Can the new Calif law discourage rampant BPOs for REOs?

[moh malekpour]

State senator proposes new real estate, mortgage rules

SB 1054 closes two loop-holes in current law. The first provision gives DRE the ability to ban individuals who have been found guilty of violating the Real Estate law from taking a real estate-related job with a company that has a different regulator. The second provision prohibits a real estate professional who gives an opinion of value on a property to a mortgage lender from acting as the listing agent on that property for a period of one year.

 

[MARK JOLLIFF]

A friend of mine who is a broker is now doing BPO'S. She was making 50k a month in the hayday and last month made 2k. This doesn't even cover her assistant. She told me yesterday that she just recieved her first 3 orders for BPO'S at 50 bucks a piece. There goes 3 appraisals for someone. I can't believe what things have come to!

 

[Soapbox Kimmie]

When you say she was making 50k per month in her heyday, was that from just real estate sales, or was she getting income from BPO type products as well as selling real estate???

 

[hastalavista]

I do not understand the rationale behind the second provision?

The second provision prohibits a real estate professional who gives an opinion of value on a property to a mortgage lender from acting as the listing agent on that property for a period of one year.

What need is there for a law to micro-manage how lenders internally price their real estate-owned properties for marketing purposes? Is there some concern that they are being cheated or swindled?

 

[Mark K]

I do not understand the rationale behind the second provision?

The second provision prohibits a real estate professional who gives an opinion of value on a property to a mortgage lender from acting as the listing agent on that property for a period of one year.

What need is there for a law to micro-manage how lenders internally price their real estate-owned properties for marketing purposes? Is there some concern that they are being cheated or swindled?

Conflict of interest?

Appraisers are not supposed to appraise a property for which they might have a financial interest. Since the brokers are acting like appraisers, the law might be aimed at treating the brokers in the same fashion.

I've seen many brokers produce BPO's that appear to be lower than market value so they can list and sell the property quickly for the commission $$.

 

[hastalavista]

Conflict of interest?

Mark-

Couldn't the same be said when a listing agent runs a BPO for any seller?

 

[Tudor]

Years ago when I was doing HUD pre-foreclosures occasionally a realtor would complain that I appraised the property too high. It makes total sense to not allow a realtor to list a property for a year after they do BPO.

 

[Mike Garrett RAA]

Banks should get both an appraisal and a BPO. The appraisal to set the value, the BPO to show what a real estate agent would list the property for!

Fannie Mae orders both.

 

[Elliott]

Nice attempt at an appropriate law, but when the 800-pound
Gorilla (Realtors) finds out about it, the committee chairman will table
it.

 

[hastalavista]

Years ago when I was doing HUD pre-foreclosures occasionally a realtor would complain that I appraised the property too high. It makes total sense to not allow a Realtor to list a property for a year after they do BPO.

(my bold)

John-

I've heard the same experience from my partner in LA.
Key word is "occasionally" it happens.
I don't think a law to prohibit agents from completing BPOs for lenders (as they would for any other client) is the correct answer (but that's me! :new_smile-l. Again, using this rationale, one could argue that a listing agent not perform a BPO for any client.
However, what will be interesting to see is how far this idea goes when CAR (California Association of Realtors) reviews it.

And, just so I'm clear, I understand that low-balling happens. I don't think it is sufficient that there needs to be a sweeping law to eliminate it. I'm against these types of laws/regulations which attempt to micro-manage business commerce.
Why shouldn't an owner of REO properties (the lender) do their own good due diligence in making sure the value is there and not taking the word of the listing agent? In fact, that's what two of my REO clients do when they order REO appraisals from me; they've already received their BPO and they want to cross-reference it with an appraisal.
Pass this law, and a lender might think,
"Well, I'll get my independent BPO and hire some other agent to sell the property and I can skip the appraisal process because the person who is completing the BPO is independent from the person who is going to be selling the property!"
This could be the unintended consequence of such a law. Now, how does it sound?
(BTW, if that is the consequence, I wouldn't blame the lenders from thinking a independent BPO can replace the appraisal- at least, I would expect them to try that process for a while).