Blind Squirrel and Acorns

[factsandtruth]

It all boils down to money...they would rather pay a BPO fee.

 

[factsandtruth]

If they dont agree with a BPO value its cheap to order another BPO. Its not cheap to order another appraisal.

 

[J Grant]

Maybe VP gets a bonus if X amount of properties are sold in X days, or his primary goal is to save on costs....a default company is not making money off the properties they are trying to minimize losses including expenses, thus they are bidding for cheapest to service the defaulted assets. The cheapest property managers, cleanout crews, repair people, RE agent commission , and the cheapest BPO provider, or appraiser.. The cheapest evaluation method (BPO or AVM ) would also be attractive to them.

They have their own cost reasons for doing things; just because it fulfills their needs, does not mean it is a sound way to use or choose valuations for other purposes, including origination work.

The fact that so many REO's sold for so far below market value ( as we see from subsequent flips and resale's ), is the price these companies paid for choosing, all the way down the line, the cheapest alternatives, from maintaining the properties to list pricing them to selling them.

 

[J Grant]

They ordered 3 BPO's....increasing the chances that ONE of them would come up with a price that later was close to the selling price...thus able to claim that BPO's are "better" at arriving at the eventual sale price.

An interesting look into another side of the business.

 

[factsandtruth]

3 bpos at $30 a piece. What money maker is not going to say bpos are more credible? What mortgage broker is not going to call for a comp check, for a extra $2000 to help the deal close or for no doc. loans...etc

 

[NEINAPPR]

If a Realtor does a BPO and says that a property is worth $25k, they then list the property for $25k and sell it for $25k does that then make them 100% accurate in their valuation of the property? The appraiser values the property based on market data and then moves on. The Realtor is the one that is selling the property, of course they can appear to be more accurate, they are the ones dealing with the buyers and can easily manipulate the sales/listing price in their favor (or their clients favor). The Realtor that deals with REO properties wants a quick turnover so they can move to the next one, there is more money to be made selling the property fast and cheap and moving on to the next one than there is in marketing the property and trying to get its true value. I know several Realtors who specialize in REO properties, they have a list of buyers waiting to buy properties, these buyers are not there waiting in the wings because they anticipate buying the property for its market value, they are waiting because they anticipate buying the property at a steep discount allowing them to make money when they resell the property.

 

[J Grant]

Even if the RE agent who does the BPO is not the one who lists the property, they will know about it in advance and be able to inform waiting buyers.

It's no secret that a lower price property will sell much faster.

A few years into it,, lenders got smarter and required a wait period before investor bids, after losing billions on properties selling below their value.

BPO stands for Broker PRICE opinion, ( not Broker VALUE Opinion)

The fact that "Broker" is allowed to stand in the product description should be struck down, them are prepared by RE agents, not Brokers.

I suppose "Agent Price Opinion" does not have quite the same ring.

 

[Meandering]

A good appraisal will always be of more worth than a good BPO. It will always be more expensive to acquire because there is so much more work required. Financial institutions want to control expenses. Financial institutions only too often do not seek out the most qualified and competent appraisers for this kind of work, they get the cheapest they can find and burden them with turn times that are meaningless with this kind of work but encourage taking shortcuts. Unsurprisingly they are "disappointed" in the quality of the product received. It is a self fulfilling prophecy.

It is also a farce. Anybody with ample experience in the real estate field can logically see how this process will lead to this conclusion. A VP "discovering" the better value of BPOs versus appraisals they acquire is obviously ignorant of the real estate industry as it pertains to field work.

What he is discovering is that the BPO system allows for a more expedient disposition of distressed assets. At the end of the day, it may well be the best way to do it. Any money left on the table due to low BPOs estimates, for whatever reason, may be eclipsed by moneys saved by getting the non performing asset off the books quicker. If that is the case, at least be honest about it.

Don't come in here and tell us how appraisers gave up this kind of work. Sure there's a bunch of appraisers out there that maybe aren't real good at appraising, but there are plenty that are. If you really want competent, experienced, certified appraisers doing portfolio management assignments for you, they are available. You just have to choose them properly.

I like this post.

Also consider that standards 1 and 2 must be written into each appraisal report. They require research, verification, deed purchases, zoning issues, disclosures of covenants, restrictions, reservations, easements, definitions, extraordinary assumptions, hypothetical conditions, and all the things lenders tell the ASB what they "NEED" in an appraisal report to fully understand the value. While a BPO has no standards or definitions, needs three closed sales, three active listings, 4 check boxes for market conditions and a value conclusion.

If lenders don't want or need all the stuff in an appraisal report, why are they not telling this to the Appraisal Foundation?

.

 

[Renee Healion]

If a Realtor does a BPO and says that a property is worth $25k, they then list the property for $25k and sell it for $25k does that then make them 100% accurate in their valuation of the property? The appraiser values the property based on market data and then moves on. The Realtor is the one that is selling the property, of course they can appear to be more accurate, they are the ones dealing with the buyers and can easily manipulate the sales/listing price in their favor (or their clients favor). The Realtor that deals with REO properties wants a quick turnover so they can move to the next one, there is more money to be made selling the property fast and cheap and moving on to the next one than there is in marketing the property and trying to get its true value. I know several Realtors who specialize in REO properties, they have a list of buyers waiting to buy properties, these buyers are not there waiting in the wings because they anticipate buying the property for its market value, they are waiting because they anticipate buying the property at a steep discount allowing them to make money when they resell the property.

Magic. Nothing up their sleeves...

 

[ucbruin]

NLCApprMgr-
The way you speak it is as if you think Realtors are the most knowledgeable people in the real estate field and they can be asked to justify almost any adjustment.

NEINAPPR,

WOW!!!!!! And I agree with you.

I'd like to think that NLC is sincere in his desire to upgrade the QC regarding his department. Yet his questions almost seem contrived and his responses have me imagining him being a field appraiser who couldn't wait to become a reviewer.