The Short Sale BPO Evaluation Mystery

29
Aug

The BPO Agent Evaluation Model and Perspective

It is good to understand the general perspective of the agent conducting a BPO (Broker Price Opinion). Did you know a BPO Agent usually makes $40-50 for each BPO the foreclosure bank orders? Consider what a BPO agent must do for that type of pay. The BPO Agent has to drive out to property, spend 30-60 minutes or more inspecting it, take 10-20 pictures, drive back to their office (which many work from home), spend ANOTHER two-three hours putting together all the data they collected and uploading the real estate pictures and information to the third party company the bank hired to order the BPO. All of that work for $40-50 buckaroos.

The reality is the BPO Agents do not make any money if they have to spend A LOT OF TIME with one BPO. They have to burn through as many BPO’s as possible to make a few hundred bucks every two weeks. This doesn’t mean they do not do a good job conducting one. In my opinion, BPO Agents they are simply not motivated enough to spend the required time to produce an accurate value on the property every time. Hence here is where investors can make some serious profit.

Many banks typically are not looking at just one property when they consider a short sale transaction. They are considering an entire portfolio and YOUR property may be .25% of a 50-100 million dollar portfolio. Banks for the most part do not make time or spend enough money to really care if they lose MORE MONEY on ONE house. Think about it. I think they spend as little as possible to have some type of paper trail to present to their superiors and Senior Lender/Credit Officers, so they can sign off for compliance with standard operating procedures for the short sale approval.

The incredible part of this is even though banks spend as little as possible to obtain values on properties and short sale them when a Loss Mitigator writes a letter of recommendation. They still SAVE MORE MONEY by accepting short sales and not letting their properties go into foreclosure and complete the auction process. Can you believe that? With all the mistakes and lack of due diligence on THEIR part, they STILL SAVE MONEY WITH A SHORT SALE! That is astounding to me, but hey…I’m not complainingn too much and you shouldn’t either because it creates great opportunities to profit in short sales for all of us. So…carry on with the bad habits banks….carry on.

Here are the basic three factors that are considered when a bank orders a BPO

•    What is the condition of the property?
•    What have similar properties in the area sold for off the MLS?
•    What does the home need to be sold in 60-90 days or less?

You got anything to add to this? I appreciate your comments.

Howard Bouchard

Who cares the taxpayer will cover any losses. What’s a few thousand here and there?
Jack B.

“It will take an ethical/professional and moral broker approximate 5H + and expenses to perform an BPO.”

Where did you come up with these numbers? My asst. usually does 3-4 a day if she has nothing better to do and can take pics, comp and submit in about 3 hours. It avgs about 45 min – an hr each and they accurate.

She is both ethical and ‘moral’.
BPO Broker

Don’t assume that the Broker isn’t qualified because BPO”s “only” pay $75 bucks. I smart broker with a good system, and experience in the market can bang 5 of these out a day, and provide a more insightlful and pragmatic assessment of Market Value, As Is Value, and Reparied value than an “no -money down, late night infomercial-investor” looking to cash in on somebody elses shortcoming. I’ve been on every side of this equation. I’ve been the investor, I’ve been the Broker, and I’ve been the buyer. I do BPO’s because it keeps me in the market, and I actually find them interesting, and maybe I’m just a glutton for punishment. I find nothing more irritating and unethical than showing up at a property in a declining market in which a homeowner is foreclosing for no other reason than he or she is cannot sell it because the bank appraised it at 30% more than what it is now worth 3 years later. So now, the homeowner is forced to short-sell, so an “investor,” can come it at 50 cents on the dollar of the current appraised value,evict the homeowner (or do a some kind of shady seller finance deal; turn it into a rental property — and slum lord the entire neighborhood. Meanwhile — homeowner is SOL, because the “investor,” is forcing the value down and trying to convince the bank, and the Broker it’s worth 50% arv, not just 70% ARV. Why should the investor get anything — wouldn’t it be easier for us all if the bank would work on helping the homeowner in adjusting the lousy mortgage they sold them for an overvalued asset in the first place? Please…do us a favor, have some respect and don’t show up at the property with your lowball investor “BPO’s” with comps of distressed houses in outlying areas that aren’t even comparable. Your not doing the “broker” any favors, or helping them…your just perpetuating the problem — and making yourself look slimy. Maybe you can do us all a favor and get a job on wall street.
Me

