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Are BPOs Driving Down Home Prices?

Ken Harney reports in today’s Washington Post that one cause of decreasing home values could be the reliance on broker price opinions (BPOs). BPOs are becoming big business to REALTORS but some fear there is incentive to undervalue short sales and foreclosures.

In the article, Gary “Crabtree argues that there are inherent conflicts of interest: “They want to sell the property fast” to make bank asset managers “look like heroes” to their bosses. They may also want additional BPO and property listing assignments from those same bank managers, yielding them commission dollars. Many of the properties are snapped up by investors at the depressed prices driven by BPO valuations. Those sales then become “comparables” for appraisers, “which simply intensifies the downward spiral,” Crabtree said.”

There are increasing calls for regulation, possibly at the federal level, of BPOs. Some states have legislation prohibiting BPOs in some way and others, such as Nevada, are getting active on the issue. According to the article, consumer and appraisal groups are calling for regulation of BPOs as well. NAR does not currently have policy on BPOs.

Comments
  1. Jack Rash

    It is pretty simple. For $50 bucks you get a BPO about the price of a carton of cigs they will both kill you. The certified appraiser is beat down to $200 bucks and that should be the price just for the 1004MC. Cumo should be tarred and feathered for he knows not the real problem and should be put out to pasture.
    I can not wait for the collage educated to start doing appraisal work with a $80,000 bill hanging over his head and he will get paid $200 for a report

  2. I wonder how many of BPO are performed in compliance with the definition of market value where the sellers are under no duress or complusion to sell? Most think that the current market value includes forclosures and short sells, simply because that is what is selling the most. The definition of the value sought never even is considered.

  3. Never mind the definition of Market Value. It could be that is not the objective. How about compliance with the NAR Code of Ethics?
    Article 1 – When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)
    Standard of Practice 1-3
    REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.
    Standard of Practice 1-14
    Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation. (Adopted 1/02)
    Article 11 – The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.
    REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)
    Standard of Practice 1-14
    Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation. (Adopted 1/02) Article 11 – The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate. REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)
    Standard of Practice 11-1
    When REALTORS® prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following:
    identification of the subject property
    date prepared
    defined value or price
    limiting conditions, including statements of purpose(s) and intended user(s)
    any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants
    basis for the opinion, including applicable market data
    if the opinion is not an appraisal, a statement to that effect (Amended 1/01)

  4. Anton Weber

    The irony about this situation is that BPOs didn’t drive the market up. If I remeber correctly, banks dont lend money without the all so valuable appraisal which never stopped prices from rising to quickly.
    This is sheer economics. There is supply and there is demand. The values were driven up by limited supply and exuberant demand during 1999-2006. The prices are now being driven down by a surplus inventory (caused by the overvalued assets all of which had the seal of an sacred appraisal) compounded by limited demand due to poor economic expectations.
    Competition drives prices down. When a property is listed too low, it gets a ton of offers. When a property is listed to high it sits on the market and ultimately reprices to a lower price. Some such listings eventually become market chasers and ultimately set the bar even lower. The problem is the supply. If prices are to decrease in value at a lower rate, then banks must not dump inventory. They should hold it until demand matches supply.
    What can an appraiser do about demand simply nothing. An appraiser can not force a buyer to buy nor can a real estate agent. But agents definitely are on the front line trying their best.
    And, yes agents have found away to cut a piece of the same pie appraisers used to have all to themselves. Its merely a merging of industries that were once separate.
    There’s my two cents….

  5. Jim T

    OK, then, to play fair, appraisers should get a piece of the broker’s pie that they have all to themselves. How about this-having an appraisal license would be sufficient to receive a real estate sales commission? Let’s see how NAR would howl at that!

  6. Tim

    ATON,
    I been saying this forever. I was feeling like the Lone Ranger out there. You hit the nail on the head !!! Recently I saw a help wanted posting for a local Realtor who had a REO and BPO team that needed help. They expected a “flood” of BPO work in the near future and needed another full time staff. The qualifications; “must be able to type, spell and place comparables on a form. We will train.” Wow I’m glad part of our countries whole financial recovery plan in the dispostiion of bank owned properties is handled by such highly qualified individuals. Maybe property valuation could be an elective course in obatining a GED.

