Broker Price Opinions (BPOs): How to Get Good Short Sale Value

Oh, the games that people play, especially in the real estate business. This is especially true in the world of broker price opinion (BPO) short sales.

For those of you unfamiliar with the jargon, a BPO is an estimate of value, like an appraisal, but it’s done by real estate agents. As one rather biased appraiser recently put it in an article,

“Unlike standard property valuations performed by licensed appraisers, which can cost hundreds of dollars, BPOs often cost $50 and are performed by real estate agents who may have little or no appraisal training and are not subject to to regulatory supervision.

Of course, in this topsy-turvy market, we’ve found that some very knowledgeable BPOs are much better at handling prices than some appraisers, but that’s a different story.

As any seasoned short sale investor will tell you, BPO is the KEY TO MAKING A BUSINESS WORK. Essentially, a loss mitigator for a bank has some latitude to close deals that are within % of BPO. For example, if the BPO reaches $150,000, then a loss mitigator may have full authority to accept offers of $130,000 or more.

If the short offer is above that magic threshold, the deal is done, the loss-mitigator clears his desk, everybody’s happy. Below that number, you can also try pushing a wet noodle up Mount Everest. Each credit institution has its own guidelines and these can definitely change over time.bpos

Many, many investors get stuck at this stage simply because they don’t understand how to play the games. So how do professionals get BPO valuations that work for them and for the bank?

1. Always remember that the BPO agent only makes about $50-$75 so you want this to be done with little friction… also remember that the bank is paying your bill so you want the customer of the bank is happy;
2. Long before the BPO agent arrives, the investor markets the home for short sale on MLS. They start the price at the highest value that could work and then start lowering the price by a set amount (usually $5K-$10K) per week. With higher prices, houses are often not shown; that is, nobody is interested. As the price drops, you’ll find a few showings price and eventually a many showings price. For a good short sale investor, his job is to explain to the bank’s BPO agent that there were no introductions until they hit a certain price… One could argue that this is a good data point to determine the real market;
3. Next, the short sale investor will be very well prepared…Lots of compensation, lots of repair estimates, and whatever other justification they can provide to the BPO agent. It makes the job of the BPO agent easier and helps them to truly assess the real value. An expert investor can work magic at this stage.
4. And of course, the short sale investor ALWAYS, ALWAYS meets the bank’s BPO agent on site so they can explain their point of view.

For short sale investors who understand how to “play the game” they get 1 in 2 deals approved and there are some really good investors who are hitting 90% approvals.