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.