  7. Stephanie

    The BPO’s aren’t making the market decline. I’m in an area where the BPO’s are ALWAYS over priced!
    They stay on the market for months, even years, until they lower the price to where someone will purchase them.
    IN my area, Broker’s are TRYING to keep the prices high. They are still pricing properties as if it’s 2005, and the properties are lingering on the market-sometimes switching brokers 5 or more times, until it is listed with a broker who ‘has sense’ to price it to sell.
    NAR is trying to goad brokers into LYING about the BPO’s to try to raise housing prices, again! It was the greedy realtor’s and appraiser’s that got us into this mess to begin with.

  8. More often that not in the short sale arena – BPO agents seem to do the opposite of what the article suggests. BPO’s seem to be the inflated values and very seldom do we see appraisals come in valued higher than the BPO’s. If this wasn’t the case then why did California pass legislation that addresses inflated valuations and the repercussions of doing so this past year?
    There is obviously a varied level of competence as in any field. The appraisals and BPO’s that are accurate are the ones completed by brokers or appraisers with an accurate understanding of the specific market they operate in. I would suggest that the majority of market activity – greater than 50% are short sales and REO’s. Dreaming that values are not continuing to fall is not the solution to the problem. Are short sales worth less to a buyer? Absolutely – they can buy new and close in 3 weeks or they can buy the same thing as a short sale and wait 3 months.
    That’s just basic economics – doesn’t always sound as soft and fuzzy as “political economics” of course.

  9. Susan L

    As a REALTOR who performs bpo’s on an almost daily basis, I am stunned by some of the comments I’ve read here. I consider myself a professional, ethical person. All of my bpo’s are performed based on the market area. If the neighborhood is reo driven, I am directed by the companies that I work for to use reo listings and sales to value the property. This is generally a new edict, in the past, we were not given a reason for the bpo, now we are seeing that it is a foreclosure/reo on the order. This I’m sure is at the seller’s request. They don’t want to hold the property any longer than they need to. I find it hard to believe that a $50.00 bpo is driving down the price paid for a certified appraisal, I think it’s more likely that appraisers, as in many other jobs, are willing to work for less and continue working. $200.00 is better than $0.00 In real estate there are many values placed upon a property; assessed value, appraised value, market or broker opinion, and of course the seller’s opinion of value, generally based upon what they were owed at foreclosure if the seller is a bank-the value that was placed on it when the market was strong, less the few years of mortgage that they have collected, which has pretty much not even touched the principal balance. As in any industry, there are the good and the bad. I have seen many instances where appraisers are doing “look back” appraisals, because the appraisal done in ’05 or so, was out of line even for that market. The true value of a property is what a willing and able buyer is going to pay for the property for cash, or if financed what it will appraise to for mortgage purposes. The bpo is generally a first look at a property for the asset manager. Any reo property that I am listing these days is usually listed pretty close to where I came in at with my bpo. This is after the certified appraiser has completed their work which the bank relies on and gives more weight to than my opinion. When a bank is holding real estate, it is costing them money on a daily basis. They are the truly motivated sellers of our market. If the sales in an area are supporting an appraisal and/or bpo price, that’s the number to go with. I don’t know of any agents in my area that are undervaluing properties to get them sold faster, it does not help the agent, the higher the property sells for, the higher the agent’s commission, simple math there. And sure, if you can get a lot of sellers to go with a lower price and get it sold faster, I suppose you have volume to make up for the lower comission, but I don’t know of any agents that are good enough to convince enough sellers to go along with those prices to make it worth while over time. And I’m not sure who is getting reo listings that have not gone through an appraisal. As these reo properties are presented to the market and sold, the inventory will level back out, and prices will start swinging back upwards.

  10. there is a problem with huge real estate brokerage’s, they are allowing no nothing agents to just go out and do their own thing any where they want! against ohio real estate law.

  11. Banks I work with specifically want distressed comparables for their REOs. Real estate agent always have made recommendations based on comparable sales and data is in writing. Sorry appraisers are upset; many thanks NAR kept the banks out of selling real estate several years back. Appraisers do their thing for the new loan. I don’t believe an appraiser is needed to determine current market value of a property.

  12. Nancy

    Tim from April 9th. I think you are mistaken when you blame our market problems on “Greedy Realtors and Appraisers”. There were many foreign investors investing in real estate big time a few years back. The banks put allot of incentives out there for the mortgage companies to bring them clients. Mortgage companies started relaxing their criteria to get a mortgage so they could meet the incentives(so they could make more money) and things just started to snowball and got really out of hand. So let’s put the blame where it really belongs.

