Thread: Broker Price Opinions

A new income opportunity has appeared on the horizon recently for down-and-out real estate agents who are in desperate need of income and this has led to one of the biggest scams in the real estate industry today. A broker price opinion (BPO) is ordered by the bank or mortgage lender who is looking at doing a short sale on a property where the borrower is upside-down on their mortgage and they cannot qualify for (or the bank is not prepared to do) a loan modification. The BPO is done by the Realtor for $40 - $60 (almost doesn

A BPO is not an appraisal. A BPO is almost always done exactly as a CMA that agents use to help a seller determine a price to market the home at. BPOs are nothing new, if you knew about BPOs, I think you would realize they are not new.

You have identified yourself as a Global Internet Entrepreneur and not a real estate professional. So have you ever actually done BPOs? A CMA? Listed REO property? Sold REO property? Been licensed in some type of capacity as a real estate professional?

What are you basing your opinion on? What actual, real world experience do you have regarding BPOs?

You accuse the Realtors of inflating values to please the bank. What, if any proof do you have of your accusation?

You say the offers are based on real market price. The BPO is for the benefit of the requesting party for the purpose of assisting the requesting party in deciding the listing, offering, sale, exchange, option, lease, or acquisition price of the real property and not for any other purpose, including, but not limited to, obtaining financing. If an appraisal is desired, the services of a licensed or certified appraiser must be obtained. A BPO, if you knew about BPOs, by their very design cannot inflate values. Why would a bank want inflated values, that would cause a delay on selling the property? It costs them money to let it sit on the market.


I understand you are unhappy about the financial mess that the world is in. But understand that BPOs are not the cause of the problem, especially when you do not understand the process of BPOs. BPOs are not causing property value to decline, they are reflections of current market conditions.

I am very much aware of what a BPO is but I thank you for the explanation for the benefit of the other readers reading his post. Concerning my qualifications, I have been a mortgage professional for 10 years and have most recently been doing a lot of loan modifications and helping Realtors negotiate short sales. My wife is a very experienced Realtor and has been a top producer or 20 years in Arizona so I would say that I am more than qualified to give an opinion on this subject. The real estate industry has been the number one daily topic of conversation in my life for more than 10 years.

The whole point of my article is that the BPO is not an appraisal and that it should be replaced by a real appraisal. It is like a CMA which is never a precise valuation of the property. The problem is the bank is taking the BPO to be the true market value and using it to base their decisions about accepting real offers or not. I have dozens of examples where the bank has even turned down cash offers on properties because they believe (based on a less than precise BPO) that it is worth more. The homeowners are then forced into foreclosure with all of the negative financial consequences. The bank takes property back and then sells it at a much lower price as an REO than the original cash offers, dragging down the prices of the neighborhood even further. All because their decisions were based on an inaccurate BPO.

I have investigated several instances where the BPO came out considerably higher than either a qualified appraisal or a real professional CMA and my personal conclusions have been only one of two things:

1. The BPO took about 15 minutes or was even just a drive-by

2. The Realtor doing the BPO had an alternative motive to keep the bank happy. There have been instances where the BPO agent was later the REO agent which in my books is a complete conflict of interest.

The whole matter is made even more absurd when you see the banks finally selling off properties at a huge discount compared to the offers it turned down as a short sale. We are talking about some huge discrepancies here - tens of thousands of dollars - which looking back was caused by a BPO which even by your definition is not an accurate gauge of the real value of a property. To solve this problem and to get deals done, we have sometimes ordered a real appraisal and confronted the bank supervisors of the problem. This is not something we should have to do.

Solution: Banks should order a true, professional appraisal instead of a BPO and pay for it. They could save themselves thousands of dollars per transaction and eliminate their costs of foreclosure. It would also eliminate the foreclosure for the homeowner (so they will be able to buy a home in the future) and it would remove the destruction of home prices that the REO's are currently inflicting (and it is going to get worse!)

Colin Buckingham

I think there is one thing missing in this conversation. Mortgage insurance plays a big factor into what the bank will take. If they have MI on the property, especially 90% MI, they will just let the thing go. If they have no MI, then the chance of a successful short sale is much higher.

