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Permalink Reply by Jim Schneider on November 8, 2010 at 4:19am

MARKET STATS:

Did you know that every time an agent fills out a bpo, they have a question that asks for the market decline, how much is it, what percentage per month is it declining. They also ask if the area is REO driven (sometimes if it is distressed sales driven) and usually if there is a vandalism risk.

Now if there was an appraiser he'd probably have to research the market and pull two comparable sales that sold three months apart...I'm not sure what an appraiser would do. Whatever it is, you can be sure that a bpo agent WILL NOT WORK THAT HARD. Would you do all that work for $40 when you already have to get to the house, take the photos, and then spend 2 hours completing it? Left to his own devices, he might stick in .5%/month, just because he's pulling it out of thin air and it sounds okay.

What do you do, you show up and have comps that show the market is declining by say 1.75% / month (if that's the case). In fact, if you have a property with a limited market, like a 2br/1ba house, you can make sure this is the market decline for 2br/1 bath homes, which is probably a bigger decline than for 3br/2ba homes.
Then when you hand the agent your comps, show them where you calculated the market decline, based on the say 1.75%/month figure you demonstrated. Now that figure can actually help you get the number you need.


There's also usually a field for "is this area REO driven".
Do you think the agent dillegently researches the number of REO's in this price range vs. the number of regular sales, looks up how many LP fillings there are, compares it to other areas and give's a detailed report.

NO!

He just pulls it out of thin air!

So you show up with something like this: in Somewhereville, IL in the last 3 months there were 14 sales of 2br/1bath detatched homes, and 8 were REO's and 3 were short sales, currently of the 28 homes in this properties price range, 9 are REO's 9 are Short Sales. In the last 3 months there were 35 lis pendens proceedings to beging foreclosure, and 15 sherrif sales. This area is very distressed sales driven.

Showing that the area is distressed sales driven is usually reason enough to allow them to include short sale and REO sale comps, which is a big difference in how the bpo comes out.

They also ask what the crime/vandalism risk is like.
Show up with the crime stats, or a news article about a home break in, or local vandalism, anything. There has to be something that's come up on the crime blotter that when you pull it all together can show the bank that a vacant home in this area is likely to be a magnet for criminals or vandals, because it just is. This makes the bank think that owning this home (foreclosing) is going to be a big hastle and the property value will decline even faster when they own it because it is vacant.

This gives you extra leverage when it comes to the bank's decision to accept a short sale or foreclose and go REO.

Good Luck!

Permalink Reply by Stephanie Hart CA 310-930-2342 on November 10, 2010 at 5:16am

Great info... I always do 1-4... but point #5,6 are great tips... I know it's obvious to state but BE NICE:P ha ha they can quite possibly make or break your short sale. Simple yet important!

Permalink Reply by Jim Schneider on November 20, 2010 at 8:19pm

We all know one bad bpo can stick with your property for a long time, but many agents don't realize just HOW long. You see when there is a variance of more than say 10% between two bpo's the bpo company starts trying to "reconcile" the values.

In fact, what it often feels like is that they don't want to have egg on their face from having submitted a previous bad bpo. I say this because they call up the NEW bpo agent, and try to get him/her to justify their price NOT the old bpo agent. These bpo companies can be downright pushy sometimes, and they are pretty blunt about what they want. Now I certainly have pushed back, but it's clearly easier to go along, you might end up with a bpo agent that's not as stubborn as me.

I would strongly encourage agents to make sure you list the short sale at the price you think you can get from day one, and then make market adjustments as you go along. Manytimes there are exterior bpo's before there is an interior, and you will never know who's doing your exterior bpo, so you can't whisper the contract price in their ear. Make sure someone can look at the mls sheet an make a reasonable guess as to what you think market value is, you may not get it, but if you list the property at $400k because you want to "show you tried" and I do a bpo and the value is $320k, it actually raises red flags on the bpo, and then the bpo company starts pressuring the agent to raise the bpo value. Then it all runs down hill from there.

So do your clients a favor and win those early battles with the phantom exterior bpo agents and you'll find it easier to get the value's you need by the time you get an interior bpo.