  13. As a Certified Residential Appraiser who happens to a licensed Broker as well, I am horrified at what is happening with the BPO fiasco. We have agents around here who are doing 10 to 20 a day – and they admit to just slamming out the reports as fast as they can be typed and don’t give a damn if they are correct as long as they come up with the value the banks want, and hopefully they’ll get to represent some of the foreclosure sales as an extra reward. What happened to ethics? What happened to independent appraisal values and honesty? Instead of the HVCC protecting the independence of Appraisers to be honest, the appraisers are having to pay the AMC companies 1/3 to 1/2 of their already low fee, and many of the AMC companies are owned, in the background, by the very banks from which the AMCs are supposed to assure appraiser anonimity

  14. The main problem that is lowering the market value of homes is the BPO’s and foreclosure sales but there is more to it than that. Another problem is the problem of like properties, especially in rural or semi-rural areas. The appraiser must consider homes sales of unlike homes if they are close to the subject property. All the news agencies state that if your neighborhood does not have any foreclosures in it, the market value is more stable than elsewhere. I find that information untrue. If a neighborhood doesn’t have sales in it for several years, they still use the non-equal homes that have been foreclosed on as comparables bringing the values of everyone’s home down even lower. Multiply this by the number of foreclosures, BPO’s and Short Sales and homes will be less expensive than cars in the very near future. And with that, everyone will be underwater with their loans making a bad problem even worse. Let’s see if the Government will bail out the rest of us instead of the people that should never have qualified for the loans in the first place.
    Someone needs to set the value process standards better allowing certain markets to be appraised higher if they are in a more stable neighborhood and there are no other equal comparables with in the magic 1 mile radius the Underwriters require.

  15. Rock

    In Georgia it is against the law to do a BPO for any reason other then to get the listing.
    Many agents are breaking the law and getting paid for this service.
    As an appraiser, I really don’t care because the BPO’s are driveing down values and losing the banks a ton of cash.
    Its good for the investors out there to move in and get a great deal. Either way, an appraisal is going to be required somewhere along the chain.
    Sad to say, its the agents who are too stupid to realize how thats going to hit them in the long run. Todays REO sale is tomorrows comp….
    When you work forever trying to sell miss whoevers house and it does not appraise,,,,you will have yourself to blaim…
    Also, Many appraisers are moving into the consultatin realm of the business and part of that is holding Agent accountable for representing their clients instead of themselves…Wait till a couple of these hit the courts…
    Also
    When HVCC takes place on May 1st. Look for a whole new world…
    Hope you all saved some cash…

  16. Robert Bolender

    How much was this guy paid by the appraisal business? I have to say this guy is way off base. If anything BPOs are helping the market correct itself much quicker, which is better for the market in the long run. Anyone who doesn’t realize that values were way overinflated (because of the sub-prime lending debacle) and need to be corrected downwards is either ignorant of the facts or a moron. I don’t engage in BPOs but know many real estate agents who do BPOs for a living now. I think they’re often as accurate or more accurate than appraisers because they work in these markets all week long. Appraisers are so scared to be blacklisted by the banks now that I think it would be hard to get an accurate value from them.

  17. I am appalled at all of the finger pointing between agents and appraisers. We should all remember that unless we decide to change careers, we are going to be working together after the market corrects itself. It was not agents/brokers that turned the apple cart over. And it wasn’t appraisers that that upset the cart either. But we do have to work together to set it back upright.
    We are really two halves of a balancing act. Those of us who practice real estate are charged with pricing properties based on current market activities, therefor we do BPOs. The appraisers on the other hand are to make sure that prices set are appropriate at the time of closing. The two parties work together to protect buyers and investors. Our current situation is a result of a few unscrupulous people from these two otherwise ethical groups of professionals, along with questionable characters from other sectors of the housing industry. In NC, it is illegal for a broker to charge for a BPO. I have done one this year and was offered compensation that I refused ($60 isn’t worth my license). But I approached it just like I was being paid big $$$. The company that asked me to do the BPO was looking to buy the property from the lender and requested that I give as low of a valuation as I could so they could negotiate a lower purchase. I acknowledged what was said, but in the end, I gave the same opinion that I would have given an owner looking to sell.

