Agent favors appraisals over BPOs
Letter to the Editor
By Inman News, Thursday, March 11, 2010.Re: 'Short-sale risk: "property flopping" ' (March 9)
Dear Editor:
As an extremely active agent, I strongly support the effort to have actual appraisers doing the evaluations versus agents doing broker price opinions (BPOs).
Most of the agents I have encountered, who have the time to just sit in front of their computer and continually hit the refresh button to be ready to leap on any BPO that comes their way, are usually the least qualified to evaluate the property anyway.
They are attempting to survive in the business at $50 to $100 increments.
Among the challenges I see with appraisers today is that many of them are coming from far afield to do appraisals in areas that they, too, are unfamiliar with, and (their appraisals) are also often inaccurate.
The appraisal prices will have to be reduced, because many lenders will be unwilling to pay $500 to $750 for an appraisal vs. $50 to $100 for the BPO. I think that having someone who is a neutral third party will indeed help obtain more accurate evaluations.
Also, if most real estate agents are completely honest, the biggest issue they are having with appraisals presently is that they are coming in too low.
Lastly, the banks need to have a system whereby they can utilize competent appraisers and not be subject to the whims of the appraisal pool.
Gregg Neuman
Neuman & Neuman Real Estate
San Diego, Calif.
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Submitted by Jill James on March 11, 2010 - 10:57am.
Pretty disappointing to hear your shallow view of your fellow agents who do BPOs!
Possibly if you were more tech savvy, you would know that many agents who work with the BPO servicers actual have the BPO opportunities sent to their cell phone, so they are not just sitting around at their computer waiting for a BPO offering. Or, possibly if you understood how many other BPOs are assigned, you would know that many agents, like me, have a relationship with a lender and have BPO assignments sent directly and without the scramble to pick it up before another agent does so. Additionally, possibly if you understood that many appraisers that work in an appraisal company make little more than the agent that does BPOs, maybe you wouldn't be so impressed with appraisers -- I've seen some absolutely ridiculous appraisals of late.
In short, I do BPOs for a major lender and I do them well. On average, my BPOs come in within 95% of the actual sale price. I also list and sell many properties -- as an individual agent I was in the top 3% in transactions of my primary MLS in 2009. I think that you really don't understand the BPO process that well, which can a great disservice to your clients. SO, seems like a good time to spend some of your time catching up on the business, because BPOs, short sales, loan mods, & foreclosures will be here for a while!
Jill
Submitted by Jerzy (George) Szkup on March 11, 2010 - 3:13pm.
George Szkup
www.DestinationTucson.biz
My 3 cent worth opinion.
...sitting at the computer and clicking to get a BPO describes me. Being a former owner of a 70 agent company “says” that I know something about real estate. I do this, in part, because my age and some health limitations prevent me from running around town and shaking hands.
Of course, pay for BPO is very low and if one was busy with other work one would not be doing BPOs.
In Tucson MLS - around 1 million population, with around 100 listings coming up per day and 4,500 residential agents available, and assuming that (as always) 20% of agents will get 80% of listings - this leaves approximately 2 to 3 listings per year, per agent for approximately 3,500 agents - BPO here we come (or a soup kitchen line).
As far quality of a BPO - we have good agents and bad agents - we always had! BPO offers a lender some advantages over appraisal (it cost nothing in comparison) and gives recommendation for pricing and potential DOM. Some BPOs probably are bad (are all appraisals good?).
George in Tucson
Trulia - http://bit.ly/4tgwkU Q&A, Blog/posts, Resume)
Destination Tucson – http://bit.ly/2Bnb3f (Monthly Blog)
Twitter - http://bit.ly/e3mCI (Georges’ Tweets)
Submitted by Bruno Skopinich on March 11, 2010 - 5:50pm.
There is much truth to what Gregg Neuman says.
Jill and George may be the exception ... not the rule.
Submitted by Chris Manning on March 13, 2010 - 4:57am.
My small REO brokerage does roughly 1,000 fee-BPOs per year. At a measly $50-$100/ BPO that translates into between $56K and $60K a year, call it $4,700 ish a month. Admittedly this is chump change in the greater of scheme of things, no question' but it still 'ain't shabby'.We rarely chase BPO blasts; 95% of the fee BPOs we do are assigned to us (this is definitely a good thing).
As a light-middle-weight in the REO world we closed 160 sides in 2008 and just over 100 in 2009; like the rest of the world REO brokers went though (and continue to go through) some real changes in the market. Admittedly not a scientific rule but our experience says that 'the more BPOs we do, the more REO's we get.' There is clearly not a one to one relationship between a BPO coming out of a BPO mill and that asset management company looking to place a new asset but it sure seems to work out that way. For us its the rule and we are sticking to it.
Past the remote marketing opportunity BPOs provide they do two other things that, in my view as the Broker are just good business. (1) Doing BPOs keeps us close to the market everyday, analyzing property, looking at property, looking at trends, in a word keeping our ears on the tracks and we do it everyday. We are in the real estate business: doing BPOs helps us become better real estate agents and, I hope a better brokerage. (2) The chump change we bring in for that BPO helps me reduce my overhead and helps my agents pay their monthly bills. Its not the fat-cat-swash-buckling-Lexus-driving big deal 'get rich in real estate' bucks we signed up for when we got our license but its real money and we can make it everyday. You bet there are times when we are confronted with the old rule of bending over dollars to pick up dimes but in time we have learned to prioritize and, frankly, we have just flat gotten better and faster at getting them out quickly and right. As a small business doing BPOs is a revenue stream that keeps us in the knitting, contributes to our overhead and helps my agents stay afloat.
One comment about the quality of the results of BPOs versus appraisals: neither are science, both are estimates of values based on certain parameters. They look alike, smell alike and attempt to achieve the same end but, in reality, they have very different rules of order. The rules for BPOs are client specific. The letter of engagement (that defines the parameters) are very specific: things like use only comps within a one mile radius of the subject within 15% GLA and closed in the last 90 days and if can't find them explain your methods and why. Appraisers have a broader brush with which they paint the picture - they reach out, reach back, find alignments that are within keeping of accepted appraisal methodology but unhampered by some seemingly arbitrary dictate from the client. Appraisers are starting to get the same kind of parameters agents do but they still hold out that they methods supersede these attempts by the client to dictate the outcome. The client - the lender in most cases - needs that slice of the market in what he views as real world terms and he gets that with agents without a lot of baggage. Sure it is cheaper for them - they like that too - but, in my experience, they like the ability to control the parameters more. It is debatable whether the client driven parameters yield a better outcome for the client but that is for folks up the food chain from my perch in the trenches. I can promise one thing: if these lenders were getting lousy results from BPO's then it doesn't matter how much money they are saving by not ordering appraisals instead they would stop buying them.
(For the swash-buckling types turns out there is real money in the BPO business: before Country Wide merged with BoA (or whatever that was) their monthly BPO budget was $400K; when MI sold to Fidelity (circa 2001) they were doing $100M in BPO business a year. It may be chump change in the trenches but there is 'real gold in them thar hills.')