I have done TONS and TONS of BPOS, the reason I did them was to get REO assignments so now I only do them for companies that can give me REO. I used to do them for IAS until they decided to quit paying and started making it impossible to get reimbursed. I now believe that BPOs are a waste of time unless you can get paid several hundred dollars per BPO because $30 to $40 per BPO is taking you away from real dollar productive activity which is listing and selling real estate.
On mid to higher end homes I think a BPO is the way to go. Even for a buyer. Especially, if the agent doing the BPO works with several local banks and lenders. It gives you an independent valuation and analysis of a home and local market, prior to making an offer if you are really serious about negotiating an offer. Sure enough, it may not go into the extensive detail as would be in an appraisal, however a good valuation by a reputable agent can go a long way in negoitations with a seller. A lot of sellers and agents are non believers. The independent BPO assessment tends to bring things into perspective. So, $100.00 spent to save $10,000 to $20,000 or more = well money spent. Afterwards, if the lender is serious enough about getting rid of the home, they just might as for that BPO, or contest it at their expense.
Anyway, this has been my viewpoint of late..........
Agreed, there is no specified guidelines to follow. That in itself lends allows inconsistencies to develop between BPOs. However, they are a lot less expensive than full appraisals if a person is just looking for an independent industry opinion. I talked to an agent here recently that told me he do most of his preliminary BPO work during normal business hours. However as to the report itself, that work is done mainly afterhours when most homes tours are avoided. Basically, he's developed a good balance of time to accomplish both. I guess in a sense, it's a good supplemental income for him.
Richard, what makes you think a BPO is any less expensive than an appraisal? The agent may not be making much but keep in mind the agent typically gets paid a portion of the BPO through a third party. I am not exactly sure how much the bank actually pays for a BPO but I suspect that the overall cost is not much less than an appraisal.
Anyway you slice it, it takes at least an hour to do a BPO without travel time, that hour pays $40.00 and an agent spends an hour to do the BPO and spends $10.00 on gas for a gross of $30.00 an hour. (Just and example) Now compare that to what can be made by spending that time on a listing, with an average of $4500 commission. Which one is more dollar productive? Any agent who fools themselves into thinking they are supplementing their income is not looking at the big picture, believe me I have been there. If agents spend their time prospecting for new listings and new buyers, they would not need to supplement their income.
BPOs are a great way to learn the market but not dollar productive for an agent. BPOs are great if you can get listings from the company you do BPOs for.
What I am saying is it, all depends. In an ideal world I would certainly have to agree with you that BPO work is counter productive for an agent in a busy market. And, if I were an agent, of course I'm going to choose a new listing over a BPO work. However, I think that it's up to the agent, the circumstances and how busy they really are at the time when the request comes in. I didn't have to twist any arms to get one done and back to me in report form in 2 days.
I guess that if you're good at these and you do 2-3 overnight for a reasonable price, that will cover most of your happy hours expenses. :)
In a recent case where I requested a BPO, there was no 3rd party payment. I checked references with a few local banks/lenders and they panned out. Yes, it took a couple of hours or so to do it, and for me it was an easy decision to make for a little peace of mind to reassure myself my numbers were correct. It was at my cost, but it was a $100 well spent for me because it gave me a little leverage in negotiations and someone who works with my lenders. Sure enough, if I make the purchase an appraisal will be required. On the up side, I don't think the appraiser will find many surprises.
WHy would you order a BPO, that makes no sense at all because a BPO would do you no good. The BPO is what the bank orders to verify the value of the property. Your BPO would do no good for you, if you wanted to know what a property is worth, a 5 minute CMA would be more than sufficient. Did you pay the agent directly to do the BPO? I sure hope not because that agent most likely took advantage of you and never told you that a quick CMA would suffice.
Even at $100.00 and if it took 2 hours, it is still not the best use of an agents time in my opinion because the time that they took to do your BPO, they could have called 30 or 40 expired or FSBO listings and probably got two or three listing appointments or more out of it.
If you paid $100.00 you could for not much more recieved a full blown appraisal. We have appraisers who will regularly do appraisals for us for less than $200.00. Sometimes we have them done to give a seller peace of mind
As I mentioned before I agree with you that BPO work is likely counter productive for an agent in a busy market. I'm not sure how busy this particular agent really is currently. Regarding appraisals, the appraisals here are costing $300-350. I've personally checked on this almost year ago and since verified it with several local lenders. Regarding what their lender, to me it really didn't matter what their lender thought because it is not a short sale. Regarding the home itself, it's a custom home in an area that is not exactly represented by the overall market data. But, partially because of the BPO, I believe in my offer as a realistic price. I knew the home would be priced higher than the nearby market based on my data. Plus if they accept the offer, I wanted to make sure it would more than likely be closer to what it would be appraised at and not be over the appraised value therefore wasting my time plus a lot more money.
Richard, as a buyer, the job of your buyers agent is to consult with you in making an offer, your agent should be doing this for you so your BPO was a waste of money, it did nothing that your agent could not have done. $100 that was wasted because any agent can do a CMA and show you comparables and not charge you for it. What did your agent do for you?
Exactly. That's one of the reasons why BPO's are NOT used for Origination's.
'Agreed, there is no specified guidelines to follow. That in itself lends allows inconsistencies to develop between BPOs.'
Jeff, I agree with you 100% but think about the agents who don't know how to work with buyers or sellers, the ones that are not good with people but are good with computers.
I will give you an example, I used to do one before I went to bed almost every night. It used to pay $ 60-150 depend what company or the distance. I made my gas money and I learned so much about the REO industry. Six years later I sell way over 50 homes/ year in REO, and I have a team of 10 agents that do the BPO's for us. We work as a team and the income is phenomenal. I'm not saying BPO's are the best but it sure pays the gas and all our expenses. We divide the territory to be more efficient and enjoy doing them. We know what property will be available soon and we know that BPO's will come second on our real estate career. We concentrate on getting all other tasks done during the day and at the end of the day or first thing in the morning we take the pictures and late at night we do the input. Works for us but it took two years to perfect what we have now. It cant be for everyone but if you like doing it; why not?? I have agents who don't want to handle any clients, they only work on BPO's. They work from home and we keep in touch via Skype on our phones. They love the pajama comfort and they would not change unless we don't get any more BPO orders.
Understood, I only do BPOs now for the companies that give me REO business. I know alot of agents who delegate the BPOs, sounds like that works well for you.