Short Sale Course: About the BPO

The Brokers Price Opinion (BPO) is probably the single most important document in the whole short sale package, and the piece upon which almost all negotiation pivots.  This opinion of value is the number on which the loss mitigator judges the value of the property on which you are making your low-ball offer.  Since loss mitigators never see the house, the BPO is their singular and defining piece of information to counter your offer.  Understanding how those BPOs are generated is very helpful information to know.

The BPO is not completed by you.  It’s submitted by a specially certified real estate agent and it is part of the overall package when it is submitted for an approval on the discount.

There are two type of BPOs. The first is known as an “exterior,” or drive-by BPO.  During the initial stages of default, the lender will send any agent out to the property to see if it is still occupied by the homeowner.  If the property is occupied, they typically have orders not to make contact with the homeowner. The agent will attempt to take an exterior picture of the property and complete a special form (see below).  The Brokers Price Opinion is considered the final judge of the house’s value.  Often times the value is way off.  This is due to the real estate agent’s assumption about what the interior of the property looks like having never been inside, and also based on the values of like properties in the area.

When you contact the lender to negotiate a short sale, the lender will often times refer to the Drive-by BPO as a true value.  Don’t assume because they have a value, it’s based on the interior.  It typically will not be.

The second document is an “interior” BPO.  In you offer letter, you should always request the lender to conduct an interior BPO and have yourself listed as the contact person.  This is crucial to securing your discount. Again, you are building a case for why the lender should give you the desired discount you are seeking. As you look at the forms, note some of the items the real estate agent must provide:

•    Three sold properties and relevant information
•    Three listed properties and relevant information
•    Neighborhood and local market information
•    Neighborhood conditions and observations
•    Low and high values for the subject property
•    Condition of the subject property
•    Cost of the repairs
•    Any adverse factors (crime, code violations)

The BPO will have a large impact on the final selling cost of the property and whether or not a bank agrees to a short sale at all.  Be sure to pay special attention to this part of the short sale package because of its vital nature to the whole deal.