Your aticle was brought to my attention. I wanted to alert you all, I am a BPO Agent. I do about 20-50 a week, depending on the need, for more companies you care to know about.
Here is what you are all missing…..
1. An Investor always thinks they are right on the price, no matter what it is for or what it is.
2. As a Licensed Professional, I take pride in my work, no matter how much I get paid due to the fact I have my name to care about, what companies I service, and the issues involved with a Short Sale can determin ones fate.
3. We do have to know the areas, the values, and yes, even the problems. We are not contractors but in fact contracted to give our best opinion, with a License to back us up.
4. A good BPO Agent knows the value without having to see the house and can do BPO in a matter of a half hour, with all comps at hand, all repairs noted, and yes, sometimes with amounts provided.
5. It shouldn’t matter who gets paid what, it should matter to you we are the Professionals who know the areas, or so it should be, and when dealing with an experienced BPO Agent, they will not take any information given so the value is not hindered on what you think or want it to be.
6. As a Short Sale Certified Agent as well, I can tell you that with my past experience and knowledge, tend to get the price right to begin with and the contracts, whether it is an Investor or end Buyer.
My point to you all, make sure the BPO Agent knows what they are doing, for how long, and they will be right all the time.
And to answer some comments, I do get listings from working with Mil companies, such as Mark to Market or Clear Capital. Your information is not 100% correct.
If you all want to know how Real Estate really works, put yourself in school, get a License and see how us Agents percieve truth to myths, knowledge to price, and Investors to Wisdom……
Bubba Realtor

Short sales? why will the servicers agree to a short sale when the largest profit center they have is reo sales
Jack O

Just to clarify a few items. There’s much mention made of “banks” doing one thing or the other. More accurately the decisions are generally made by servicers rather than the “banks”. When a servicer accepts a loan mod on behalf of the bank/guarantor, the servicers profit margin shrinks. When they accept a short sale they make NO profit. However, when a property is foreclosed on they make a considerable fee to handle the FC. Thus there’s a disincentive to support a short sale. I would also add that to generalize what “banks” do would be similar to making the statement “all (insert an industry here) do things the same way and would also indicates a basic misunderstanding of how the entire default servicing industry functions.
Next on to the statement that agents aren’t qualified to value properties. Once again we see a generalization. Consider your chosen profession, now consider the least qualified individual in that profession. That least qualified party certainly doesn’t set the baseline for the industry. I’ll be the first to say that many agents aren’t qualified to tie their own shoes, let alone perform an accurate BPO. The 80%/20% rule applies to all professions. However, in many cases, the short sale BPO provider will also be called upon to sell the property after FC. As such, they’d better be able to “put their money where their mouth is”.
Regarding the 50 to 100 paid for a BPO, In many cases the BPO requestor is also a major listing client. Thus it reverts back to accuracy or lose a client, regardless of the pay. My staff performs about $100,000 in BPOs a year. That’s chump change when one considers that the accuracy of these BPO generates about $2,000,000 in foreclosure sales commissions. Don’t pity ME for the low BPO pay, it’s a starting point, not the finish line.
Don’t bother to give the BPO agent comps, it’s only shredder food. Most agents have access to many various sources of information. Not the zillow, foreclosure.com, or other out of date internet databases. We’re in these neighborhoods daily, we experience the market constantly and we discuss trends among ourselves on a pretty steady basis. Further we fully understand that, in many cases, the provider of the comps has a vested interest in a low valuation. Again, the 80/20 rule comes into play and many agents will take the bait. Just keep in mind the other 20% will see right through it.
Some of what I’ve read in this thread is accurate. Some of it almost reflects what parties wish it was rather than what it is.
Short sales are fast becoming the income stream that is now associated with REOs. The difficulty many will experience is that many banks are going to their existing REO agent databases for their SS agents. That is to say, they’re going with those they trust, those with a demonstrated track record of accurate performance.
David Thomas

