Ok, so you've received the short sale requirements from
the lender and you've made friends with the loss mitigations rep that's
assigned to your potential deal. Next, you are now ready for the
lender to order a BPO on the property. Notice that I emphasize "you", this
is because I don't want you to miss out on a key opportunity to
influence the overall outcome of your short sale.
Although many investors are aware of the benefits of influencing the BPO,
few know exactly how it's done. The BPO is the single most influential
component that the lender considers when deciding how much they are
willing to accept as a reasonable short sale offer. If your offer is not
in the ballpark of the BPO it will most likely be rejected. Many
investors give up at this point and assume that the lender is not willing
to accept a short sale. It's not that the lender is not willing to accept
a short sale, it's that the short sale offer does not come close to the
amount of the BPO. It's just that simple. There is a big difference
between a lender not accepting a short sale and a lender not accepting the
offer.
What exactly is a BPO?
BPO stands for Broker's Price Opinion. All this means is
that a real estate agent or broker will assess the property and give their
professional opinion of it's value to the lender. The closer that number
is to your offer the better. You want the BPO to be as low as possible.
Listed below is a snap shot of a BPO requirement.
1. Run comps and take pictures of the surrounding neighborhood,
subdivision, or area.
2. Inspect the overall condition of the home and estimate the cost
of repair. Take pictures.
3. Formulate their "opinion" of the property's value based on the
information that was gathered.
4. Submit a detailed report of their research to the lender.
Here are 5 necessary steps to influence the Broker's Price Opinion (BPO)
Step 1:
Before your package is submitted ask your loss mitigations rep to
order the BPO. Let them know that there is not a lock box on the door and
you have the only key. Give them the best number to reach you and have the
agent doing the BPO call to set up an appointment. You must be
present for the BPO.
Note: There are two types of BPO's:
a) Full BPO - The agent does a full inspection of the home.
b) Drive by BPO - The agent only takes pictures of the outside and
other homes in area.
Always request a full BPO. If a drive by BPO is done you will not have any
one-on-one time with the agent, therefore eliminating any possibility of
influencing the outcome.
Step 2:
Compile comps, estimated costs of repair, and any other relevant
information that will justify a discount. If possible, visit the property
prior to the BPO or at the least a half hour before the agent arrives.
Make two lists for repair costs. One with all of the obvious repairs such
as wall damage, carpet, paint, etc. The first list will be mostly cosmetic
repairs. Make a second list of all repairs that the agent will not see
with their naked eye (i.e.: roof and water damage, faulty plumbing or
electrical fixtures, pests, mold, etc. This list will contain more serious
problems. Be sure to have an itemized breakdown of the costs involved.
Bring this information with you to the BPO appointment. Be
prepared to explain in detail how you came up with your estimates.
Step 3:
Make sure if the house is occupied that the homeowner is not present
during the BPO. You do not want the agent asking the homeowner any
questions about the property or offering any unwanted information. All
communication must be between you and the agent. Follow this rule
each time and you will maintain leverage during your negotiation.
Step 4:
On the day of the appointment shadow the agent as he/she
does their assessment. Bring a camera and take pictures of every room in
the house. The agent will only take a limited amount of pictures and may
miss something important. As you are walking throughout the house,
point out the most important repairs only. Take notes and make them aware
of other homes in the area that are comparable to your offer. Share with
the agent the information about the house that you've compiled.
Doing these things will help establish you as a well prepared professional
and help you earn respect with the agent.
Step 5:
Before the BPO is complete, ask the agent if they have a ballpark
estimate in their head. They will most likely tell you that the numbers
will be determined once they complete their report. At this time, ask when
they will be finished and if you can give them a call at a specific time
to get their final numbers. Note: The agent works for the lender
and more than likely they will inform you that their report is proprietary
to the lender. You have to feel that person out and see if they may be
willing to share that information with you. It doesn't hurt to ask more
than once if necessary.
Let the agent know that you are very familiar with the
neighborhood and tell them what you think the property is worth. The agent
doing the BPO knows only what they have researched and what they discover
once they actually see the property. You will be surprised as to how much
your opinion matters. I like to call it YPO (Your Price Opinion). If the
agent views you as someone who is educated about the property and
the activity in the neighborhood your opinion will be valued and taken
into consideration when they make their report to the lender.
Hopefully I've helped shed some light on this most important area of short
sale negotiations and that you are able to apply what you've read to your
next deal.
Best Wishes!
Written by D.C. Fowler, Real Estate Investor/Educator
