What is a BPO?
It means “Broker’s Price Opinion.” When a short sale package is submitted, the bank will send a real estate agent or broker to the property who will produce an opinion of what the property is worth. If the BPO comes back much higher than what you have let on, the lender might reject the short sale offer.
What do you do if there is a rejection?
First, try to prevent this from happening by carefully reviewing your comparable properties in the neighborhood and detailing any all damage and remedial measures that need to be taken. Then make sure you meet the broker or real estate agent at the property when he or she is preparing the BPO. Run the comps for the agent, give him or her copies of our pictures, your list of repairs, and walk the agent through the house room-by-room. Make the agent spend time in and on the property. Make the homeowner come to life by showing the agent the property, family pictures, and explain how a low BPO will insure a successful short sale, thus giving the homeowner a chance to start over. Do not, for example, be afraid to show the agent things like the medical bills of the homeowner. Pull those heartstrings.
The terrible truth of the matter is that many real estate agents are not very good at this. Do not believe this, just look at all of the overpriced properties listed in your market area. A sales agents training and mission is to inflate property values, and not to depress them. Therefore, the BPO is counterintuitive for them. Then there is the "just going through the motions problem" with which you will need to deal. Real estate agents that walk through a lot of houses are not that thorough, and they get immune to issues. They think that they can personally sell past the problem. They are not getting paid that much, and there is a tendency to just look at the comps, do a quick walk through, and push out an opinion without any great thought on the subject.
Think of this process as a mediation and the agent is the mediator. You very much need to get the mediator to see and reflect your opinion to the other side.
Second, if the BPO is hurting your position, do not be afraid to attack it (or the agent who performed it). Tell the lender that you ran comps (or that you had another real estate agent run the comps), and tell the lender that the person who did the BPO was not doing the lender any favors. The BPO is flawed and unrealistic. Tell them that the numbers are way too high. If the agent doing the BPO does not normally work this neighborhood, and therefore could not be certain about the property values, tell the lender. If the agent has had grievances or complaints filed against him or her, tell the lender. If the agent was lackadaisical or rushed at the walk through, tell the lender. Tell the lender that it will not look good for his company or the lender to take the property at the sheriff’s sale, only to lose more money. The purpose of your conversation is to make the bank question the first BPO. Lenders are not in the business of losing money. An incorrect BPO will come back later to haunt the loss mitigation rep. later. Make sure they understand that you are a "I am afraid I told you so kind of person" and you will be keeping an eye on the value received if the short sale does not go through.
Then ask the lender to do a second BPO. Use the assumptive close by saying, "Your company or investor who owns the note is not in the business of losing money, is it? I did not think so. When is the best time to schedule another BPO. How about the day after tomorrow at ... let me see ... at 5:00?”
Once the second BPO is scheduled you will need to go out and do your magic all over again. Meet the new agent and plead your client's case.
If the second BPO comes back high, and or the lender will not deal with you effective, then move on. It is a loss cause.
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