  18. L A Huston

    There are some strange comments on here that makes you wonder about competency. Far too many to comment on. Here are just a few that should be able to offend nearly everyone:
    First, if any agents or brokers out there believe that they should be performing a BPO to a “Standard of Value” as quoted by Desi, please know that you are definitely in violation of law. A Broker or Agent provides a “Price Opinion”, not an “Estimation of Value.” It is called a Broker Price Opinion, not a Broker Appraisal, which would indicate a value estimate. A BPO does not, nor in no way should it, conform to USPAP or any definition of “value”.
    That is probably why most BPOs are more accurate in estimating a real sales price than an Appraisal. That, and the real time experience the provider of a BPO has working with real live buyers every day. In a real time, live market. Instead of just pulling “Comps,” which, many times, represent ancient history. Sometimes ancient history is far less than six months. Sometimes the best “Comps” are more than a mile away.
    An obvious requirement that should exist for BPOs is stated in the name: It is, and was always intended to be, a “Broker” price opinion. Fed law and every State law should require that only a Broker can perform a “Broker Price Opinion.” That would solve a whole lot of competency questions. Yes, I know there are a whole lot of very competent agents out there. If they want to do BPOs they should pay the price and become a Broker, like the order says: Broker Price Opinion. It doesn’t say “Successful Agent Opinion” or “Knowledgeable Agent Opinion.”
    The biggest problem facing appraisers is the same thing that has always faced appraisers: appraisers themselves. What is driving down the price for appraisals are appraisers more than willing to work for nothing. How any appraiser in America can afford to do an appraisal correctly and not receive a minimum net of five hundred dollars is way beyond me. With the new form just added, which cannot be completed in less than an hour, appraisers have, once again, accepted a significant cut in pay. (Yes, I know some appraisers can and will do the new form in less than five minutes. See first sentence of this paragraph)
    With the HVCC being accepted by lenders even before it was finalized, and now no one knowing what it really says, including any member of Congress, there is no profit whatsoever in appraising except for those new “appraisal managers” who will always use the lowest cost appraiser available with no regard whatsoever for quality. The biggest problem that appraisers face is that there are so few left, and now so many more that will quit, that they have no political clout at all. The AI long ago joined the dark side when it came up with the most ambiguous document in governmental history: USPAP.
    The only solution for regulation of appraisers, and to make appraising viable, is for all appraisers to be hired by the Federal Government. The Government already employs thousands of appraisers. To receive quality and true independence of opinion, and to eliminate the worthless appraisal management companies, they should employ them all, and any property being valued by any financial institution for any purpose should be appraised by a government appraiser. Bye Bye BPOs.

  19. The banks should hire a Realtor to list the REO property and that Realtor should provide the bank with a comparable market analysis based on the neighborhoods market value. The property can then be appraised by an appraiser to complete the loan approval process. Putting in the extra step of BPO’s is just a waste of time, more of the banks’s money and leaves room for inaccuracy.

  20. Jack Gowan

    Most appraisers in our area are smart enough to understand “value” If the neighborhood is full of foreclosures that dictates the market value. BPO or appraisal does not. the banks will list a property and reduce the price every 3 to 4 weeks until “market value” is found.
    As in the S & L problem appraisers were blamed and more work and regulation was implemented for them. It still does not change value of the market. It looks as if they will be blamed for this mess as well.

  21. Jack Rash

    Make every BPO have the 1004MC attached. And picked apart like appraisers are being picked apart.

  22. Jerry

    BPO reports are biased driven, completed mostly by unqualified realtor agents and wholly lack any form of credibility in the valuation business. Any lender who would use information off one of these reports is only asking for what they deserve. If a report is not subject to any form of verification then it should not be considered a professional opinion.
    At the very least – regulate; that way whom ever signs such silly forms can be held accountable for their information and opinions. Most are presented in a very poor fashion and are obviously driven to meet the needs of the realtor

  23. Look the problem is not the BPO agents, it is the banks that what the BPO value to be a value that the property would sell for in 60-90 days in a market that is 180+ DOM.
    Problem 1 – REO Properties
    What we should do is have the banks disregard the comps of distressed properties because they were not “arms length transactions” between a willing seller and a willing buyer (obviously the seller did not intend to sell).
    Problem 2 – Short Sales
    Look, on this one, it is the bank’s fault. Why on earth would a seller seek top dollar when selling the property if the bank will not allow them to keep a penny from the sale. If all I could gain is less damage to my credit, I would cut and run as well.

