What Is The BPO Foreclosure Connection?
When lenders take back a property through the foreclosure process they want two things: They want to know how much it’s worth and they want to know as cheaply as possible.
One way to determine value would be to get an appraisal of the property. Appraisals are independent estimates of value developed by licensed appraisers, valuations which typically cost several hundred dollars.
Alternatively, lenders can get an estimate of value from local real estate brokers, including those who hope to list the property or find a buyer for it. An estimate of value from a real estate broker is called a BPO or broker’s price opinion.
BPO Foreclosure
A BPO is designed to produce an estimate of value from a local real estate professional. The cost is typically less than $100.
Why is a BPO so inexpensive?
First, it’s a very rough estimate, often based on nothing more than a drive past the property and a knowledge of like properties in the neighborhood. In other words, the broker is not entering the home. The inside of the home could be pristine or it could be a foul mess, factors which would plainly impact value.
Second, the BPO cannot be used to obtain a loan because it isn’t an independent estimate of value. The broker is not independent because he or she may hope to get a commission listing or selling the property.
Third, no buyer will accept a BPO in lieu of an appraisal for the very reasons mentioned in item #2.
In the end, a BPO is nothing but a quick and rough estimate of value from a local broker for a loan owner who may be hundreds or thousands of miles away, good enough for general purposes but not for getting a loan.
© Copyright 