Do Your Homework....

INFLUENCING THE BPO

The broker's price opinion (BPO) is the value the lender believes a property is worth based upon an appraisal done when a short sale is initiated. The good news is that with some know-how and a little bit of people skills you are able to help determine that the BPO amount is returned as low as possible. As the real estate market gets softer and softer, influencing the BPO has quickly gone from a little known short sale strategy to an absolutely necessary step in successfully completing a short sale.

1) Do your Homework

Comps – You will want to pull 3 – 5 comparables from a reliable source. If you do not have comp software than use your county auditor's website. It is important to use houses in the area that went through foreclosures because the homes were sold in similar situations and because they are generally nice and low.

Inspection – The drama is in the details. You need to hire a top notch inspector who takes the time to look in every nook and cranny to find as many problems with the home as possible. They need to provide a detailed professional report that ideally includes pictures. Certified inspectors are generally more thorough than non-certified.

Estimates – After the inspector gives you the detailed report you need to get a contractor to put together a list of how much it would cost for each of the needed repairs and improvements. While you want to make sure these figures are realistic, obviously the itemized list should not be created with the intent of the contractor coming in with a low bid.

2) Make Arrangements

No Driveby – The truth is that many BPO's are done without the appraiser even stepping foot into the home. To ensure that this is not the case you should speak with the lender to ensure that they do a full appraisal.

Meeting the Appraiser – While they are more reliable than the cable guy, realize that BPO agents do not always keep to a solid schedule. Make sure you get there early and schedule to stay there late if need be (take work with you). Be sitting in your ear or standing in the driveway as they show up.

Help from the Homeowner – You will need to make sure that you and the appraiser have access to the home. Also, it is a good idea to ask the homeowner if there is anything they can think of that you could share with the appraiser to further devalue the home, from high crime to bad neighbors.

3) Make Some Magic

Explain the Situation – Focus first on just meeting the appraiser and set the tone as a casual conversation where you are just sharing a story. "I am working with the lender to help the homeowner stay out of foreclosure". Help the appraiser realize that a real person is in a bad situation and that they are in a position where they can do something about it.

Point out the Problems – Tour the house with them subtly showing some of the biggest problems with the property. Focus on the things that could turn into huge potential expenses such as cracks in walls, problems with the roof and mold in the basement. Remember that you are not a used car salesperson and try to be receptive of how much of the house the appraiser wants to see.

Give the Evidence – Do not shove all of your documents on to the appraiser right away. Make sure that you are first acquainted and just casually hand the packet to them when it feels right during the process. When you give it to them mention that it was intended to help make their job a little easier and then briefly go over the contents of the packet.

Wrap Up – Ask the BPO agent for their contact information as you walk out. While you will likely never see them again it is a good idea to give the impression that you will follow up. Added to the heartfelt description you already gave about the homeowner this will hopefully weight on the appraiser enough to get the desired result.

While the short sale negotiation with the bank affects the percentage of discount that is received on the debt, it is a process that takes months to complete and a lot of experience and specialized knowledge to perfect. Influencing the BPO is on the other hand takes only a few hours of your time and serves as the starting point in the bank negotiation.

Every hour of your time needs to be used on high value activity. While meeting the BPO agent is a good use of your time, there are many things that are best outsourced. Specifically, negotiating with the bank is the largest time drainer as much of the work is spent with endless follow-up, waiting on hold, fighting fax machines and sending emails. You may wish to consider partnering with a full time negotiator who formally worked as a loss mitigator.

Daniel Postemock

Article reprinted and slightly modified from inmanwiki; contributed by Matthew Leitz Co-Founder of RealEstatelnvestor.com