  24. Kay Mann

    BPO’s are just one step of the REO process in considering value. The appraisers are not losing anything, as they are also doing an appraisal in conjunction with two BPO’s. The REO companies are taking the average of the three to price their listings. However, I have had some “ASIAN” Asset Managers, say, “WHAT DO YOU THINK?”, and then go with that. In the long run, it really doesn’t matter, the market is going to be driven by what the buyer is willing to pay and what the seller is willing to accept.

  25. I am a Certified Residential appraiser in Claremont, California. Claremont is on the border of the San Gabriel Valley and the Inland Empire. We are home to some of the most distressed markets in the country, in fact, San Bernardino is #9 on Forbes’ list of distressed metro areas. Before this all hit I was making 70k a year doing honest work for conservative clients such as Greenpoint, Dana, United Pacific Mortgage et al. They are all gone because Wall street bundled their conservative prime paper with the garbage the Fremont and InstaFi were spewing out. When the CDO’s were rejected by he investors for having been falsely rated by S&P and Moody’s, these good folks had to buy back the paper AT PAR, though the paper had been sold to Wall Street at a discount. So much for the mortgage banker. Then it was the local S&L’s turn to go. Who told Downey Savings to write all those subprime loans? ACORN of course, and then Schumer writes an open letter to the California Department of Corporations warning them of Downey’s immanent collapse. Downey was fine, but in the way of the program of bank consolidation. Now Downey is gone, along with PFF, Union Bank, WAMU (which won’t be missed as they had it coming) and the corporate credit union bank that was FORCED to close by Federal Regulators. All that are left are hard money investors and the big banks. Now appraisers will be required under HVCC to work as nameless and underpaid functionaries for these banks hired by AMC’s that are owned by the banks themselves. Case in point, RELS is jointly owned and managed by Wells Fargo and First American Title. Wells is the only bank whoi has shown a 1Q2009 profit and First American is about the only title company left. There is a class-action lawsuit under RICO against these two for RESPA violations. RELS determines compentency based upon the amount charged for the appraisal, (I can testify to that and I don’t care who reads this). As for the rest, why dpo you think the Appraisal Institute signed on so quickly to HVCC? Who do you think came up with the CDO’s and SIV’s to begin with? CDO’s and SIV’s are corporate finance structures that are used to fund capital improvements for corporations. Who are the people who do the appraisals for those corporations? Members of the Institute of course! Connect the dots guys. We have been had. I was fine until I was told by HUD that only the loan officer could order and appraisal in 2005 to which mortgage broker was grudgingly added their list of approved sources. Now mortgage brokers are off the list and I must now talk to wholesalers who have neither the time nor the infrastructure to set up a compliant appraisal department. This progression shouldn’t be a surprise, however. The game was rigged from the beginning. When FIRREA was written, no protection was written in for the appraiser even though the appraiser was required to bear up under the bulk of the regulations. No path was set up so that a person could advance up the ranks. The Certified General Appraisers were a good old boys club who would only admit those they liked. Imagine having to beg the supervisory appraiser to sign your work log, or being subjected to sexual harrassment as part of the process. I have first hand and public evidence to actual occurrences of this and it is more common that any one of us would care to think about. So where do we go from here? God only knows. We do need to stand firm in our ethics and serve notice nationwide that as a debtor nation, transparency and ethical behavior are no longer optional, they are required.

  26. Shar Benson

    It is against the law in Utah to do a BPO for other than a listing, but all company’s requesting BPO’s assure you that you will probably get the listing. It is time the banks became honest.

  27. This is a continuing nightmare. Having a person with a vested interest in the outcome do the BPO is as bad as the bad old days (20+ years ago) when the VA appraiser for our area would call the agent up before coming (from two counties away) and say: “Pull the comps for me.” And, of course, in all states we have the situation that as soon as the ink is on the new agent’s license, they are supposed to know how to price homes. I teach appraisers and agents, and I’m always finding out more stuff agents don’t know. The sad thing is, this kind of irreponsible, ‘let’s just get this deal done quickly, I need a commission’ behavior will have strong influence on the market. The same agents doing this now to effect a quick sale will be whining at the appraiser in 2 or 3 months when the only comps are too low to support the price they sold another house for.

