Steady stream of inflated BPOs- REO agents using them as loss leaders for listings
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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I hear what everyone is saying here and have experience on both sides. MOST of the time when an agent is doing a BPO for a short sale, it is very unlikely, especially with larger lenders that this agent will get the REO assignment, the exception being smaller lenders. Most of the time the agents that do BPOs are newer agents that dont understand the market, they are doing it to make extra money. They dont have alot of experience and do them purely for money.
I have a few REO accounts and if I were to do a BPO on a property that I was going to list in the future and I overvalued to get the listing it would just bite me in the end because I recommended a wrong price and it would be very hard to convince them that it is worth 1/2 of by recent BPO amount when I do get the REO listing.
Not to say it does not happen but I think it is more rare than you think.
On another note, I had a discussion with an agent who overvalues everything because she did not want to lower the comparable because it would ruin the market. she seemed to think that overvaluing would help the market?
ALWAYS meet the agent doing the BPO and explain in detail with comps and listing history along with showing history at the very least.
If you truly believe that an agent has other motives, deny them access and make the lender order a new BPO
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Dianne,There are some banks who want "normal" or "fair market" comps instead of distressed ones. That is where an experienced BPO agent will give detailed notes on the market and explain why they must use distressed comps when normal comps are not available. Problem is that most agents doing BPOs are inexperienced and just follow instructions even if they are not accurate.
Dianne Meyers - Scottsdale AZ said:I've spoken with BPO agents who say some banks specify that they use "normal" sales and no foreclosure or short sales as comparable sales so it may not always be the BPO agent positioning themselves for the listing. Must be challenging to even find those comps!
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Permalink Reply by Sherrilee Denton on
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How are you working around the banks demanding comps with NO REO's or SS included???
I have CHASE negotiator stating "they won't accept short sales and REO's in comps!" Instead they want 6 month comps with NO distressed sales included! Our PHX market IS short sales and REO's and I try to always provide current 3 month comps. There is enough activity in 3 months, in the specific subdivision, that you do not have to go back farther in time, nor outside the subdivision for comps. Our market IS short sales and REO's with a limited number of "non-distressed" properties thrown in and those are mostly properties that have been flipped and/or have major improvements and their sale price reflects this. If the BPO agent is providing comps that exclude SS & REO's their numbers will be skewed and the banks are than countering SS contracts at unrealistic high prices! Plus how is the property supposed to appraise when the appraisers include SS & REO's in their comps??? How are you working around the banks demanding comps with NO REO's or SS included???
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First off, I will not lower my professional standards for anyone, especially a lender that wants me to wrongly value a property, just wont do it, Secondly, im my market it is impossible to find non distressed comps on most properites. I have yet to see a bank that says no SS or REO comps, they ask you to try to find them and in most cases you can not find them. I write a very detailed explanation of the market and always say "in the past 12 months there have been 45 sales withing the neighborhood hood, area , city, etc and out of those 45 sales, 33 were REO and 12 were short sales. there were no non distressed comparables in the last 12 months" You have to paint the picture and DO NOT change your comps or values or anyone. Stick to your guns and do not let the BPO companies manipulate the values to fit the need of their client/lender.
Sherrilee Denton said:How are you working around the banks demanding comps with NO REO's or SS included???
I have CHASE negotiator stating "they won't accept short sales and REO's in comps!" Instead they want 6 month comps with NO distressed sales included! Our PHX market IS short sales and REO's and I try to always provide current 3 month comps. There is enough activity in 3 months, in the specific subdivision, that you do not have to go back farther in time, nor outside the subdivision for comps. Our market IS short sales and REO's with a limited number of "non-distressed" properties thrown in and those are mostly properties that have been flipped and/or have major improvements and their sale price reflects this. If the BPO agent is providing comps that exclude SS & REO's their numbers will be skewed and the banks are than countering SS contracts at unrealistic high prices! Plus how is the property supposed to appraise when the appraisers include SS & REO's in their comps??? How are you working around the banks demanding comps with NO REO's or SS included???
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Permalink Reply by Tara Polley on
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Let's keep in mind, if these agents that are doing inflated BPO's are "Realtors", they are held to a standard of ethics. If you can prove they are practicing this way, you can file a complaint with NAR, or your local board to have them disciplined. In our area, if an agent inflates a BPO, they can lose their license as well. It is in all of our best interest (including the homeowner!) to track and report these dishonest "professionals"!
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Good point for sure!!! The problem that I see is that getting the actual copy of the BPO is nearly impossible. I wonder if you did bring that agent up on charges if they would be required to provide the BPO as evidence. Since it is a Broker Price Opinion, could they just say that it is thier opinion? Interesting to say the least
Tara Polley said:Let's keep in mind, if these agents that are doing inflated BPO's are "Realtors", they are held to a standard of ethics. If you can prove they are practicing this way, you can file a complaint with NAR, or your local board to have them disciplined. In our area, if an agent inflates a BPO, they can lose their license as well. It is in all of our best interest (including the homeowner!) to track and report these dishonest "professionals"!