I've had the exact situation that freepoint brought up a couple of times already, and usually MI was the cause. Silly BPOs are also a major contribution to the problem. It's why I've tried to do BPOs on the low end of the price range. Maybe that's why I don't get listings?

There is no doubt that the decisions of banks sometimes do not appear to make sense. But neither does you calling your clients savvy yet they are facing foreclosure or a short sale which means a bank has to use it's MO which includes a BPO. If the bank was not forced to need a BPO or appraisal or whatever other valuation method they decided to use, this problem would not exist. Even if it is an appraisal that the bank uses, it is because someone is not paying their mortgage. That is the problem.

The same types of problems that you are speaking of regarding BPOs are some of the same problems regarding appraisals according to some when speaking of the current housing mess, especially where there are accusations of fraud.

The real problem is not BPOs versus appraisals, it is the banks hesitation to modify mortgages, the predatory loan modification companies, the rapidly declining property values in areas that had the bubble of skyrocketing prices, the loosening of lending standards by the government to allow anyone that could fog a mirror to get a loan, the crappy economy, the unemployment rate, the outsourcing of jobs, etc etc.

But the real solution in my opinion is the mortgage being paid. If that means the bank must modify the loan, then that should be done. Check out this article about possible steps to reform problems in the mortgage mess. Now that sounds like steps in the right direction. Saying that agents are doing something unethical when doing a BPO sounds like something the media would do to sensationalize a story.

I appreciate your concerns about the much needed changes in the industry. Changes are needed, but before you climb on your soapbox consider your audience.

All of the comments have their merit and, of course, there are always different sides to a story. But most of us are shaking our heads at why the banks are not getting either loan mods or short sales done in lieu of foreclosures. I am addressing the moment in time when we are past the loan mod, the client has no way to pay the mortgage so we are in the "short sale segment" of this disaster. The bank now knows it is definitely either a short sale or a foreclosure...these are the last two options. The fact is the number of foreclosures is still rising at an alarming rate and yet the bank more often than not is basing its decisions on the BPO which they ordered.

If the BPO is not accurate (which is the case almost by definition) then it should not be part of this process. I agree that other factors like MI are also reasons for the short sale not being completed but I am not talking about those cases. I have a list of 13 properties right now where the banks are basing their decisions on the BPO which in every case is way too high. They could all go into foreclosure even though we have offers that all the (non-BPO) experts say match the true current market value.

I talk to lots of top negotiators every day that are trying to close these deals and they are all saying the same thing - BPO's are a problem. I honestly believe that the real savvy homeowners might not take this lying down and will seek recourse if the lender finally sells their property as an REO 30-40% below the offers they had on the table. These are not isolated cases. And to make it worse the taxpayers (you and I) are going to have to pony up the capital the banks will need to cover these unnecessary losses. There are a lot more shoes that have to drop with many of the banks.

Since you are looking at the time period that is after the bank has ruled out loan modification, it must be said that multiple BPOs will be done in most cases. The odds are they will not come back at the same amount. But they will be close or the bank will order another.

It seems that in any real estate transaction, if things do not go someone's way, then the agent is to blame. But in the case of a foreclosure or short sale, the original problem is someone is not living up to the obligation they agreed to pay. It is a sad and disturbing situation when a family is losing their home. But before signing the paperwork, the home buyer had better understand what they are agreeing to.

Failure to pay and the subsequent short sale or foreclosure is the result of the person not making the payments they agreed to. Blaming someone else and not accepting responsibility for your obligations is becoming a trend.

Some banks made some risky loans. When you gamble and lose, you have no one to blame but yourself. If the home is foreclosed because the person took on more than it turns out they could handle, anything after the point where they stop living up to the obligations they agreed to is a moot point.

Whether or not the mulitple BPOs comes back with results you like does not change the fact that if the person lived up to their obligations, there would never be a need for a BPO or appraisal or any other method for the bank to determine how to handle a property with a mortgage that is not being paid.

Foreclosures and short sales are sad. But to blame an agent that is doing a BPO after the fact is not the cure for someone not paying their mortgage. Mortgages not being paid is the problem, not the method the bank uses to resolve a mortgage not being paid.

You can blame anyone you want. The problem is the mortgage is not being paid.

its a real help thanks for the info

Can you blame the homeowner? i think we shouldn\t.