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Want Smooth Sailing? The Short Sale Listing Agent and the BPO



How do you handle the BPO?

sailingI’ve seen some interesting blog posts over the last few days that discuss how mortgage lenders participating in short sales determine the value of a property.

First off, so that it doesn’t seem like I am speaking a foreign tongue, I am going to provide a little dictionary definition for novice short sale agents. The bank determines the value of the property using something called a “B.P.O.” which stands for Broker Price Opinion.

To determine this value, the mortgage lender hires a licensed real estate agent. Agents are paid anywhere from $50 to $100 for this service. The service usually requires the agent to visit the property and to provide the lien holder with three ACTIVE and three SOLD listings (within the last 60-90 days) in order to determine the value of the subject property.

In contrast with the BPO, a buyer—when purchasing a property—obtains an appraisal from a licensed appraiser who does a significantly more complete and thorough analysis of the property and the comparable sold properties in the area. Because the appraisal is more thorough than the BPO and because it is completed by a licensed appraiser, the cost for this is greater—usually beginning at over $300.00.

In determining whether the short sale transaction will be approved, the results of the BPO are one of the most significant components of the short sale package—and the one over which the listing agent has the least control. After all, a listing agent can control what items are sent to the bank, when they are sent, and where they are sent. However, the listing agent cannot control the price determination made in the BPO.

If an agent comes from another area of the city in order to prepare the BPO, he or she may not have all the latest information about problems and issues that may be occurring with the subject property or in the subject neighborhood. Additionally, agents who make an appointment to view the property in order to prepare the BPO and are unable to obtain access probably get pretty darn frustrated. After all, if you drove 20 miles to view a property and the key was not in the lockbox or there was no one at the property to open the door, you would be frustrated as well!

Here’s what you need to do.

As short sale listing agents, I always say that our role is to be available to open the door for the BPO and to be available to answer any questions and provide any information as needed. This is a vital component of the short sale transaction. The BPO is ultimately returned to the bank and whether or not the short sale offer is accepted is based (in large part) on the results of that BPO.

So, if you are a lazy listing agent who has little interest in your deal closing successfully, that’s cool. Don’t go to meet the agent preparing the BPO. But, if you want to be a super successful short sale listing agent and see more closings than ever before, get out of bed and go meet the agent at the door!

It may be a little harder to get up early this week (because the time just changed), but if you attend the BPO, it’ll make your short sale transaction go sailing along quite smoothly.

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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  1. Gia Martinez

    March 16, 2010 at 9:35 am

    I am going to add my 2 cents worth here (as I do BPO’s and have short sale listings) and say to agents who have short sale listings…COOPERATE with the BPO agent! If they cannot give you a specific time that they are going to be there (because maybe you are not their only BPO they have to do that day), then make sure that there is a lockbox on the door with a key in it. Make it super easy for the BPO agent. If there is Chinese drywall in the house, for example, make sure you have all your estimates and inspections regarding it and get it to them in an email or leave it at the property for them to have a copy of (I always upload those reports into the BPO so that the lender has a copy). Give them the community information that they would otherwise not know. I go out of my way to make sure that there is a lockbox on the door and tell the agent they can go anytime (including calling them into gated communities). Do not force the BPO agent to work around your schedule – so not cool! I have gotten more “thank you so much for making it easy for me” from BPO agents. 😀

  2. Ted Mackel

    March 16, 2010 at 11:14 am

    I m not sure why BPOs v appraisals are an issue. Oh yeah the appraisal community has been beat up by the HVCC, their income attacked, so now they take aim at BPOs and do a pretty darn good job with their anti BPO spin.

    I was at a REOMAC conference and the question was asked how much weight the BPO has in front of Asset managers. I know how much weight they have with my asset managers and I see first hand with Short Sales how well the process is working. The answer: appraisals are getting the weight for the value not the BPO. Agents have a hard enough time taking pictures and properly describing the interior condition of home for the MLS. An interior BPO is not going to change much.

    Appraisals not tied to a 1003 Loan Application are problematic. Every single one I have dealt with in the last three years has not been the paper it is written on.

    So what do we do? Stop thinking that BPOs are appraisals or take the place of an appraisal. A BPO is just a snapshot, this is how asset managers veiw them and how loss mitigation views them. On the short sale it is a way for loss mitigation to make sure the property has not been placed on the market under area values.

    95% of the BPOs I have been assigned in the last two years have been properties that are not listed for sale – Not Short Sales and this is not related to my REO account.

    I have started a Video Blog series on this topic and I am working on my third installment.

  3. Short Sale Artisan

    March 16, 2010 at 8:05 pm

    Great post again Melissa;

    Speaking of BPO’s, I just saw this article on Housing Wire. Apparently there’s a bit of a scuffle between the National Association of Realtors (NAR) and the Appraisal Institute, with the appraisers saying BPO’s aren’t that accurate and then NAR defending against that accusation.

  4. Buying A Short Sale

    March 19, 2010 at 2:24 am

    We have been teaching about the influence of a BPO being the most important aspect of a short sale and it seemingly falls upon the deaf ears of lazy agents. I can’t tell you how much money we have made simply by controlling the BPO.

    I have to disagree vehemently with the first commenter, NEVER would we allow a BPO agent to simply access the property by lockbox. Make an appointment and we’ll meet you. We’ll get there early and be waiting with bells on.

    A BPO is show time for us! We make sure that every aspect of the property is seen. (gotta love disclosure rules).

    We recently bought a property that had a $300,000 mortgage balanc eon it for $5,000.00. Not a misprint, I said $5,000.00! It helped that when the BPO agent showed up we asked her if she had a concealed weapons permit as there were some crackheads sleeping in the unsecured house.

    She walked up and it was like a scene out of Silence of The Lambs…she could not wait to get out. She was there maybe 5 minutes…bank called the next money!

    Hey, we’ll never put a dead dog in a house but if the dead dog is in there, we leave it there until the BPO has concluded. Now that’s influencing and controlling the process.

    Cha ching!

    Great article,
    Barry Cunningham
    Real Estate Radio USA

  5. David

    April 13, 2010 at 6:36 am

    Nice information about BPO.

  6. Friend

    November 17, 2010 at 1:33 pm

    Is it possible that listing broker and BPO agent both are same?

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Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!



magic eight ball

magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:



short sales standoff

short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.



short sales

short sale approval

Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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