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What is a BPO?
By Felix Hung of Exit Beach Cities Realty
HUNTINGTON BEACH - A BPO stands for broker price opinion. It is a valuation product that licensed real estate agents offer to banks and asset companies. Today, the primary purpose is to valuate short sale transactions to validate the contract price. The banks enlist the help of local real estate agent to do CMAs (Comparative Market Analysis). This helps the bank to determine if the contract on hand is a good offer and if it is close to market value. BPOs have been around for a long time, but not know to the general public or to most real estate agent until late 2006/early 2007 when the real estate bubble burst. Other uses of BPOs are: for a refinance (usually home equity lines of credit), requests to remove PMI (private mortgage insurance), to check listing prices of REO/foreclosures, due diligence for investors/investment banker when bulk assets are sold, to review an appraisal, to supplement and support an appraisal, to check fraudulent activity, for valuation of a portfolio and establish a portfolio price (usually in bulk asset transfers). The reason a BPO is now a common term in real estate is because the cost of a BPO is a fraction of the cost of an appraisal. An appraisal is a specific product, also for property valuation purposes, but is only conducted by licensed appraisers. No one else can besides licensed appraisers can complete these. With bulk REO sales occuring behind the scenes, the influx of REO/foreclosures and short sales flooding the market, banks have chosen a cheaper alternative to the appraisal. If you are a distressed homeowner in the position of a short sale, please contact your real estate agent as soon as the BPO agent calls. This is a very important piece of your short sale approval. Most times the approval decision rest upon this independent valuation. Often homeowners, skiddish about letting anyone into their homes and give these agents a hard time. Please, for your own good, don't do this, but do verify they are a licensed agent before letting them into your home. The best way is just to have your agent do this for you. A good short sale listing agent likes to be there during the BPO inspection. Not all agents are created equal. |
BPO Association Website (NABPOP)
| How to complete a Broker Price Opinion
PLEASE VISIT THE CONTRIBUTOR'S WEBSITE
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Thanks for the info Felix. By "short sale", do you mean below market value?
CONTRIBUTOR'S REPLY
Short sale is when someone owe more on a property than it's worth and the transaction requires the homeowners to get approval from the bank they have their mortgage from. The term "short sale" comes from shorting the mortgage or not paying the full balance back.
Aha! Thanks for clearing that up for me.
Another interesting intel! Thank you.
Laraine
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This intel was contributed by Felix Hung
Felix Hung
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May, 2012
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