Jun
04

Thinking About Ordering a BPO? Think Again

By

I knew it was coming, I just didn’t know when…….

My phone rang yesterday afternoon. It was a slightly frantic banker/friend, who jokingly asked if I was hiring appraiser trainees. He went on to tell me about an REO property that the bank has just sold. The bank had ordered a BPO from a local broker, and it came in at “a little under $2 million.” The bank sold the property in that price range, and the buyer flipped the property a few days later for “a little over $3 million.”
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My banker/friend asked me:

“Do we have any recourse against the broker?” Not that I’m aware of.

“How did the broker miss the value by that much?” Perhaps a lack of data, or maybe improper valuation methodology.

How much did they pay the broker for the BPO? Maybe $450 to $900 is my guess. For another $1,000 or so the bank could have ordered a restricted appraisal from a certified appraiser that would be acting as a true independent third party. Am I the only one that sees paying a broker to value a property, and then pay him a commission to sell it, as a conflict of interest?

Michael Dodds

P.S. – No, the photo above is not a real BPO……..or is it?

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    Comments

    1. Anonymous says:

      As a broker, I do not disagree. We strongly suggest the banks we call on to get an appraisal (why would I want to get yelled at?). With a thorough appraisal, I want to use it as a guidepost in underwriting/valuing and even marketing. We encourage the bank to use an MAI, in particular we specifically suggest Integra Realty Resources nationwide. By the way the broker should be shot, especially if he re-sold the property for buyer #1.

    2. PS C says:

      As a licensed appraiser in both the state of Georgia and South Carolina, using a BPO for a market analysis (no, they are not licensed in either state to perform an appraisal) is buyer beware; you get, or rather don't get, what you pay for. The "Banker" was an idiot to use the results from a BPO to value a property that they sold for almost $2M. If the broker subsequently was involved in the "flip" sale at almost $3M, not only was it unethical, it perpetuated the fraud from the first sale. This "broker" should be brought before the state real estate commission and sanctioned.