BPOs Allowed for Re-Fi's and HELOCs?

[Alison Swain]

A RE agents reply to me about BPOs:

I believe that you are the one who is incorrect! On re-fi's, if under $250,000 a BPO will suffice, not a purchase money loan. You're also correct regarding a HELOC (you do remember HELOCs, don't you?), an agent can do the BPO.

Have at it, kids.

 

[Mztk1]

The agent is 100% correct. A desk jockey who is new to a company and has no experience in real estate at all can do an AVM appraisal for any loan with an FRT amount below $250,000 in Florida. Real estate agents are allowed, in the state of Florida, to do appraisals as well, and they count towards experience as long as they follow USPAP standards. But an agent does not have to follow USPAP and can easily be hired to do BPOs for non-FRTs.

Hopefully the laws will change and an appraiser will be required for all state real estate transactions. But I don't see that happening. Florida is very anti-regulation and I believe they only set the bar as high as they have to in order to meet federal requirements. Now the state appraisal board gets carried away, so laws that apply directly to appraisers are a bit more severe. For instance, appraisers are bound by USPAP in all valuation activity. But the general laws that apply to the public are a lot more relaxed.

 

[Alison Swain]

His point was that there's no difference between a BPO for $100 and an appraisal for oh, let's just say ..... $350. So why should the banks pay more. He didn't seem aware of FIRREA and the $250K de minimus.

Surely, in light of this meltdown, some strict valuation regulations will be put in place.

 

[Mike Boyd]

His point was that there's no difference between a BPO for $100 and an appraisal for oh, let's just say ..... $350. So why should the banks pay more. He didn't seem aware of FIRREA and the $250K de minimus.

Surely, in light of this meltdown, some strict valuation regulations will be put in place.

We can only hope. Letters to your congress person might help.

 

[Bob Ipock]

If it is under $250,000....they don't even nee a BPO. A tax value will do here in NC. Loans are maid every day with just a tax card.

 

[Mztk1]

I would hope so. But then again, the brutal truth is that an *average* sales agent who farms a particular neighborhood will be more reliable for a value in that market than the *average* appraiser who has that area in their territory. Territories for an appraiser are typically not as focused and since there are a lot more agents, you can almost always find one that farms a particular market and who can walk in to a house and know what it will sell for before writing a BPO.

A *good* appraiser or *very good* appraiser is typically as good or better than a *good* or *very good* sales agent in any market, even that agents market. But with the growth in the number of appraisers out there, especially poorly trained here in Florida since 2000, *good* and *very good* ones are the exception.

 

[Sandra Koutsopoulos]

BPOs flawed, costly

The top producing REO specialist Realtor in my area asked me for some assistance in doing research for her BPOs, which she initially used to try to secure the listing, and afterwards to comply with the asset manager's requirement to provide a new BPO every month on every property listed. Since her personal inventory is in the 100s of listings at any given time, she clearly doesn't have time to do "accurate" BPOs on all of those herself. Her solution was to mark everything declining value, 9+ months marketing, excess inventory, avg condition and location etc. She didn't drive the comps, some of which had remarkably better or worse locations, didn't use nearby comps (hers were usually 1+ mile away when there were 10 within 1/2 mile), had no clue on how to adjust the subject distress sale to the market, clueless about cost-to-cure defects, and had no understanding that a 5-bedroom house in a blue-collar family neighborhood having a carpeted 7'x8' kitchen and dining area and with only 4 kitchen base cabinets was a functional problem which most certainly was a reason the property was still on the market after 635 days. When I brought those issues to her with a realistic listing value 20% below hers, she was furious because she said, "I can't tell my client in Nebraska that!" because she thought she'd lose the listing. It would have been kinder to be straight with that lender back then, using a real appraisal, because it took much more time to sell that property in a downward market, and it probably cost them an additional $300,000 in value losses than if they had hit the nail on the head with an accurate unbiased appraisal in the first place. So they got their "free" BPO, and it only cost them an additional $300,000.

Lenders apparently don't value unbiased accurate information which might enable them to make prudent financial decisions. They'd rather entrust the value to an agent who might be 'bidding' to get or retain the listing. Brainiac financial banking geniuses.