What is a BPO?

Broker’s Price Opinion, or BPO, is a method that a real estate broker (or a sales agent acting on behalf of their employing broker) uses to estimate the probable selling price of a house. The estimated price is submitted in a BPO report (2-3 pages) that includes local and regional real estate market information, neighborhood analysis, and comparable properties (comps) that compare to the house (subject) that is being evaluated. This method of estimating a selling price has similarities to a Certified Market Analysis CMA and a residential real estate appraisal.

The Broker’s Price Opinion (BPO) is the single most important aspects of the short sale process and one you must understand and appreciate because the BPO will determine the difference between a $10K profit or a $50K profit.

A BPO will determine the bank’s opinion of what they believe the property’s as-is fair market value is worth; this is formed by their own appraisal. In other words, the bank sends their own appraiser to the property to determine its fair market value, which the bank representative will then turn around and use in negotiating with you on price.

Now, here are a few little known facts about the BPO that are vital for you to understand. First, the bank will typically set the BPO price based on what they believe the home can be sold for within 90 days.

The most important reason why agents need to be meet the BPO is precisely because in order to save the homeowner from foreclosure,

YOU NEED TO BE ABLE TO SELL THE PROPERTY.

If the bank mistakenly believes the property is worth $400,000 (perhaps because you didn’t meet the BPO) and the property is actually worth $370,000, this will make the property impossible to market and sell.  The problem is worse is a declining market and no buyer would buy a property above market value in this economy.  Remember in this market buyers have a strong advantage, so to be competitive a property must be priced at or below market.  It is important the Bank’s BPO agent is reminded of this at the meeting.  You will be able to point out the falling comparables, the slow sales of the surrounding properties and other negative market pressures.

1. When you do your part, EVERYBODY WINS!

Why is this stage so important?  The Bank is overwhelmed with loan modification application, foreclosures paperwork and short sale request.  The Banks are forced to evaluate a large quantity of properties in a short time, with limited Bank resources.  Often they subcontract the responsibility to a licensed real estate person.  This person receives less than one hundred dollars for this service.  It would be impossible for the Bank’s loan officers to individually evaluate every application; the files are already piled to the ceiling.  The Bank therefore will base its short sale decision as a percentage of the Fair Market Value (FMV), established from the BPO.  This is huge.  Most Banks will accept between 80%-95% of the number of the BPO, therefore you must do your best to influence that number.

Areas to Consider in a short sale report to the BPO.

• include a detailed market conditions
• include information on foreclosure activity
• pending and closed sales activity in the subject’s market area.

If you fail to justify to the evaluator why the number you need is correct, then your chances of getting your short sale accepted at the price that you want, are pretty low.  Your presence during the evaluation process will hope ensure the required knowledge and information is communicated.  BPO agent’s knowledge of the market and property type may not be relevant to actual market conditions.

The BPO allows a lender to know what the expected sale price would be in an REO situation and therefore influences any decision in the short sale process. The BPO allows the lender to make an informed decision as to the most cost effective alternative to pursue; foreclosure, repossessing as an REO property or short sale.

Key Note: Property valuations must NOT be more than 60 days old! Banks require property valuations to remain current.  Therefore it’s important to maintain a timely response on all paperwork after you submit the short sale package.  BPO is also known as a comparative market analysis.

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