BPO's And Cma's What Standard & Condxs

[Austin]

I am getting ready to write some stuff on this subject. I was talking with a local Realtor that does a lot of BPO's for a fee. I asked him what definition of MV they used. He said he didn't know. I ask what standard and conditions of value related to the definition of MV, and again-"I don't know." I asked-"as of what date?" His reply-"The date I turned it in I guess." He said sometimes you don't have to give a value, just send in the comps. I asked if the price opinion was prospective, current, or historical. Again, he had no idea. I wanted to ask what legal interest he was valuing but thought better of it.
In my mind words mean things, so a Broker's Price Opinion should mean an estimated price to ask for a property when putting it on the market. A CMA, competitive market analysis, should mean how does the subject rate among the competing properties. So, what is the difference? Good tools for a broker but what other use can they have? If I am correct, then why would banks, lenders, and mortgage companies want or need this information as so defined?
Can someone elucidate me on this subject please or refer me to an official definition and meaning of these concepts.

 

[Bob Ipock]

This is one area where the NAR does not see eye to eye with appraisers. Why do tehy continue to support this activity.

 

[Annemieke Roell]

Austin, this is a great subject.

Until recently I did rural BPOs because it helped me sharpen my research skills. I then realized that there are real estate people out there performing those BPOs without having a CLUE as to what exactly they were looking for. (This is aside from the fact that the BPO company asked me, on several occassions, to "wing it").

The process used to do a BPO and the data asked for are not unlike an appraisal. Usually, they want 3 sales and 3 actives. However ..... on numourous occassions I would enter my opinion of value and would receive a message stating that a previous BPO concluded a different value (always significantly higher, usually double mine) and would I reconsider.

There is NO way in hadens that those previous BPO values could be accurate. Especially not if a value must be determined by viewing a subject from the curb or, in rural areas, from down the driveway.

I can see, MAYBE, how in a cookie cutter suburb a BPO can give a half-way accurate value, even without an interior inspection, based on similar sales in the immdiate area. But mostly, especially in rural areas, BPOs are SWAGS ......

I think BPOs as methods of determining MV should be outlawed.

 

[Bob Ipock]

Austin,


I know that sometimes...BPO's are ordered instead of an appraisal if the value is expected to be under the de minimis. Bet that is the reason 75%+ of the time.

Recently I do a lot of REO work, and nearly always they order a BPO to see if it agrees with the appraisal.

There are real estate secretarys in this town doing BPO's for their real estate boss.



There is one fellow here who let his appraisla license lapse and now does 20-30 (BPO's per week according to him).

 

[Austin]

Anne & Bob:
You are making my point. Everybody does BPO's or knows someone that does them, but my question is: Define a BPO in terms of standards and conditions of value. What is the definition of MV for a BPO? Even the OCC has some standards for an evaluation but where is BPO or CMA defined in terms of MV definition, standards, and conditions of value? Marketing time, exposure time, cash equivalency, most probable price, highest price, fair value, etc. Just what does the BPO tell the client and how can they use it? Without some guidelines an opinion of value in a vacuum is meaningless.

 

[Francois K. Gregoire]

Originally posted by Austin@Jan 5 2006, 05:23 PM
Without some guidelines an opinion of value in a vacuum is meaningless.

Austin,

Truer words were never spoken.

 

[Bob Ipock]

I am not sure the users of a BPO care. If it is for a loan under the de minimis, it is ordered to make someone feel better having it in the file. Maybe it is a company policy of the banks. Who knows?


BPO's are being done in big numbers....I do not know why. I have never done one. I do know quite a few brokers and some appraisers that do them on a regular basis.

They may not mean anything....but people are doing them and being paid to do them.


Is it good for the pubic and does it promote public trust? ....I would say no.

 

[Annemieke Roell]

Originally posted by Austin@Jan 5 2006, 05:23 PM
Anne & Bob:
You are making my point. Everybody does BPO's or knows someone that does them, but my question is: Define a BPO in terms of standards and conditions of value. What is the definition of MV for a BPO? Even the OCC has some standards for an evaluation but where is BPO or CMA defined in terms of MV definition, standards, and conditions of value? Marketing time, exposure time, cash equivalency, most probable price, highest price, fair value, etc. Just what does the BPO tell the client and how can they use it? Without some guidelines an opinion of value in a vacuum is meaningless.

Austin, that is my point. There is no such thing because real estate agents don't understand the proper method of determining these things.

Case in point ... I did a BPO on a rural property about 3 miles from my house. It was abandoned and I could only get half-way up the driveway because of some unhappy (and very big) dogs. All I had to go by were old MLS histories and Assessor's records.

Now .... while I could not see the interior, I COULD observe a sagging roof, holes in walls and a deteriorating in-ground pool.

It was sitting on acreage and my value came in at about $35K. As I was entering the report on line, a message kept flashing that TWO prior BPOs had come in at around $80K and would I care to change my opinion of value? I didn't and received a call the next day from the company trying to pursuade me to change my value.

As this was not the first time this took place, it was the proverbial drop and that was the last BPO I did.

My point is that there are NO guidelines ..... and no standards. I have seen how some real estate agents look for comps and their criteria are completely different from ours.

Lenders should know better than to utilize them.

 

[Ross (CO)]

Bob,.......I'm sure you did hear correctly.....about someone letting their license lapse and then applying their years of practice and wealth of local market knowledge to grinding-out a vast number of BPO's, CMA's, EOV's, Comp Checks and whatever other hybrid of valuation product is requested. Who would not actually prefer that an experienced (former) appraiser be one to produce and provide that certain client's alternative valuation options ! ?

Imagine the intense marketing campaign one could launch in a major metro market area, doing various non-appraisals, as a no-longer-licensed and former appraiser, creating a S.o.W. to compliment that certain assignment........and concluding with a communicated........"Heh, it's possibly worth something, somewhere, between maybe $X and $Y.".......and the client loving you for your great, cheap, and fast turn-time !

.......and doing all that without ever signing anything.

The definition of a BPO is.........any value hunch which is cheaper than a legitimate appraisal.

 

[xm39hnu]

Last month I got a request from a major AMC to review two BPO's on a REO that I appraised for them "to determine whether lowering the value would be justified." They'd used the biggest crook in the RE business in the town in question for one of the BPO's, and used a Realtor from 40 miles away for the other.

The crook's work was crooked. He just made stuff up to look good. I pulled his first comp from public records, and ripped him a new one in detail. GLA, lot size, room and bath count--all were wrong. The second guy's was pretty close, but no cigar. I reconciled something like this:

"The BPO from XXXX Real Estate is summarily dismissed due to the gross inaccuracy of the data provided for the first comparable sale. The BPO from YYYY Realty is fairly close, but uses comparable sales from up to five miles from the subject. The appraisal report's comparable sales are no more than a mile from the subject. The difference of $3,000 can be called merely a difference of professional opinion. But I think my opinion has better support. I am not persuaded to lower my opinion of value."

No, I didn't charge them for the BPO review. But I cut at least one crook from the rolls of BPO providers for that lender and AMC.

What's the difference between a BPO and an appraisal? Well, plenty. A BPO is not an opinion of market value, for one thing. And, at least in TN, it is not defined as an appraisal either. The provider of a BPO can do anything he wishes without fear of sanction by authorities; you all know what can be done to an appraiser.