A BPO is a tool used by lenders to estimate the value of a home they are financing. BPO’s are usually requested by lenders just prior to a foreclosure. This gives the lender an idea of the value of the asset they are going to acquiring.
The BPO may be called for by an asset management company or by the lender themselves. Most often an asset management company handles the BPO. The BPO’s are actually completed by local real estate agents who are familiar with the local Real Estate Market.
Industry guidelines for BPO’s
• Photo of the front of the home
• Photo of the address
• Photo of the back of the home
• Photos of both of the street
• Photos of damage and areas needing repair
• Photos of external influences which may influence the price of the home
• 3 active listings and 3 sold listings
• Homes must be within 25% either way of the square footage of subject home address.
• The comparables should have similar property characteristics.
• Sales should be supportive of the value.
Brokers Price Opinion report
The client needs the most probable value for a 30 day sale. The important thing is not to overvalue the home. It is extremely important that the home be accurately priced to compete in the market place. If the market is dominated by REO’s then the homes used for comparable should be REO’s also. The lender may ask if repairs are needed in order to sell the home. If repairs are deemed necessary then the report should have an estimate of the repairs.
The report will include a neighborhood summary. The lender wants to know if the neighborhood is declining in value. Are homes being kept up or they becoming boarded up? What is the percentage of rental property versus owner occupied property? All of these factors should be used in pricing the home to sell in 30 days.
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