  28. Dan F.

    EVERYONE has blood on their hands. Buyers, sellers, agents, appraisers, loan officers, banks and our friends on Wall Street. If you think otherwise, you’re delusional. The common denominator is greed. Pure and simple.
    If you want to talk about ethics or competency you better look in the mirror first. Just because you are a certified appraiser or a broker doesn’t make you ethical or competent. It only proves that you passed a test and paid your fees. For proof of that just contact your real estate division and look at their lists of complaints and disciplinary actions.
    The old school business model is broken. It is time to stop resisting change and to move forward and adjust to the realities of the business. It is time to start thinking outside the box. Be a part of the solution and not a part of the problem.
    It boils down to a simple equation: value = what a buyer is willing to pay.

  29. Carlos Pumilia

    I see there are a lot of opinions from agents and appraisers. The fact is that appraisers went through the training and certification process to perform an appraisal and follow up with 30 hours/2 Yrs. to keep that certification. As both an agent and certified appraiser, I see agents overstepping their bounds and NAR with its head in the sand. NAR supports the Appraisal Foundation and In some ways the AQB. NAR will never say anything to the agents, they just raised their fee’s. I can’t raise mine…. As wise as some states are on the BPO question, leave it to Louisiana to pass legislation allowing agents to perform BPO’s. Still the banana republic, The Bayou State. Why should there be any question. Agents were not trained or certified/licenced to do BPO’s, so don’t. Appraisers don’t sell real estate. We cannot by our code of ethics be involved in the sale of a property we appraised, without a lot of disclosure that would make it an arduous at best.

  30. Sharmane

    I agree that this is totally an economics issue. Realtors are not stealing work from appraisers, nor do we desire to be appraisers. We provide comparative market analysis’ to banks. When completing a bpo, if the area is concentrated with REO sales, then typically the bank will ask for REO comps. Likewise, there are times when they ask for ‘Distressed Value vs. Repaired Value’ OR 30 day sale vs 180 day sale. Any Realtor would know that these values would come out differently. It is the bank who chooses which value they will utilize and how long they are willing to wait to get the price they are desiring. I have been on both sides of the fence (where the property sold in 30 days and where the property sold in over a year). Honestly, the over the year ones was not because there was no offers – the banks did not like the offers and rejected them. Let’s all work together for solutions and not pointing fingers. Markets go up and markets go down. Interest rates that are now 4-5% were once 22%. If we all agree that this is a buyers market then that clearly tells you we have an abundant supply. Therefore, prices would have to decrease. Commissions will decrease (appraisers and realtors). We will have to learn how to specialize and diversify in order to get the best bang for our buck because we all still have fixed costs (dues, associations, shelter, etc.) It is the law of diminishing returns.

  31. AJ

    The bottom line is; you get what you pay for. I’m a broker and realtor in Palm Beach County.
    I tried doing a few of these BPOs at the wonderful $45 fee they offer in my territory (which is on the top 10 list for National declining markets). It takes time to be accurate, and no one can make a good living doing these things unless they spend less than 2 hours per BPO (although I would say most spend less than 1 hour). It takes me 2 hours just to research and document market conditions in a given neighborhood, because detailed analysis is the mother of accuracy. I’ve lived here my whole life and I know my local market, but conditions change weekly and you need to approach each new value estimate with a new set of research statistics (in my territory anyway). Now add in the time it takes to find comparables, call agents to confirm concessions/terms of sale/market drivers of the sale, DRIVE THE COMPS (not “required” but necessary), and research public records to confirm property attributes/sale price/sale history. Then adjust the comparables to CURRENT market conditions (a pool is worth XX as of today in the community), fill in their form with all of the other things you could not accurately determine from the street anyway, and oh yeah, guess at the value based on the limited information you have. Now provide 4 values based on a range of marketing times as provided in the form. I’m sure you are going to derive those multiple values based on something besides your gut, like maybe a detailed market statistical analysis of historical sales. Since MLS rarely displays accurate marketing times, that means you have to individually compile DOM from the 6 listings on your single comp entered over the last 2 years. Has it been more than 2 hours since you started this insanity?
    You get what you pay for, and the BPOs are low quality as a result. We can argue about these reports being high or low, but they are not accurate.
    I agree with the previous post; make the BROKER price opinion a product of BROKERS only, and you will end the quick and dirty reporting that we all know is happening out there. Otherwise rename these reports as “quick Realtor market value opinion”. That is what they are.

