their decision in your favor. Rather, make it as if you are just trying to help them do their job.
5. Follow up with lender – Check to see if the lender has received the BPO and be prepared to provide additional data regarding the market value of the subject property, especially if the value comes in higher than your purchase offer. Use the research you put together as ammunition.