The Drive By…
There are certain buzz words in short sales that make me cringe. DRIVE BY BPO happens to one of those phrases.
I called into SPS (Select Portfolio Services) last week. We are working on a property that is extremely time sensitive as there is an auction date in January. When I spoke to the agent about the short sale package, she indicated they would not postpone unless they had an appraisal on hand. The auction is coming quickly and they happened to order a BPO right before Thanksgiving. She explained they had a BPO on hand that was well over $100,000 more than the offer price. HUH??????
For those who aren’t familiar with the term BPO it stands for Broker Price Opinion. The lender has two options for obtaining value. They can hire an appraiser or a real estate agent. Now most agents who are hired are grossly underpaid, and have limited listing experience (that’s my own personal opinion) however I appreciate the lenders who actually shell out the few hundred dollars for a proper appraisal to be done.
Now the listing agent on the property told me that there was no BPO done, so I immediately asked the SPS agent if the BPO in November was a drive by. YES, she explained. SPS doesn’t hire appraisers from my experience either.
Homeowners, be aware that a drive by BPO is NOT in your best interest. The short sale process is difficult enough, but a drive by BPO should be outlawed. BPO agents are not paid enough money for the work they put in to formulating values for properties, however that portion of the industry is booming. There are now BPO mills, in which most agents hired to do the BPO send someone else to the property to take pictures and then after reviewing those pictures that the other person took the agent comes up with the value without ever setting foot on your property. A drive by BPO is ONE STEP BELOW THAT. There is no benefit to the lender, homeowner, or listing agent when this happens. Intricate details about the property will be missed. Those details can GRAVELY affect the value.
In the case above, there is a HUGE crack in the basement and mold in the property. There was an appraisal done and the appraiser said the property is a tear down. A BPO agent doing a drive by for $40 dollars is NOT going to know this going into the valuation. Now, we are faced with trying to stop an auction where the lender thinks the value is well over $100,000 more than what we listed the property at.
Most listing agents have an intricate knowledge about the homeowner’s property. They are the most qualified to provide crucial details to aid in the valuation of the property. They know things about the property that most BPO agents will never know, see, or hear about unless they walk through the property.
So, here is the problem with my current situation. The drive by BPO done in November indicated the value of the property was $330,000. OUCH. The property was doomed to foreclosure from the start at that price. There is an extreme amount of mold in the basement, there is an easement issue with the property hanging over into the neighbor’s yard three feet, there are major roof issues and water damage, the house is a tear down according to the appraiser and there is limited parking. Hmmmmm, just a few small issues affecting the value of this property that couldn’t have possibly been noted on a drive by BPO, so now my homeowner faces foreclosure over a $40 dollar inaccurate valuation.
The drive by BPO doesn’t do the lender any good because if they foreclose on this property and try to relist it for $300,000 it will sit on the market for well over a year while they pay to maintain it, pay taxes, etc., only to have it sell at its actual value which is more likely $160,000. The drive by BPO doesn’t do the homeowner any good because the lender will foreclose and the homeowner’s credit will be trashed, when getting an INTERIOR BPO for a bit more money COULD have been arranged. The only person who benefits from a drive by BPO is a BPO agent who may have picked up $35 for coming up with a value that is far of the true value of the property and to me, that is NO benefit
Realtors, MAKE sure when you are submitting your short sales to the lender, you have in writing you are requesting an INTERIOR BPO, otherwise you are in store for an uphill battle on your sale.