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Permalink Reply by Katherine Muhs on
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If only the banks/negotiators would forego the BPOs, do it right and order a real appraisal!
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Permalink Reply by Sandra Koutsopoulos on
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As a Realtor for the past 33 years, and a Certified Residential Appraiser for the past 12 years, I know that an accurate appraisal, submitted to the lender with the original short sale request holds a lot of weight. I have done many of these for other Realtors, and to my knowledge, all their short sales closed at or very near my appraised value. Submitting the appraisal in the beginning gives the negotiator an 'unofficial' starting place, as they will order their own BPO or appraisal later. Not all appraisers have the same experience, so it is important that you interview them to find out what their experience and mindset are. What you want is an experienced appraiser who has real estate sales experience, realizes that the mere fact that it is a short sale means the price needs to incentivize a Buyer to stick it out for 2 months to a year to get it done. If they have to buy it for full retail, and there are other options out there, why would they tie up their money, hopes & dreams for an indeterminant period of time to get that ONE special property (which may not be so special). Also, when people are in distress, they often don't maintain the property as pride of ownership is cut off as they disengage from their ownership position. So the property often shows poorly, or has deferred maintenance issues, and that is unlikely to improve prior to the short sale closing. Your appraiser needs to know that you want a realistic appraisal, taking into consideration the condition, length of time it may take to close (which will dissuade a Buyer), and that if it does come in high you want to have him explain that very clearly to you, and if it comes in low, you want him to fully point out his reasoning in the appraisal (for lender's consumption).
Therefore, I will often appraise a property at the lower end of the value range to compensate for deferred maintenance, condition, distressed nature of the sale, with an eye to the fact that the buyer has to stay motivated for a long time to close it, and the Market Condition Report will also give a clue as to whether the value is likely to continue to fall prior to closing. Also, an appraiser MUST include other short sales or REOs because that goes to motivation. The comps are supposed to be COMPARABLE! Distress sale should be compared in part to other distress sales of nearby similar properties, because that is part of what makes them comparable. Typically Short Sales & Retail Sales will give you the high and low of a market.
Many agents are mis-informed re: 'influencing' an appraiser's value. Actually, it is appreciated to give the appraiser all information at or before the time of inspection so he can find similarly-affected properties to use as comps. After the value is established, it is a bit trickier, because then you are trying to influence value, unless you provide "new information". Best to do your homework and provide that information up front so the appraiser gets the full picture.
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Permalink Reply by Brenda Houghton on
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I do BPO's myself so I know the rules. This has been helpful in countering bad BPO's. There is one agent I will never again allow into a short sale. He gave a ridiculous BPO on a WF short sale some time ago. I protested the BPO and finally WF agreed to send another agent for a second opinion. They sent the same guy back, but we didn't realize it when he showed up because the first time my partner met him, and the second time I did. We compared notes afterwards, so I again protested WF because they did not obtain a true second opinion. We went round and round (and lost at least 2 buyers I think). I finally got them to agree to a third BPO AND THEY SENT THE SAME GUY A THIRD TIME!!! I refused to give him access and told him to his face why. We finally got a decent BPO but by that time the homeowners had to declare bankruptcy to stop foreclosure and we are still trying to get the SS negotiated through bankruptcy. Recently we had a BPO on a different short sale and this same guy shows up. I had a chat with him about not over valuing my listing and he seemed to understand. I also handed him comps and repairs, and listed every negative marketing feature, like the apartments behind the back yard that did not impact most properties in the neighborhood. However, he has come back with a $200k valuation on a property that has been listed for 150 days and we can't get anyone in the door at $175k. He will never do another BPO on one of my listings again.
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As a long-time Realtor & Appraiser, few years ago I did a LOT of BPOs for several REO agents, and was shocked to find that they didn't drive the 'comps' to see if they were comparable, used properties even miles away from the subject as comps, didn't take into consideration any factors such as busy street, big power lines, apartment complex next door, condition of the property, often did not inspect the subject but had some other non-licensed go-fer do that, and they had somebody else upload MLS photos of the comps. There were/are large BPO "mills" which have one department that shoots photos of the subject, and the clerical people who actually fill in the form! No connection to the property or the comps; no wonder they don't make sense.
The low fees which are paid for the BPOs have created this disaster, because to actually check out the property, drive the comps, and have a local agent familiar with the area come to a realistic, thoughtful determination of value, takes TIME. Can't be done for 24-48 hour turnaround time at $30-$60; to make it financially viable for an experienced agent to do that, they would have to be paid more, or cut corners. You often get the quality you pay for.
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Permalink Reply by Trisha Bush on
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Wow. . .amazing that so many of us are faced with this problem. I plan to blog about this topic and hopefully shame our local agents into reporting accurate sales and figures. They are going to keep doing it as long as they can get away with it.
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One of the BPO agents that I spoke with does these all the time and told me it is the lender who is running up the amount. He said that if it comes in where it SHOULD be the lender tells them they have 3 others that are higher. He also said that if he does not do what they ask he will not get any more business. It is 9 months later and the price has fallen farther and the lender, B of A, still has no money.
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