Technology TransactionsSo You Want To Do BPOs?
Real estate sales are slowing in some areas. Mortgage bankers report that late payments and defaults are on the rise. That means more business for asset managers and subsequently, for brokers who are willing to do Broker Price Opinions (BPOs.)
What is a BPO? A BPO can be looked at as an expanded CMA (comparable market analysis) that is performed for a bank or an asset manager instead of for a homebuyer or seller. BPOs require as little as some field work and gathering some comps on a property, but they can also require preparing a property for sale, arranging repairs, or investigating the condition of a home whose occupant is delinquent on mortgage or lease payments. Many times, BPOs require considerable expenditure on the part of the agent upfront, and weeks or months before those expenses are reimbursed.
Generally, asset managers will call for a BPO in lieu of asking an appraiser to do an appraisal or in addition to an appraisal.
"It"s good fill-in work for times when an agent is stuck in the office for hours doing phone duty or general work, or working at home," says Colorada Realtor Ken Cox, Realty Check Real Estate Services, Inc.
According to Cox, the five most commonly used BPOs are:
Drive-by Only, no photos, no contact. These may be for REPOs but most are called for when banks sell off loans to other banks. Generally, they require 3 Sold Comps and 3 Active Comps and evaluation of the Subject is required. This is the base for all BPO"s
Drive-by with EXT and Photos. These require the agent to walk around the property, determine if is vacant, who the tenant is, condition of the exterior with photo documentation and then the Base 3/3 Comp evaluation. This is most often a pre-REPO action.
Interior with Photos. Interior access with photos of each room, and any damage or improvements. Exterior photos are also required, and then the Base 3/3 Comp evaluation. This is often a PMI removal evaluation but can be a post REPO evaluation to determine list price.
Interior / Re-Key / Preserve. This is a Post REPO action where the lender secures the property at or after eviction. The agent normally has to advance pay the lock smith to perform the lock pick / rekey activities and must invoice the company for
reimbursements which is typically 45 days or more. Full interior photos,
documentation of any damage. The agent provides clean up and repair estimates.
Often the agent is asked to prepay for clean up / board up services and
invoice the lender or Asset manager.
RePo Listing: Agent gets the listing and provides a no-cost interior
BPO to lender / asset manager. Develops clean up and repair costs and
coordinates the activities. If property sells, s/he pays the lender / asset
manager 30% of his commission as referral fee.
Out-of-pocket expenses agents may be asked to pay are:
Re-key locks
Winterization
Trash removal
Lawn care /snow removal
Repairs needed to secure property
Board-up costs
Some repairs to improve marketability
In addition to BPOs with daunting out-of-pocket expenses, some agents say the drive-bys are often hardly worth the investment in time.
Says Indiana Realtor Lynda King , "Typically a BPO pays about $50 to $100 per property. An appraisal would be $275 minimum. Indiana requires a four-page form, and then the company that orders the BPO has a different form that is frequently supplied online.
"So you need to take pictures, fill in the forms, do the drive-by, do the comparables - it"s a lot of work," adds King. "And they want you to return the BPO in a couple of days or at the most, a week. Most asset managers will accept BPOs over the Internet, but some companies aren"t set up with technology, and then they want BPOs overnighted to them. They don"t reimburse you for the overnight fees. I like the companies where it is done online."
With such potentially low return for the time invested, why do some brokers do BPOs at all?
The lure for most brokers is that they could possibly get the listing for the property they evaluate. Many BPOs are performed prior to foreclosure. If the bank involved is pleased with the work that the agent has done, the home may be turned over to the agent for marketing.
"I do about $1250 per month in BPOs which pay my office rent and most expenses," says Cox. "That is a big plus when the market is slow."
Editor"s note: Some state regulations prohibit BPOs unless they are ordered in conjunction with the broker obtaining the listing on the property.
Tomorrow on Agent News - Agents Complain About Slow-paying BPOs