BPO's And Cma's What Standard & Condxs

[bradellis]

Rae and Bob,

If memory serves, there are about a dozen states (+/-) in which BPOs for a fee are illegal. In some, if the broker can demonstrate that the work was really to obtain a listing then the fee is allowed. But, sure NOT easy to demonstrate that.

In PA it is illegal and they went so far as to create a special class of licensure- broker/appraiser so some could do them. Last I saw there were about 4000 on that list but that was 5 years ago and I suspect many have dropped off.

Brad

 

[Austin]

Brad:
You stated above that you use BPO's all of the time. Do they really meet the following Realtor Code of ethics requirements for BPO's with specific emphasis on items 3, 4, 5, and 6? Five will get you ten they don't.

1. identification of the subject property

2. date prepared

3. defined value or price

4. limiting conditions, including statements of purpose(s) and intended user(s)

5. any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants

6. basis for the opinion, including applicable market data

7. if the opinion is not an appraisal, a statement to that effect

I did an appraisal this week on a large 72,000 sf industrial property under contract. The Realtor had done a BPO and I appraised it back in June to help establish an offering price. The exposure time from the market was four years for this market segment. The Realtor never heard of exposure period. Exposure period was the most import factor in this valuation. That is the basis of my concern, not to mention a Realtor doing a BPO for an asset management company on an industrial property when he had never dealt with or sold one before.

 

[Fred]

Austin

The exposure time from the market was four years for this market segment.

You make reasonable points about the elements of the appraisal problem, like what factors are included in the definitions of value. Did it ever occur to you that four years might exceed what the fRT definition of MV calls "reasonable exposure."

 

[bradellis]

Austin,

3 and 4- no. 5 yes.

I am not in the business of being either the USPAP police (I will not turn someone in for a minor infraction unless it causes or contributes to fraud) or enforcing NAR ethics. That is something for the broker to do.

I ask for the suggested listing price, including exposure time and get more than one value with differing marketing (not exposure) times since I need to sell the property and need to know how long it will take to get the suggested price level for REO stuff. BTW, I get those value opinions in the appraisal as well.

We do not do commercial so I have no comment on the scenario you laid. Still, the client for the BPO knows full well what they are getting. My primary interest, though, is in the data moreso than in the suggested price. I make up my own mind about that price and then, after involving our asset managers, they set the final asking prices.

Brad

 

[Otis Key]

Interesting. Austin started this out with an attempt to get a clarification of BPO & CMA and we've gone the full round to nowhere. I was very curious as to what might finally come about for definition differences between the two also. I have been asked to write a program for our local board for new agents and after doing some research, along the same lines as Austin, started coming up with questions as well.

We haven't gotten any closer to an answer yet. It's been 10 days - that surprises me with some of the knowledge and experience floating around here that almost always seems to come up with an answer.

 

[Austin]

Otis:
You noticed it too huh? I guess that is the answer to my question-there is no standard and universally accepted definition of BPO's. That being the case, what does that say about the NAR ethical standard 11?

Here is what I learned from this thread:
1. Apparently BPO's and CMA's are the same thing. At least in one state. Money and political influence talks.
2. Some Realtors told one appraiser a BPO or CMA means an exposure time of three to six months.
3. To accept a BPO you have to assume the definition of mv, the standards of value, the conditions of value, and that NAR standard 11 doesn't mean what it says. How can someone assume concepts they are not even aware exists?
4. It is unethical for an appraiser to make this kind of assumption because it may mislead the public and cause someone harm because appraisers are viewed by the public as possessing the requisite knowledge to form a defined opinion of value. On the other hand and conversely, in order to accept the Realtor version of events, if they do a BPO not having any idea what it means, the public is not being mislead or having their interest endangered because the public must assume that the Realtors have no knowledge of value at all.
5. These Realtors are the people that advise the clients what price to put on their property so that when appraisers come along to do the appraisal they can appraise it according to a specified definition of mv. Does that make sense to you?

 

[Pamela Crowley (Florida)]

Nope.

IMO, a Licensed Appraiser should be the ONLY ones that can provide a value for any reason. Real estate agents should only be able to do price estimates for clients that are considering selling or purchasing and only with a disclaimer that what they are providing is only a price estimate and in no way can it be considered an appraisal - AND THEY CANNOT BE PAID FOR THIS PRICE ESTIMATE.

