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The evolution of the Broker Price Opinion – harsh words on industry changes

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The evolution of broker price opinions

Broker Price Opinions- I spend a good portion of the working week completing quite a few of them, just as many other Realtors do. Even before the passage of the Dodd-Frank Act, BPOs could not be used for new, purchase, government backed loans. What they were used for (and are still used for) is dropping PMI, determining price (please note: price opinion – hence the name BPO, not value, appraisers determine value, as real estate agents determine price) for REO listings, short sales, refinance mortgages, bankruptcy, note sales, divorces, relos, sheriff or auction sales, for insurance companies, loan modifications, and even for estates.

While the forms will vary based on the company, a BPO usually contains information on a subject, the very local sub-market, as well as listing and sales comparables. Whether due to pressure from those in government or throughout different aspects of the real estate and banking industry, BPOs are becoming less than a highly detailed CMA and more an appraisal-esque report. Companies are also requiring more education, higher E&O insurance, if not outright asking to be added onto the policy itself, and lowering contracted fees as well.

Certification alphabet soup

Whacked out changes have occurred across the board from a number of different banks, and outsourcing companies in the last few years, none of them really seem to mesh with one another, or make a ton of sense other than maybe the education thing. Preferential assignment of BPOs may not be the preferred terminology to use, however there has been a push to attain additional education, actually, certification from any number of groups, be it NAR’s newly introduced BPO Certification, the certification offered by The National Association of Broker Price Opinion Professionals, online courses offered by other loss mitigation companies, or continuing ed classes from anyone else out there.   

On at least a few instances, there have been requests to up E&O policies from a million bucks (probably the industry norm) to three million. For BPOs, and even tossing in REOs into the mix, it just isn’t cost effective to raise the limit for some real estate companies; including the fact that more than one agent is working this niche. The expense doesn’t justify the payout

The new industry bidding war

One notable company implemented the requirement of actually being added onto E&O policies a couple of years ago. This same company has recently started a bidding war between Realtors in regards to fees. Instead of an order being broadcast out to Realtors in a given area at say, $50, and the first one to accept, gets it. Now, Realtors can bid down or up in $0.50 increments, lowering their fee by $7.00, or raising it by a whopping $2.00 from the base price. There’s nothing like whoring oneself out in the name of getting business, right? Not when many of these companies are tightening their search parameters – try finding comps for a somewhat normal house, let alone an obscure one, within a third of a mile when it’s an urban area, on mile when suburban, or three miles in a rural area… seriously. 

Additionally, some companies now require driving by all comps and original comp photos to boot. Another company wants Realtors to upload a copy of tax records as part of the order. Let’s not forget my favorite new requirement of all- a complete sales history not only of the subject, but of all the comparables to boot. We also enjoy the companies who charge us for using whatever jacked up flavor of the month online platform they are so inclined to use, none of which are exactly user friendly. The fees go from one to two percent to a flat fee of $5 or $10… per ORDER.

BPOs & appraisals- speaking up for the industry

Allow me one brief second to speak both for the masses, and to quote myself, dude, if I wanted to do appraisals, I would have gotten a freaking appraisal license.  In some messed up way, many of these things are knee-jerk reactions to an equally messed up housing industry, and yeah probably some (albeit relatively few) scheming, shmuck, agent-types were out there falsifying or influencing BPOs. Newsflash- this is why we have real estate licensing laws and means of punishment for not following them. The sins of the father should not be revisited upon the son.

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

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3 Comments

3 Comments

  1. CJ

    September 26, 2011 at 8:46 am

    Could not agree with you more. One thing you did not mention is the manipulation of the BPO's by some vendors. They will tell you which comps you can use and which comps you can not use, make you adjust brackets and final evaluations, and even reject a comp that is right next door for another in a completely different neighborhood. What ever happened to location, location, location? What I have also found in doing over 100 BPO's a month is that some pay in a timely fashion but others take upwards of 60 days and are living on Broker/Agent floats. They get paid in 2 weeks and get $150 for the BPO you are providing for $35. One company recently went out of business owing BPO providers hundreds of thousands of dollars. I have been doing BPO's for over 20 years and with all these recent new developments I will probably fall by the wayside and let the hungry newbies who are desperate to work for $5 an hour take my place. Even Mickey D's and Wally World pay benefits for minimum wage. Guess what the quality of this new BPO product will be worth? That's right you ALWAYS get what you pay for and a BPO will be worthless at the rate this is going.

