BPOs (Broker's Price Opinions) have been a mainstay of the real estate industry for many years. Essentially, the BPO is a fair market value (FMV) estimate by a real estate licensed agent for a specific property. This value estimate is based on comparable sales in a designated area around the property.
These estimates are designed to help an owner determine what price to ask for his property when he is ready to sell. The individual generating the BPO looks at the sales prices and the similarity of the properties and how long ago the comparable properties sold.
Agents are usually paid $40 to $100 for doing BPOs by lenders who want to foreclose on, or sell a foreclosed property. These BPOs can be done as a drive-by of the property, a thorough inspection of the interior or by simply using computer data and never actually seeing the property itself.
Agents also use the same method of property analysis to make a presentation to a homeowner to get a listing to sell his property. In this case, the report is called a CMA (Comparative Market Analysis). This report is much less formal than a BPO and is actually more of a sales tool than a value report as required by the foreclosing lender.
The other popular use of a BPO is for evaluating a property where the homeowner has agreed to do a short sale on his property. The BPO price is then used as a listing price as the agent waits for a prospective buyer to make an offer. If the agent doing the short sale also does the BPO, he will look to do what is commonly known as a "Reverse BPO".
A reverse BPO is an in-depth review of the condition of the property as well as the usual comparisons with comparable sales. However, the comparable sales, instead of being the highest in the neighborhood, are the lowest and include distressed property sales. Any negative factors about the property or the neighborhood are factored in to reduce the buyer's offering price.
The reverse BPO is designed to favor the buyer of the property instead of the seller. These BPOs are realistic, especially if the buyer is an investor who has to purchase the property and rehab it back to a former condition just to resell it. In some cases the lenders have requested a second BPO and if they vary by much from the listing agent's BPO, the sale will not be allowed to continue. This situation happens in about 30% of short sales and usually results in the lender having to foreclose on the property.
It is imperative that the investor buying the property be on site when and if a second BPO is done by a different agent. This is because the new agent may not see or be looking for the deficiencies in the property and may not have even seen the interior of the property.
Reverse BPOs do not get listings for agents and are not discussed much in the industry. However, they are a critical part of every investor's strategy in being able to buy properties at below FMV so a profit can be made on resale. These same reverse BPOs can be used in a presentation to a homeowner when an investor is trying to make a logical presentation about accepting his offer. dbrown
BPOs (Broker's Price Opinions) have been a mainstay of the real estate industry for many years. Essentially, the BPO is a fair market value (FMV) estimate by a real estate licensed agent for a specific property. This value estimate is based on comparable sales in a designated area around the property.
These estimates are designed to help an owner determine what price to ask for his property when he is ready to sell. The individual generating the BPO looks at the sales prices and the similarity of the properties and how long ago the comparable properties sold.
Agents are usually paid $40 to $100 for doing BPOs by lenders who want to foreclose on, or sell a foreclosed property. These BPOs can be done as a drive-by of the property, a thorough inspection of the interior or by simply using computer data and never actually seeing the property itself.
Agents also use the same method of property analysis to make a presentation to a homeowner to get a listing to sell his property. In this case, the report is called a CMA (Comparative Market Analysis). This report is much less formal than a BPO and is actually more of a sales tool than a value report as required by the foreclosing lender.
The other popular use of a BPO is for evaluating a property where the homeowner has agreed to do a short sale on his property. The BPO price is then used as a listing price as the agent waits for a prospective buyer to make an offer. If the agent doing the short sale also does the BPO, he will look to do what is commonly known as a "Reverse BPO".
A reverse BPO is an in-depth review of the condition of the property as well as the usual comparisons with comparable sales. However, the comparable sales, instead of being the highest in the neighborhood, are the lowest and include distressed property sales. Any negative factors about the property or the neighborhood are factored in to reduce the buyer's offering price.
The reverse BPO is designed to favor the buyer of the property instead of the seller. These BPOs are realistic, especially if the buyer is an investor who has to purchase the property and rehab it back to a former condition just to resell it. In some cases the lenders have requested a second BPO and if they vary by much from the listing agent's BPO, the sale will not be allowed to continue. This situation happens in about 30% of short sales and usually results in the lender having to foreclose on the property.
It is imperative that the investor buying the property be on site when and if a second BPO is done by a different agent. This is because the new agent may not see or be looking for the deficiencies in the property and may not have even seen the interior of the property.
Reverse BPOs do not get listings for agents and are not discussed much in the industry. However, they are a critical part of every investor's strategy in being able to buy properties at below FMV so a profit can be made on resale. These same reverse BPOs can be used in a presentation to a homeowner when an investor is trying to make a logical presentation about accepting his offer. dbrown