  32. Robert

    here we go again, trying to blame Realtors for everything. I have done around 3000 BPO’s in the last 8 years and have been within 5% of the final selling price on ALL my valuations. I have received formal training on the various types of sales activity, REO, Short sale etc and utilise that training in completeing my BPO’s. In my view the problems lie directly with the Banks and their use of UNTRAINED individuals, in other words the cheapest they can get, as the front end for Appraisals and valuations. How often do you find out you are dealing with a person in India with NO knowledge of the USA market. You pay peanuts and you get !!!!!

  33. AG

    I do believe that appraisers and real estate agents had a great deal moving the prices up before and also shooting them down so much right now. I am a Real estate agent and have seen it happen over and over again.for most appraisers valued the house as lenders wanted them to. And right now they are doing it again. As for the Realtors, unfortunately some just want to sell fast and don’t care about the sellers loss of equity.

  34. As a Realtor and a certified residential appraiser, I have long thought that appraisals, not BPO’s, should be used for foreclosures. IT IS A HUGE CONFLICT OF INTEREST for a real estate agent who lists the property to do the BPO. The temptation is there to undervalue for a quick sale or overvalue for a listing instead of short sale. In the San Diego area this has become a huge problom with dozens of offers the first day foreclosures come on the market due to undervalued properties. Appraisers should have access to MLS data and have lock box keys and be required to do interior inspections of the comparable listings for more accurate valuations. For foreclosure
    transactions, appraisers should be required to reside and be officed in the county in which the property being appraised is located. Appraisers who are not familiar with areas are more apt to make errors in valuation. If more than two offers are received on the first day marketed, an immediate 10% increase in ask price should be required by law with substantial financial and criminal penalties for failure to comply. No Realtor should be allowed to both list and sell a foreclosed property. The temptation is there to not present all offers when twice the commission is at stake. There are Realtors I know who will not take offers from other realtors on their foreclosures.
    Lenders are significantly under staffed for short sale transactions causing foreclosures due to their inaction or delay. The federal government needs to send in Americorp volunteers to help staff ailing lenders short sale departments to expedite the process. This would be at no cost to the lenders. Foreclosures due to lenders insuffiecient staffing to effect short sales causes credit scores to fall for people who should be able to purchase vehicles, etc. and help this economy. I have been told that at some lender’s short sale departments staff is actually physically wading in paperwork that is flying off fax machines. Federal government please send in help!

  35. Glad to see the appraisal industry jumping on this. BPO’s are the norm here in Las Vegas, and are not only in violation of Nevada law, but also open the door for “insider trading” by listing agents. We have had many seminar “guru’s” come to Las Vegas to teach REO and Short-sale listing agents how to manipulate BPO’s to double-escrow their own listings and collect an extra $25,000-$30,000 profit at the closing table. I had 2 minutes with Congresswoman Shelley Berkley to inform her that HUD needs to require banks to obtain an independent appraisal, not a BPO, in determining fair market value for a property. Take it out of the hands of the listing agent. Martha Stewart served jail time for insider trading. Now it has become a cottage industry.

  36. Susan

    I am truly amazed at the misinformation I have read in response to this article. I have been a Realtor for over 20 years, listed and sold REOs in the mid 80s and have been doing BPOs for 12 years. When I do a BPO I price the property as if I were going to list it. I am not an appraiser so I cannot give a value. I am surprised at all the over generalizations about how little experience a BPO agent has, for it has been my experience that a Realtor must have at least 3 year’s experience before an Asset Manager will allow them to complete a BPO or list an REO. I also know new Realtors who do not prepare BPOs because it is totally out of their realm of expertise.
    This year, I did hundreds of BPOs and only received one listing. The Asset Manager had me prepare a free CMA for the property, plus there was an appraisal and another independent BPO. The bank listed it for far more than what my CMA came in at and it sat on the market for 6 months until the bank finally decided to price it where I told them to.
    BPO reports are not bringing down values. The market is declining. We can only go by what the market shows us, nothing more and nothing less.

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