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  • What to trust?

    There has been a considerable amount of press in the REIA and REO journals about BPO's not exactly being on the up and up when they form thier opinion. Depending on which side of the fence, and what your options are, it can be a little confusing.

    And frustrating. Granted, inventory prices must rise if we are going to survive the bubble debacle, and in many cases that is true. In fact BPO's are under the gun for Over-Inflating the value of properties in many areas, while on the other hand I've read stories of individuals raiding the equity of properties for pennies on the dollar. Stealing 200K houses for 5K.

    Where am I going with this? I buy REO for possible ReHab and Flip. When the numbers are all over the board I frequenty find myself wasting my time. what looks like an excellent prospect, one that I take all the pictures of, inspect the property, and run the comps, run the ARV and repair costs, I suddenly find myself facing RETAIL prices on Distressed property.

    There are thousands of foreclosed properties here in South Florida that could easily be turned into homes again, if only there were some standard of value in the BPO field. It's not my intent to ruffle any feathers, I know everyone has thier reasons, but a common ground of reason in the BPO market would definitely benefit the people and economy of SWFL.

    To your success, I love you,

    Dan Todd

  • #2
    Dan, some agents are good at producing accurate BPO's, others not. Some banks ask for a 30 day value (how much do I have to list it for to have it sold within 30 days), others ask for a 90 day sales value. That can be a determining factor in price as well, what the banks requirements for the BPO agent are. Some banks do not follow the recommended BPO value from the agent. Some banks require "as is", some banks will afford the cost of repairs to increase the total net.

    On our REO owned foreclosure, we produce a BPO, but many banks also order a full blown appraisal. They rely more heavily on the appraisal value, even if our BPO vs Sales price is over 99%. For example, we just had a listing that our valuation was at $130K 90 day sales price. Our listed estimated repair cost was $65K. The appraisal came in $135K needing $15K of work. Our overall values were roughly the same, but the appraisers estimated repairs were $50K less than ours. His estimation for repairs was UNBELIEVABLE, completely ridiculous. Our Asset Manager called us to warn us that the investor requires them to favor the appraisal value. She said they had send an estimator our for the values, and it came in at $62K. Even with this info, the bank priced at $130K as is, no repairs completed because the appraiser lost his sense of balance on this tricky property. It had to get reduced to below $65K to sell.

    Neither you, nor the bank paying for the BPO(s), has any way to determine the accuracy of the party producing the value.

    The benefit of BPO's, is that a bank will often have a few, to help battle inconsistencies.

    The bank could might want to hold the property for 6 months, so they price high.

    In my opinion, REO is still a retail purchase. I work mostly for banks, and they sell for market value. Maybe you are buying in bulk, I am not sure.

    Who to trust, trust yourself.
    Kim Knox
    Principal Broker, Owner, ABR, GRI, PME, A-REO, REDCpro,
    541-899-7222
    Licensed to conduct Real Estate in the State of Oregon

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    • #3
      Re: What to trust?

      I'm a licensed appraiser as well as a managing broker, which puts me at both an advantage and disadvantage when I perform BPOs (about 500 a year).
      My BPOs aren't glorified CMAs. I use appraisal software, make adjustments whether the company and its form requires it or not, and am willing to put my work up against an appraisal of the same property. I follow USPAP whether it's a BPO or appraisal assignment.
      Based on some QC inquiries, some of my peers aren't slowed down by the rules of the road I follow. GLAs are guesstimates even when assessor info is readily available. Although a little effort would discover it, a second side lot isn't taken into account in their report. Below-grade square footage is included in GLA. Comparables are fabricated out of whole cloth to "support value." I could go on.
      Fact is, banks don't want to pay $300 or so for an appraisal. It's more cost efficient to pay for three BPOs, compare them, and in some cases, attempt to pressure one or more BPO producer to "revisit" their value to all three numbers line up nicely in a row.
      Lately, I've been getting assignments from one BPO mill asking for "non-distressed" values, which obviously would be inflated, if not impossible to produce where markets remain distress-driven. So far, they'll let my two or three REO and short sale comps fly once I prove the distress situation of the local market. Perhaps these are the sellers in Dan's area.
      Not to defend either the appraiser or BPO in Kim's case, but if I read it correctly, both values came in at around $130,000, whether repairs were $15,000 or $65,000, correct? In the Chicago market, it seems appraisers valuing properties for HUD seem extremely low on repair costs, even though appraisers are basing their costs on what's needed to bring the home up to "average" condition, rather than a remodel, which is often the case for flippers and investors.
      On the other hand, I've gotten grilled by QC people and other "experts" outside my market insisting my repair costs are too high, obviously trying to juke the numbers for their own purposes unrelated to the market value of the property. In one case, one asset manager "knew" he could get the subject property painted for much less than my estimate. I never got the name of the contractor(s). Too bad. If they existed, I might've kept them busy.

      Comment


      • #4
        Re: What to trust?

        Dan
        I mainly work with investors and REOS. I think you cant get frustrated. Run the numbers and trust your numbers. If the numbers work and you can make some money go with it. If they don't, then move on and let someone else deal with it. Don't get frustrated. If the number don't work then be thankful you did not invest in the transaction.
        Alan Plager
        Berkshire Hathaway HomeServices
        Top Ten for units US 2015
        Over 6,000 Units Sold
        Toll Free 1-888-722-2098
        Office 727- 451-8776
        Email Alan@LoveTampabay.com
        Web AlanPlager.com

        Comment


        • #5
          Re: What to trust?

          Select an agent with the right credentials

          Just as doctors specialize, so do real estate agents. And even generalists will get additional training in some areas. So that alphabet soup after the name can be an indication that the person has taken additional classes in a certain specialty of real estate sales. Here's what some of the designations mean:

          CRS (Certified Residential Specialist): Completed additional training in handling residential real estate.
          ABR (Accredited Buyer's Representative): Completed additional education in representing buyers in a transaction.
          SRES (Seniors Real Estate Specialist): Completed training aimed at helping buyers and sellers in the 50-plus age range.

          If the agent calls himself a Realtor with a capital "R," that means he's a member of NAR. By hiring a Realtor, "the most important thing you get is an agent who formally pledges to support the code of ethics," says Phipps.





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          Last edited by Laura Scheffner; 06-09-2015, 05:44 AM.

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          HomePro Plus 25 years of experience in repairing, building, and working on single family homes has set me up to be particularly qualified to take distressed REO properties and return them to better than original condition. Specialties REO ReHab Find out more about HomePro Plus

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