Was just posting to another agent blog about this and thought it an interesting blog on its own. Broker Price Opinons, or BPOs. What a SCAM!!
How many people are harmed by inaccurate BPOs? Why is this system flawed and in some cases should be outlawed?
Folks, I developed a way to break minto the BPO market for one reason. It was very misguided! I thought it would enable me to get REO listings. I went to a training school based in Arizona but after a short time got my money back. They preached half truths and outdated practices.
Truth is you only get REO from a FEW BPO sources and you usually have to pay for membership and be a very well heeled individual who can pay OUT OF POCKET to have the properties cleaned up, keep the electricity on, etc until you are paid back. So, after discovering all that I decided to do BPOS in a major way.
Wow what a mixed blessing. Im buried in work but its not like hitting the lottery. Ive completed over 1,700 BPOs and can now be a blind taxi driver in my county. Ive logged thousands of miles and spent a few thousand in gas. These things were paying very well a few years ago but as more and more agents beg for the business, the BPO portals smell blood and lower the pay because some agent, somewhere will always take a dollar.Â Drive by BPOs now pay from about $30 to $55 if you are lucky. Corelogic just started a new bid system that causes the agents to drive down their own pay and Corelogic makes the extra profit! Interior BPOs will pay from approx $50 to as much as $85 with a few portals.
Now then---why do I call this a SCAM?Â I have to butt heads all the time with various quality control people within the portals. Many of them are staffed by service people with a minimal understanding of the appraisal process. They have a 'fill in the blanks' form. If one wanders outside guidelines, it constipates the staff! I had a mortgage company for years and have been trained in underwriting school with an emphasis on appraisals. Here are a few of the innacuracies that cause problems for the poor selers and even buyers:
Split level, or daylight ranch styles: Many portals only want you to count ABOVE GRADE GLA, or Gross Living Area. So you have a 2400 sq ft 2 level home that shws one level from the street but the land sloes to the rear and a complete lower level is there. Not a basement, mind you! The portal will make me comp it as a 1200 sq ft house when no other dwellings in the area exist at only 1200 feet. How about driveby BPOs? You have zero idead whats inside. In parts of my county certain subdivisions were almost totally remodeled from about 1995 through 2006 or so. If I p-ull comps based on GLA. AGE. number of BRs, etc, I could be off by tens of thousands if the subject is a remodel and the comps are not or the other way around.Â
Ive been asked to justify my findings many times, causing extra work for my measily $45.
I come in at $150,000 but the BPO agent befor me (they will sometimes pull up to 6 or so BPS throughout the proicess) came in at $110,000 or $200,000. I will be asked why I think Im accurate and the others are not.Â I swear to you that after a time, I started emailing back 'Because the last BPO agent is an imbecile and shouldnt be licensed'. No one ver asked me to take that statement out of the finaol form before it was sent to the lender.
We are not supposed to talk to people at all. Same with regular appraisers but you will see seminars in the web that tell you to meet with the BPO agent and 'guide' them toward your perception of value.
I was speaking to a friend in foreclosure. As we stood in the front yard, a BPO agent came up to take pictures. My friend told him that the house is zoned commercial and financing isnt available. Also told him about the structural problems. The home had been worth $450,000 at one time but was at the time worth about $135,000.Â He owed $190,000. As the BPO guy was leaving, he said "I'll bring it in as high as I can stretch it" then drove off. He was thinking that it was a goodthing to do for the owner but it wasnt. The BPO came in at $250,000 and the lender wouldnt modify, starting the process for judiciao foreclosure. The lender thought they had a lot of equity to gain at sale.
I BPO'd it for my friend just for info and it came in at a solid $119,000 for me with good comps. He tried to give that to the lender but they wouldnt budge and now he is facing the court date and will probably lose the house.Â
Drive by BPOs should not be allowed. The home can be be beautiful and remodeled or it can be stripped out to nothing.
Some of the portals really do a great job and make you treat the BPO as almost a full appraisal. Other require so little info that its a joke.Â BPO agents can trick their way through the process. Many have the attitude that its only $45 so why should they do much work?
Along with this is the sadness of walking through hundreds of homes that have kids coloring pictures on the walls, growth charts in the doorways, etc.