Appraisal Groups Seek Ban of BPO’s

The Appraisal Groups have written a letter to the FDIC asking them to prohibit the use of Broker Price Opinions in the FDIC’s new Loss Sharing Proposal.

In a November 19 letter, the Appraisal Institute strongly urged the Federal Deposit Insurance Corporation to require the use of appraisals performed by licensed or certified appraisers as part of its program, Loss Sharing Proposal to Promote Affordable Loan Modifications. Currently, the program permits the use of broker’s price opinions to ascertain loan-to-value ratios as part of the modification of “underwater loans” – loans where the value of the collateral is less than the loan amount – that are in default.

The issue of BPO’s is a sticky one. Many states outlaw the use of BPO’s, and yet, they are still used quite frequently by banks.

  1. I agree with the AI. Mark, Broker & Appraiser.

  2. CJK

    Nevada BPO Task Force Recommendations Advance to Legislative Council for Review
    At its November 12 hearing, the Nevada Real Estate Commission approved a motion to approve recommendations submitted by the State’s Broker Price Opinion Task Force regarding the use of BPOs in Nevada. Earlier this year, the Commission directed the Task Force to take an in-depth look into BPOs and to recommend changes to existing real estate laws and regulations regarding the use this tool. The Task Force’s recommendations include new language clarifying the use of BPOs by real estate professionals. According to the recommended language, real estate licensees may perform BPOs—for a separate fee—for a buyer or seller only for the purposes of listing and selling property, or for third parties making decisions related to the listing or sale of property. More importantly, the recommendations clearly state that a real estate licensee may not perform a BPO for financing or valuation purposes.
    The Commission forwarded the recommendations to Nevada’s Legislative Council Bureau for review and input. It is likely that several recommendations will be implemented through the regulatory process. However, some may require legislative action, which the Nevada Legislature will consider when it reconvenes in February 2009. Following the LCB’s review, the State will conduct two public hearings on the proposed regulations.

  3. Joseph Bennett

    You get what you pay for. Isn’t cutting corners what got us to this point? If ever a time for accuracy was needed, this is it! Joe, Appraiser & Realtor

  4. John

    What’s the issue? each bank owned property gets a minimum of two appraisals anyway, before it’s listed and for financing. The fact that the appraisers just want to do 4 or 5 appraisals on each property borders on gluttony. Why inflate the cost to the bank and the market just to get an opinion of the market. It seems more appropriate that appraisers concentrate on more accurate appraisals and get out of the inspection business. Appraisers are not inspectors yet they routinely make issues with areas of property inspections which they know little about. There’s enough for everyone, don’t overfeed guys.

  5. Patti

    I think every Realtor in the country would be happy if BPO’s were discontinued. We like to be paid for our work just like everyone else. Banks and Mortgage companies take advantage of Realtors when they call out 3 of them knowing full well only one of them will obtain the listing! This is a misuse of the profession and by all means let the appraisers do the work and make the mortgage companies and banks pay for it!

  6. A few points from an appraiser member of NAR.
    Appraisers do not want real estate agents to perform BPO’s based on core competency issues. We honestly do not want appraisers to perform “4 or 5” appraisals on a property. Neither do we want to list or sell these properties. That is a function for an agent. In many states you risk breaking the law if you offer appraisal services and you are not a licensed appraiser.
    I suggest agents and brokers focus their energies on their core areas of competence: listing and selling real estate.
    Eric Schwartz

  7. Shannon

    I’m unsure where there is a problem the realtors doing BPOS are experienced and have been in the field and know what homes are selling for. Seems to me some of the problems with the current market was becuse home were over appraised and the banks loaned too much money.

  8. randy

    Appraisers and appraisal firms got us into this financial crisis. many were not at arms length (see rels/wfhm/first am). appraiser came in at the sales price nearly 98% of the time. WTF? BPO’s are more accurate, less costly, and completed by experts who actually understand the resell markets.

  9. Alice (Realtor)

    I have been a real estate professional for 14 years and having been performing Bpo’s 12 years. I know the real estate market and what homes are selling for. We do not claim to be doing appraisals and bpos are not intended for appraisal purposes. This is clearly stated on the bpo. We are giving a professional opinion of what the home will sell for. Who better to determine that than someone who sells homes.

  10. I agree with Alice (REALTOR),who better to determine what a home will sell for, someone who actually sells homes.
    BPOs are valuable service to the homeowners, banks, lenders, and/or servicing companies who request them to obtain a current market snapshot.
    Frederic Din ~ Imperial Valley Real Estate REALTOR, BPO, REO, Short Sale agent

  11. Broker Price Opinion

    That’s great, I never thought about National Association of REALTORS like that before.

  12. Jesse

    I totally agree with Alice (Realtor) comments. Well, i have seen appraisers used totally wrong data in their reports not sure if they used it for the benefits of lenders or if they used it for the benefits of buyers but who ever they used it for is totally wrong doing and they should not blame those honest agents / brokers who try to prepare the reports (BPO) by using their years of experience in Real Estate industry and by knowing the areas by their hearts!

  13. Bob

    I have seen many BPO’s and most are inaccurate junk thousands off of a real value. I know, I am an appraiser and a real estate agent. Most, not all agents are not qualified to give a BPO. All intern appraisers in my state need a minimum of 2400 hours of actual appraisal experience under a Certified Appraiser, before you can obtain a license. As an agent, there was 1 hour of class on appraisals.

