In this ever changing world of short sales, one constant is that the BPO continues to be one of the top ways to screw up a short sale. I rank it in the top 3 reasons a short sale dies. The other 2; HOA fees not being paid by the homeowner and buyers that were never committed in the first place.
Back to task, I have to credit Desiree Montgomery’s MSSC class where I first hear this expression. In my opinion, truer words have never been spoken. We need to officially change the acronym BPO from Broker Price Opinion to Be Present Or else.
Much can be said as to why BPO values can differ so much from contract prices. It could be the flawed system the bank uses to perform BPOs. I have attended REO classes where the instructor actually advocated submitting higher priced BPOs as a way to get the inside track to REO listings once the property is unable to sell at the higher price.
Another reason might be the “$50 Flyer” mentality BPOs have developed. I’m not sure how much research or time is invested in this report for a $50 payout.
Finally, in my opinion, why, BPOs don’t work in a declining market. By nature they are backward looking values in a forward looking market. Sold comps can not give an accurate picture of the current price as the agreed upon price can be 2+ months old. By the time the value is recorded those numbers can be 90 days old, now add to the problem that you can use comps 3-6 months old.
Some progressive agents are now paying for an appraisal so when the value comes back messed up, they have some leverage back with the bank. A good practice regardless, is to remove all the contact info from your listing once the offer has been sent to the bank. At least the person doing the BPO has to contact you to schedule the BPO. It might not be perfect, but it can at least prevent a worst case scenario, a non-licensed person just taking pictures for $10.
A few other tips to consider. Don’t be late to meet the person doing the BPO – imagine a reverse cab meter, for every minute you are late… start dropping the price you hoped to get. ID the person and get their info, make sure when you get the value from the bank you confirm the name you have as the person conducting the BPO. If it’s not the same person, you might have some more leverage.