    • Jonathan Benya

      September 27, 2011 at 5:03 pm

      I think BPO's are already pretty worthless. I hate having to fight valuations on short sales because a BPO agent did a shoddy job, but it seems to happen all the time. You're right about the payment problems, too. I don't even know how much I have outstanding on BPO's owed to me right now, I just gave up on doing them completely.

  2. Kathleen Cosner

    September 27, 2011 at 5:08 am

    Hey CJ-
    I have had a company suggest what they thought was a more appropriate comp that they found on Zillow or someplace, if I had to go out of normal search parameters. Once it was explained why their comp was not good, they backed down, but have not seen this lately at all.

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Opinion Editorials

The secret to self improvement isn’t always about improvements

(EDITORIAL) Self improvement and happiness go hand in hand, but are you getting lost in the mechanics of self improvement?

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fitness happiness

Think back to your New Year’s resolutions. Now that it’s summer, how many of them are you still keeping? Think about which ones stuck and what went by the wayside.

If you’re like most of us, you had big plans to make yourself better but didn’t stay the course. I’ve only managed to keep one of my resolutions, but it isn’t always easy.

I want to take a look at why we can’t keep our goals. I think we’re always on a journey of self-improvement. It’s easy to get obsessed with reading self-help books or trying to learn new things. We want to be better. This spring, I went through a Lent study with a group of people. Lent is a time of growth and self-reflection, just six weeks. And yet many of us are struggling to keep up with the daily reading or maintaining a fast of something we willingly chose to give up.

Why do we fail?

I think we fail because of three things.

You might think I’m going to say something like we fail because we don’t have willpower, but I think that is the farthest thing from the truth. I’m no therapist, but I’ve read the literature on alcohol and drug rehab. It’s not willpower that keeps a person sober. It’s community. One reason I think we fail at our goals is that we don’t have a cheerleading team. I believe that we need people on our side when we’re trying to improve.

Secondly, I think we fail because we want immediate results. We have this mentality that things should happen quickly. I’ve written about this before. It’s like you workout once and want that swimsuit body. We get frustrated when we don’t see results right away. So, we move on to the next pursuit.

Do your goals lead to happiness?

Failure can also be because self-improvement goals don’t always lead to being better person. We do a lot of things because “we should.” Your doctor might think you need to lose weight. Maybe your boss wants you to be a better speaker. Meditation should make you a better person. Maybe you ran a marathon, and now you think you need to run an ultramarathon because that’s what your best friend did.

What makes you happy isn’t always what you should be doing.

Your doctor might be right, but if you’re choosing to lose weight because you want to make your doctor happy, you’re probably not going to stick with a program. If you’re trying to learn Spanish to make your boss happy, again, you’re probably not going to enjoy it enough to really learn. If you’re chasing after goals just to say you’ve done it, what value do your achievements bring to your life?

If you’re obsessed because you “should” do something, you’re going to get burned out and fail. Whether it’s New Year’s resolutions, a self-improvement project or giving up meat for Lent, you need solid reasons for change. And if you give something a try that isn’t for you, don’t soldier on. You don’t need to spend years taking yoga classes if you don’t enjoy it.

When something becomes a burden rather than bringing benefits, maybe it’s time to take a look at why you’re doing it.

When you don’t know why you’re knocking yourself out to be better, maybe you need to figure out a reason. And if you feel as if what you’re doing isn’t enough, stop and figure out what will satisfy you.

I’ve been doing a lot of meal prepping on the weekends. Sometimes, I want to quit. But it pays off because I have less to do throughout the week. It might seem like a burden, but the benefits outweigh the burdens. I’ve been able to eat much healthier and use more vegetables in my meals, which is the one goal I’ve been able to keep. I have some good friends that help me stay on track, too. I choose to eat more vegetables for my health. I think it’s a combination of all these things that is helping me meet my goal this year.

Don’t give up on making yourself a better person. Just don’t become obsessed over the program. Look at the outcome. Are you pursing happiness on a treadmill or are you really working to find happiness?

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Opinion Editorials

What I wish I knew about finances in my 20s

(EDITORIAL) They say money makes the world go round. So, let’s discuss how to be smart with finances before it’s too late.

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finances

Being in my early twenties, something I’m still getting used to is the fact that I’m making my own money. This is not to be confused with the babysitting money I was making 10 years ago.

Twice a month is the same routine: I get my paycheck and think, “Wooo! We goin’ out tonight!” but then I snap back to reality and think about what that money needs to be put towards. The smallest part of it going towards fun.

It’s been tricky to really start learning the ins and outs of finances. So, I do what I usually do in any type of learning process? I ask for advice.