Wow, Cory. There are some angry agents out there. First, done well or poorly, a BPO is an opinion of value. The true value of a property is what a willing buyer and willing seller agree the value is. Short sales are distressed sales and are generally lower than a nondistressed sale. Second, I guess some believe short sales are bad. Nothing could be further from the truth. Banks agree to short sales when 1, the homeowner cannot afford the house by mortgage mod or forebearance, and the short sale will cost the bank less than going through the entire foreclosure process with increased legal costs, holding costs, deterioration of an empty house and interest lost not only on the mortgage principal but on the reserves the bank is forced to hold for a nonperforming asset. The homeowner benefits by selling their house rather than loosing it. Their credit score is less adversely affected, later, if they buy another house, they can qualify two years earlier for a Fannie Mae mortgage. And lastly, the homeowner can save a little dignity by saying that they sold their house rather than being foreclosed on. When I resell a house I acquired by short sale, you bet I make money and I make no apologies for it. My buyer is getting a good deal on the house, and i usually am paying some or all of the buyer’s closing costs. I have only sold one short sale house where I have not had to make some kind of repairs; a little home rehab and I have rehabed the title to make it marketable. During all this time, I am keeping the grass mowed and the house secure and am minimizing the time a house is empty in a neighborhood, minimizing the time local government is without property tax revenue, helping someone to realize the American dream of homeownership, helping the homeowner out of a bad situation, getting a Realtor a higher commission on a higher sales price and decreasing the loss the bank will take otherwise. I get paid to solve problems and I am certainly not taking advantage or hurting anyone. Now, someone tell me what the heck is wrong with that.
Jack O

David;
I doubt anyone could explain what’s wrong with that. I certainly see nothing wrong with profit. It’s the American way. From what you posted I’d guess you look at the figures and make an offer that reflects your ability to make a profit. What raised my ire was the blanket generalizations directed towards BPO providers and the “banks do it this way” comments. There are so many behind the scenes factors impacting the decisions on short sales. Granted a SS will result in about a 19% loss and an FC will hit about a 40% loss. But a loss to who? There’s a lot of recourse paper floating around which has a must different fimpact than non-recourse paper. Just as one for instance; Let’s suppose the note holder has full recourse against the originating entity. If the not holder approves the SS, the originating/selling entity COULD argue “you accepted the loss, not I and as such you take the loss”. However if it goes into foreclosure, the note holder charges the loss back to the originating entity, thus having no loss. That assumes the originating party is still around. That’s just one scenario in a very complex and murky environment. So in one case the bank would be “nuts” to turn down a SS and in another they’d be “nuts” to accept it. More importantly those of us at the bottom of the pecking order have no way of knowing which case we’re dealing with. Of one thing I’m certain; I know enough about this industry to realize I’ll never know it all. Handing a few comps to an agent won’t change that, paying them 50, 100, or more for a BPO won’t change that, and tossing legislation around like a frisbee won’t change that. David, you crunch your numbers, you negotiate with a profit in mind, and it appears, from what you wrote you’re doing okay at it. To qoute you “Now, someone tell me what the heck is wrong with that”. NOTHING, it’s why we’re in business. Congrats.
http://www.crfhomebuyers.com Jeff Beatrice

ONE, of the most important things is the type of outstanding loan product on the subject property! FHA and VA loans have a guideline on how much the Lender can discount the loan. As a Buyer, you must know this before the BPO is ordered. Always provide the BPO Agent as much information to help your value come in!
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Ronald Barboza

Considering the condition set forth prior to the BPO'S EVALUATION, for the sale OF THE PROPERTY would it be better to lessen the price after the BPO sell the property after the bank set forth conditions then pay commission to real estate person, pay person and self who did process of sale. Some time I don't understand all my conditions. do I really know what I'm thinking or doing? Please enlighten me!!
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http://www.shortsaleology.com Cory Boatright

Thanks for your support Steve!
Runfromcops

My guess is the writer hasn't done many BPO's. I've done 1,300 BPO's in the past 12 months here's my stats; Avg drive time per order – 30 min, Avg time to take photos – 5 min, Avg time to fill the report – 60 min, Avg pay per order – $62. Yes you can be accurate with these parameters if you are good. Do I nail each and every order? Probably not, but I've seen tons of poor appraisals over the years as well. I would guess I'm accurate within 5% on 95% of orders.
http://www.shortsaleology.com Cory Boatright

Wow that is a LOT of BPO's!
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You are welcome!
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http://www.shortsaleology.com Cory Boatright

Hmm… did you have a real estate question?
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That doesn't surprise me
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Then why don’t Banks allow BPO’s for Origination?

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The Short Sale BPO Evaluation Mystery

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