I was recently contacted by a company to do a BPO (Broker Price Opinion). A BPO helps the bank determine the price of the home. Usually they are trying to determine the price because the homeowner applied for a loan modification, short sale or is going into foreclosure. The most common BPO is called a driveby. It is where you drive by the house, take picture of the front, side, address and of the street sign. While doing this you need to assess if the house is occupied or vacant and any damage that can be seen from the road. In theory this sounds like an easy task, right?
I’ve done many BPO’s but this had to be one of the worst ones. Typically, something that takes me 30 minutes to 1 hour took me 3 days to complete. I did everything I needed to do, go to the house, take photos and submit 3 “active” comparable listings and 3 “sold” comparable listings. This house was a one level, 2 bedroom, 1 bath log home with 684 sq. ft. and no comparables nearby (bank requires max 5 miles radius). After finding nothing, I did some extra work and expanded my search to 40 miles to get good comparables. I submitted what I thought was a fair market value of the home before repairs ($50k-$60k) and after repairs ($70k-80k).
Lo and behold, the bank rejected my valuation because of the following reason:
“The current estimated value is outside the reasonable range of tolerance considering the prior estimated value. Review the sales from the prior order and add comments on them under subject comments.”
Along with the remarks above they submitted three address to me to conduct further research to see why my valuation of the property were different. I did my due diligence and found the following:
- Banks Comparable #1 – This house was a 2 level home with 1496 sq. ft. and with 3 bedroom located less than 5 miles from the subject property. This house sold for $107,500 in March 2011.
- Banks Comparable #2 – This house sold for $68,900 in January 2011. This house was renovated but similar structurally to the subject property and sold for the price I had quoted them.
- Banks Comparable #3 – This was a vacant land located within 5 miles of subject property and sold for $105,000 in November 2010. There was no home on this land to even compare to the subject property.
The Bank rejected my valuation because it was not above $100,000. They wanted me to match the price to their comparable #1 and #3.
I spent three days researching more on this property and even making a second trip to the house to take additional photos to justify the price I had originally told the bank. The entire reason I wrote this lengthy blog is to tell everyone the story of BPO’s gone wrong. There are many real estate agents out there that do nothing but 4-5 BPO’s per day and earn $40-$80 per BPO. A lot of them don’t do their due diligence and give proper comparables to the bank. The value of the BPO helps determine your loan modification or short sale approval amount.
If you’re a homeowner in distress and need an expert on your side, call me today at 703-577-4320 and let me see if I can help you out of your predicament!
Remember, foreclosure and bankruptcy are NOT the only options!