  14. Susan

    I have been a Realtor in my area for 15 years and have been doing BPOs for 12 years. We do not give values in our BPOs, they are only price opinions from an agent that sells homes in that market area. With that being said, the easy way to resolve the issue of inexperienced agents giving poor info on BPOs is to require more education on the part of the agent. I suggest that every agent that wants to prepare BPOs, take classes to become certified. NABPOP, for which I am a member, offers education to certify BPO agents. There are a few others too.

  15. Bill

    Let me start off by saying the states that have outlawed BPO’s did so for very good reasons. Those that haven’t outlawed the practice, apparently have their heads in the sand. Right alongside them are the Realtors that think their BPO’s aren’t occassionally being substituted for an appraisal. You may do an excellent job and feel content knowing there’s CYA info on the BPO, but by continuing to perform these neo-appraisals you’re encouraging their continued use by those real estate agents that are not as competent (read nearly all) and the not so scrupulous lenders. I was a Realtor before I became an appraiser. I now practice sales and appraisals. When I was solely involved in sales, I didn’t even know what I didn’t know about valuing property. Ignorance is bliss I suppose. Since then, the catastrophic collapse of the real estate industry has wrecked the lives of hundreds of thousands of our citizens. Our country’s economic health and well being is at risk and our industry has suffered yet another black eye. Then before we’re even out of this crisis, we have the same corporate types proposing a new business model. One where sound business practices are shoved aside so the corner cutting, quick buck artists can make themselves gazillionaires. When the next disaster happens, they’ll be secure in the knowledge that their money is safely tucked away in Switzerland and their private jet is being warmed up on the tarmac. Their first step in implementing the new business model is to lower the bar for property valuation by continuing to allow the substitution of BPO’s, AVM’s, etc for appraisals. For sure, BPO’s have their place in our industry, but they are not a substitute for an appraisal. How many real estate agents are truly capable of performing an accurate BPO? In my observations, the percentage would be very, very low. Yet how many are willing to perform one. Nearly all. By doing the BPO, they hope to get the listing. Real estate agents are not held accountable for the quality of their work or the conclusions they reach like appraisers are. If, like appraisers, they had to perform them in accordance with USPAP, you’d see the number of BPO’s being done by real estate agents plummet. Shockingly, we real estate agents receive very limited education in valuing property. It’s not our fault, it’s the system. We’re simply not required to know more in order to get our licenses. We make our best estimation about value, and when the property is under contract, the appraiser is brought in to determine the true value. Not every appraiser is perfect, nor is every appraisal. I’d like to share one thing with my fellow real estate agents. One of things that can cause an appraisal to be inaccurate is the lack of quality information that the appraiser has to work with. One of the main sources of information comes straight from the real estate agent. Typically, it’s the information contained in our flyers, our web site and the MLS sheets. If it’s incomplete, exaggerated, or incorrect, then the appraisal is going to reflect that. Garbage in, garbage out. I have tried for years to get my fellow Realtors to improve their info. All to no avail. It’s well known in our industry that we as a group lack professionalism in this aspect. We don’t like to be called sales people, but then we act that way. Remember, the sale with bad info may be used over and over again by appraisers and agents to determine values. It just snowballs. Take the time to do the very best job you can in this respect and you can expect appraisals to be better. Based on some of the other comments on this page it’s apparent some agents think they’re better at appraisal than appraisers, while others recognize the truth. If a BPO was good enough, they would’ve supplanted a proper appraisal a long time ago. Instead, it’s headed the other way. Appraisers are being required to have more education and more on-the-job training with a qualified appraiser than ever before. Wanna experience real estate without appraisers? Check out the mortgage meltdown of the 80’s. As long as the educational requirements for getting a real estate license are kept to a minimum, like they are now, it creates a less than perfect system. Note to corporate America and supporters: Stop trying to cut corners. If your buyers you can’t save up the money for an appraisal, a survey, an attorney, etc., they shouldn’t be buying real estate. But if you want to go “Wild West” again, then maybe we should consider some new methods to speed up our destruction. Instead of hiring a surveyor, lets’ give the real estate agents a tape measure, metal detector and an etch-a-sketch. Or how about using a boiler plate deed where all an agent has to do is fill in the blanks and emboss it with a real estate license stamp. Skip the title search, instead we’ll just add a buyer beware clause. Okay, that’s a little extreme, but where do you draw the line? Professional, semi-pro, or amateur? When I see an agent trying to figure out how to do a BPO, it’s like watching a shade tree mechanic working on your Ferrari. It’s not a matter of will it blow up, but when. Can we afford another industry collapse?

  16. Jon

    I have to agree that no one, typically including appraisers, have a better idea of what a property might sell for than an agent or broker who spends all their time pricing property for this very purpose. Giving appraisers their due, I would still like to have a dime for every time I am called by an appraiser and asked about comps. Now the banks are required to bring in outside appraisers who may or may not have any sensitivity for the local market at all. This is a system that was kind of broken but made much worse by the fix.

  17. All of this is very interesting, the pointing of fingers. But one thing remains a mystery to me, I would like to know, why then if agents are not quailfied to price property, is it that appraisers use our mls, and sold and list comps to value property? We do not consult an appraiser to price our listings, but yet apprraisers use our data to value property? Just a thought.