BPOs and CMAs are for listing or selling purposes and should be paid for via the commission they earn if what they've done makes it to closing. They should never be able to be paid for these - and if that were the case, this idiotic practice would end.

This part of the NAR Code of Ethics is confusing and just wrong.

 

[Ms. Janet]

Originally posted by Pamela Crowley (Florida)@Jan 16 2006, 09:04 AM


IMO, a Licensed Appraiser should be the ONLY ones that can provide a value for any reason. Real estate agents should only be able to do price estimates for clients that are considering selling or purchasing and only with a disclaimer that what they are providing is only a price estimate and in no way can it be considered an appraisal - AND THEY CANNOT BE PAID FOR THIS PRICE ESTIMATE.

Why should they be prohibited from charging for a CMA or a BPO?

They are licensed professionals. As far as I know, there is no law that demands only a commission is permissable as payment for real estate services.

 

[Austin]

Janet:
Back in the 1980's when I affiliated with what is now the AI, they sent me a large packet of material that I actually read. One of the articles was the definition of what makes a profession a profession and separates it from vocations. First on the list was a strict code of ethics and standards of practice that are strictly enforced by professional peers. Second, was a detailed knowledge and understanding of the legally defined standards of the profession. Knowledge base legally defined.

First: Where do the Realtors fit in the code of ethics picture with these BPO/CMA's in light of their code of ethics standard 11? Read Bradellis's post above. Apparently he orders thousands and few if any conform to standard 11 and he uses them as a source of data.

Second: Where do they stand in regards to point two above in relation to knowing what a BPO/CMA is and what it means in light of this thread? What does that say about a detailed knowledge of the body of real estate knowledge substance?

The answer to both questions shoots your theory to pieces. Then you think they should be paid for all of the above and claim they are professionals?

This is not intended as a Realtor bashing thread. I mean it in the most profession sense as a wakeup call. Something is rotten in the state of Denmark!

 

[Ms. Janet]

Austin,

How I became a cheerleader for BPO’s. Chapter 7

Realtors need to conform to their code of ethics, no doubt about it. A percentage of realtors do not. No doubt about that either. Appraisers need to conform to USPAP. A percentage of appraisers do not. Realtors and Appraisers are both licensed professionals. Some are professional and some are not. That’s life.

I have a client who believes appraisers overvalue REO’s under $100,000 and undervalue REO’s over $200,000. So instead of an appraisal, they order 2 CMA/BPO products for REO properties under $200,000. Then they want me to reconcile the 2 BPO’s but it is usually an impossible task; IMO, the reports are typically garbage and most often don't even seem to describe the same property. But, that's where their comfort level is. And all that's required under the threshold. Brad Ellis states that the BPO’s he orders do not meet the code of ethics, yet, he still considers them. He also is very clear that he know exactly what he is getting when he orders a BPO.

This is a quote from Brad

There are really lots of very good reasons to use BPOs, and I think the biggest one is that I can buy them for a great deal less than it costs me for similar work from an appraiser. This is a matter of economics. I just ordered over a hndred of them to use as a check see on an AVM product I was assessing.

Do you think if it was free, users like Brad would stop ordering them? That the quality would improve? That the value of this product to the users would decrease? Are you kidding?

No doubt about it, I agree 1000% that there are inadequate standards in place for these products. It seems to me NAR is in complete agreement there needs to be stricter standards for the use of CMA/BPO products; read Frank’s post in the NAR thread. That’s why I think 11-1 is even in their code of ethics and written as it is. Realtors completing a CMA/BPO are supposed to state that it is not an appraisal, etc. Sometimes, they just don’t. And apparently it doesn't bother the users.

What is your solution? Realtors completing a CMA/BPO to be bound to a 900 page document like USPAP that says the same thing in 37 different ways? That's not going to happen. Or, do you want the public and the lenders to be legally bound to consider only a "professional appraisal"?

IMO, CMA/BPO's are probably not an endangered species. They are a part of the real estate industry that the general public has come to expect for a variety of reasons. Primarily, It's all about money. Everybody loves a freebie. Accuracy and reliability are only an issue if its got an appraisers name on it. To quote NAR “Less appraisals, less appraisal fees.”

That's the bottom line.