The great thing about free market, if they will not sell at price your are willing to pay, you have the right to move on!
Who did the BPO? Was this done for the bank, for you? By your agent? or another? Broker Price Opinion is simply that...an opinion. You don't mention if you are using an agent, you mention that you "were advised". If that advice is not coming from an agent, perhaps you could request a Broker Price Opinion from a Realtor and see if they find anything different.
It may simply pertain to the first part of my answer, that the bank would prefer to receive a higher amount to cover more of the existing loan and closing costs.
I hope it all works for you!
Writing an offer on a foreclosure is working with a banker.
Writing an offer on a short sale is working with an owner, who must then work with a banker. It's a double whammy and that's why, in Virginia, we see 4% of the short sales listed actually make it to the closing table.
I agree with the other posters who suggest you rely on an experienced agent who is working for you to give you your "advice". A short sale may be a great opportunity for someone who has the time to wait (second home, investment property, etc.) but if you need to move or have a deadline, it can be dreadfully frustrating.
On how much to pay for any house, consider this. You know what's on the market in your price range. If this isn't the one, what's your plan B? (If plan B isn't all that great, maybe it's better to bite the bullet and pay what you need to ENSURE you get this one.)
Look at the bigger picture. If you'll live in a house for 5 years or more, you'll likely do well with appreciation over the entire time you own the property (not to mention the tax savings you'll enjoy and the better standard of living that pride in ownership brings--it also instills a good "norm" in the minds of your children). If it's the right house for you, you can pay $5,000 MORE than it's worth and still be happier in the end.
Sometimes trying to save a few thousand bucks on the purchase price can cost you dearly in interest rate changes or having to settle for second best because you let the really great one slip away. It's like tripping over silver dollars to pick up a few pennies.
All the foreclosures and short sales have created a market for first time investors hoping to get in on a good deal!! This past year I have worked with many buyers that thought they wanted a foreclosure only to be disappointed and end up buying a great house that was not a foreclosure and got a good deal anyway. Please keep the other houses on the market in mind when choosing, working with an owner is much easier than with a banker....