I used to be fixated on asking those more advanced in age than I what they wish they knew when they were my age. Now that I’m determined to learn about finances, that question has been altered.

I reached out to a few professionals I know and trust and they gave me solid feedback to keep in mind about building my finances, about what they wish they had known in their 20s. However, I don’t think this only applies to those just starting out, and may be helpful for all of us.

“It’s important to simply know the value of money,” says human resource expert, Nicole Clark. “I think once you start earning your own money and are responsible for your housing, food, etc. you realize how valuable money is and how important it is to budget appropriately and make sure you’re watching your spending.”

Law firm executive director, Michael John, agrees with Clark’s sentiments. “I wish I had kept the value of saving in mind when I was younger,” explains John. “But, still remembering to balance savings while rewarding yourself and enjoying what your efforts produce.”

There are so many aspects of finance to keep in mind – saving, investing, budgeting, retirement plans, and so on and so forth.

In addition to suggesting to spend less than you make and to pay off your credit card in full each month, Kentucky-based attorney, Christopher Groeschen, explained the importance of a 401k.

“Every employee in America should be contributing everything they can into a 401k every year, up to the current $18,000 maximum per person,” suggests Groeschen.

“401ks present an opportunity for young investors to 1) learn about investing and 2) enter the market through a relatively low-risk vehicle (depending on your allocations),” he observes.

“An additional benefit is that 401ks also allow employees to earn FREE MONEY through employer matches,” he continues. “At the very least, every employee should contribute the amount necessary to earn the employer match (usually up to 4%) otherwise, you are giving up the opportunity to earn FREE MONEY. Earning FREE MONEY from your employer that is TAX FREE is much more important than having an extra Starbucks latte every day.”

Whether we like it or not, money is a core aspect of our daily lives. It should never be the most important thing, but we cannot deny that it is, in fact, an important thing. It’s tricky to learn, but investing in my future has become a priority.

This editorial was first published in May 2018.

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Opinion Editorials

How strong leaders use times of crises to improve their company’s future

(EDITORIAL) We’re months into the COVID-19 crisis, and some leaders are still fumbling through it, while others are quietly safeguarding their company’s future.

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strong leaders

Anthony J. Algmin is the Founder and CEO of Algmin Data Leadership, a company helping business and technology leaders transform their future with data, and author of a new book on data leadership. We asked for his insights on how a strong leader can see their teams, their companies, their people through this global pandemic (and other crises in the future). The following are his own words:

Managers sometimes forget that the people we lead have lives outside of the office. This is true always, but is amplified when a crisis like COVID-19 occurs. We need to remember that our job is to serve our teams, to help them be as aligned and productive as possible in the short and long terms.

Crises are exactly when we need to think about what they might be going through, and realize that the partnership we have with our employees is more than a transaction. If we’ve ever asked our people to make sacrifices, like working over a weekend without extra pay, we should be thinking first about how we can support them through the tough times. When we do right by people when they really need it, they will run through walls again for our organizations when things return to normal.

Let them know it’s okay to breathe and talk about it. In a situation like COVID-19 where everything is disrupted and people are now adjusting to things like working from home, it is naturally going to be difficult and frustrating.

The best advice is to encourage people to turn off the TV and stop frequently checking the news websites. As fast as news is happening, it will not make a difference in what we can control ourselves. Right now most of us know what our day will look like, and nothing that comes out in the news is going to materially change it. If we avoid the noisy inputs, we’ll be much better able to focus and get our brains to stop spinning on things we can’t control.

And this may be the only time I would advocate for more meetings. If you don’t have at least a daily standup with your team, you should. And encourage everyone to have a video-enabled setup if at all possible. We may not be able to be in the same room, but the sense of engagement with video is much greater than audio-only calls.

We also risk spiraling if we think too much about how our companies are struggling, or if our teams cannot achieve what our organizations need to be successful. It’s like the difference in sports between practice and the big game. Normal times are when we game plan, we strategize, and work on our fundamentals. Crises are the time to focus and leave it all on the field.

That said, do not fail to observe and note what works well and where you struggle. If you had problems with data quality or inefficient processes before the crisis, you are not fixing them now. Pull out the duct tape and find a way through it. But later, when the crisis subsides, learn from the experience and get better for next time.

Find a hobby. Anything you can do to clear your head and separate work from the other considerations in your life. We may feel like the weight of the world is on our shoulders, and without a pressure release we will not be able to sustain this level of stress and remain as productive as our teams, businesses, and families need us.

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