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Can Anyone Explain This?

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RustNeverSleeps

Junior Member
Joined
May 15, 2007
Professional Status
Certified Residential Appraiser
State
Texas
My neighbors are talking to their bank about getting PMI removed. It's been over 3 years since they bought their house, but they don't have the LTV based on the original purchase price for PMI removal. Home values in the neighborhood have increased roughly 40% in this time period (I'm not making this up as it's based on market stats and recent sales). They have made roughly $10k of improvements (roughly 10% of the original purchase price).

Here is what I don't understand. The bank has given them 2 options:

Option 1: An interior BPO by a licensed appraiser for $150 and the decision to remove PMI will be based on 80/20 LTV of current market value.

Option 2: An interior Appraisal (1004) for $350 by a licensed appraiser and the decision based on 75/25 LTV of original purchase price plus value of improvements. Maybe, and this is a big maybe, they might consider the current market value.

Does this make any sense? Why would more credibility be given to a BPO? Do appraisers really do BPO's? Wouldn't it be an appraisal if an appraiser gives an opinion of value? :Eyecrazy:
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Is this in writing?

PLEASE send a copy to me!!!!!!
My Email: pec514 @ yahoo. com (remove the spaces)
My Fax: 321-281-4734
 

RSW

Elite Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Appraisers can't do BPOs in TN.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
If a licensed appraiser--who is subject to the USPAP--completes a "BPO" in his or her role as an appraiser, the appraiser has completed an appraisal.
 

RustNeverSleeps

Junior Member
Joined
May 15, 2007
Professional Status
Certified Residential Appraiser
State
Texas
Is this in writing?

PLEASE send a copy to me!!!!!!
My Email: pec514 @ yahoo. com (remove the spaces)
My Fax: 321-281-4734

Hi Pam, no its not in writing just based on a conversation with my neighbors. It just sounds wrong to me. What appraiser would do a BPO??
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
My neighbors are talking to their bank about getting PMI removed. It's been over 3 years since they bought their house, but they don't have the LTV based on the original purchase price for PMI removal. Home values in the neighborhood have increased roughly 40% in this time period (I'm not making this up as it's based on market stats and recent sales). They have made roughly $10k of improvements (roughly 10% of the original purchase price).

Here is what I don't understand. The bank has given them 2 options:

Option 1: An interior BPO by a licensed appraiser for $150 and the decision to remove PMI will be based on 80/20 LTV of current market value.

Option 2: An interior Appraisal (1004) for $350 by a licensed appraiser and the decision based on 75/25 LTV of original purchase price plus value of improvements. Maybe, and this is a big maybe, they might consider the current market value.

Does this make any sense? Why would more credibility be given to a BPO? Do appraisers really do BPO's? Wouldn't it be an appraisal if an appraiser gives an opinion of value? :Eyecrazy:


Sounds like they trust broker opinions more than those of appraisers. Hell in this market and with all the bad appraisers out there, Im not so sure I blame them.
I know Im gonna get flamed for that .. but think about it ... with number hitters roaming the streets ... its not hard to imagine.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I agree with PE in that I can't blame them these days; however, something doesn't add up with what they are saying so it leads me to believe that your friend got what he was told a little off-kilter.

Mortgage amount must be 80% or less of the BPO value. Got that, no problem.

Mortgage amount be be 75% or less of (appraised value + the value of the improvements)? I don't get that at all.

If the appraised value and BPO are both $400,000 and the improvements are $275,000, the PMI will be removed with the appraisal if the mortgage amount is $506,250 or less?

I just don't get what is being said.
 

RustNeverSleeps

Junior Member
Joined
May 15, 2007
Professional Status
Certified Residential Appraiser
State
Texas
But if both the BPO and Appraisal are by licensed appraisers what's the difference. I have never seen a BPO form so maybe it contains less information?

Jim, the 75% LTV for the appraisal is based on the original purchase price plus value of improvements.
 

Lobo Fan

Elite Member
Joined
Nov 28, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
I went through a huge drawn out audit process with a customer over a BPO. The BPO was full of errors, yet I had to make a formal defense of my appraisal because of a dubious BPO.

PE may have a point. There are apparently lenders out there that put more credence in a BPO than a full appraisal. Sad but true.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Okay so if it is worth $400,000 today it was worth $240,000 at sale and if land values are 30%, the improvements are valued at $280,000. 75% of $520,000 is PMI removal at $390,000 mortgage or less on a $400,000 house as opposed to $360,000 mortgage or less with the BPO. So using those numbers is seems they are putting more precision on the appraisal then on the BPO.

I still think something is wrong though.
 
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