How To Get REO Listings: Button Down Your BPO's
By Frank Patrick
The Importance of Being Accurate and Complete
If you’re already an REO agent or want to become one, there’s one important thing you have to do to receive a continuous stream of REO listing assignments and BPO orders. And that’s to strive to submit on time, every time, a 100% accurate and complete BPO (Broker Price Opinion).
For those of you unaware of what a BPO is, it’s a tool used by lenders and mortgage companies to value properties in situations where they believe the expense and delay of an appraisal is not necessary – BPO’s are used extensively on foreclosures. REO agents and brokers are assigned to do them by the lender or asset management company, and it’s also a common entryway to actually being awarded REO properties to sell.
Doing an accurate BPO can be tricky and difficult, however, when you adjust the price of the foreclosed property against active and sold comparable properties in the gross living area. This is one of the first things the asset manager or the quality control manager is going to review when they’re auditing your BPO.
If your adjustments aren’t consistent and on the money, then you’ll be asked to do it all over again – and your quality control score will suffer. There’s a way to avoid that unfortunate situation – by using the formula below to accurately calculate the adjustment.
Step # 1: Add the sales price of all three of your sold comparables: For example, $900,000 + $870,000 + $800,000 = $2,570,000
Step #2: Add up the square feet (above ground – do not include the basement, if there is one) of all three sold comps.
Example: 4,000 sq. ft. + 4,500 sq. ft. + 4000 sq. ft. = 12,500 sq. ft.
Step #3: Now, divide the total combined sales price of all three by the total square footage of all three.
Example: 2,570,000 from Step #1 divided by 12,500 from Step #2 = 206. This determines your average price per square foot in the area: $206.
Step # 4: Determine your adjustment value by multiplying that average price by .25. Example: $206 x .25 = $51.
So $51 is the amount you would use to adjust for the variance in square feet between the subject property you’re doing the BPO on and your comps.
Here’s how you use that number. Let’s say the difference in square feet between the subject property and the comp is 500 sq. feet in this particular scenario. That means you multiply that 500 by $51 – which equals $25,500. That is your adjustment figure.
So if the comp is bigger, you would make a negative adjustment by subtracting the $25,500. If it’s smaller, then you make a positive adjustment and add $25,500.
Keep in mind that you are trying to “equalize” the indicated value. Let’s continue working with the $51 per square foot adjustment figure we calculated above. Let’s say your comp is 3,800 sq. ft. and, again, your subject property is 4000 sq. ft. The difference is 200 sq. ft. We multiply that by the $51 and raise the indicated value of it by $10,200.
By making this adjustment, we are saying that if the comp were 200 sq. ft. larger (equal in size to our subject), that it would have sold for $10,200 more than it actually did sell for.
About the author
Frank Patrick is the founder of ASREOS (the American Society of REO Specialists), the first professional association for REO Agents created by REO professionals and contains numerous resources and tools to maximize REO opportunities and find REO listings - as well as the ability to interface with other REO Agents across the country in an exclusive forum. Find out more at http://www.asreos.com from http://www.FreeArticlesAndContent.com
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