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I just got done with my first short sale. There were no good comps for the BPO. The agent doing it called me and asked what the contract amount was. Guess what to BPO came in at? She looks good to the lender and gets to keep doing their BPO's!
I work for a city that will be getting the first opportunity to buy certain foreclosed houses directly from lenders. It's a pilot program and is supposed to work like this. The day after the redemption period expires, the lender/asset manager gets a BPO and then comes up with a selling price after considering their likely holding costs if they had to sell on the open market. The lender's price is supposed to include a 5% to 15% off of the current market value as an incentive for the city to buy it. The final selling price is offered on a "take it or leave it" basis and the city has 48 hours to inspect and decide whether to purchase.
Here's my concern: There is anecdotal evidence that lenders are pricing their foreclosed properties too high because it seems there are usually several price reductions before a private buyer and the bank find a compromise. Are lenders chasing the market down, just like many sellers?
So even though the "special price" for the city is supposed to include a 5% - 15% discount, if the BPO is unrealistically high, then the city will be paying too much. This is a crucial point because the city must produce an independent full appraisal (within 60 days of purchase) that proves the City did not pay more than the current market value. If the city cannot prove this, then the city forfeits its federal funding for the purchase, even though the purchase has already happened.
What are your thoughts on the accuracy of BPO's on foreclosed properties?
My opinion of BPO's to establish anything but a listing price cannot be posted in a family oriented public forum.
The REO companies have read the same rules you have. They over price it, then discount the inflated price, knowing there is only 48 hours for you to determine whether or not you want it at that price.......certainly no where near enough time to get an honest estimate of value in place.
I would encourage the city to do two things:
1) Do a study, using MLS, to determine the ratio of selling price to original listing price for typical properties in the area. Apply that ratio to any REO houses coming on the market. For example, if it appears that most REO's sell for 10% below original listing price, then you should expect a 15%-25% reduced offering price for that house.
2) Ask code enforcement to monitor REO's and issue citations for ANY violations.....grass too high, building not secure, evidence of tresspassing or deterioration that would constitute a public hazard, etc.
I feel the REO managers should learn in a hurry that you have a pretty decent program, that you are not going to be taken advantage of, that you will pay a fair price but no more than a fair price, and if they try to gouge you, you will gouge them back, up to and including condemnation.
My opinion of BPO's to establish anything but a listing price cannot be posted in a family oriented public forum.
The REO companies have read the same rules you have. They over price it, then discount the inflated price, knowing there is only 48 hours for you to determine whether or not you want it at that price.......certainly no where near enough time to get an honest estimate of value in place.
I would encourage the city to do two things:
1) Do a study, using MLS, to determine the ratio of selling price to original listing price for typical properties in the area. Apply that ratio to any REO houses coming on the market. For example, if it appears that most REO's sell for 10% below original listing price, then you should expect a 15%-25% reduced offering price for that house.
2) Ask code enforcement to monitor REO's and issue citations for ANY violations.....grass too high, building not secure, evidence of tresspassing or deterioration that would constitute a public hazard, etc.
I feel the REO managers should learn in a hurry that you have a pretty decent program, that you are not going to be taken advantage of, that you will pay a fair price but no more than a fair price, and if they try to gouge you, you will gouge them back, up to and including condemnation.
Well that is a little narrow...According to our legal beagle...
Quote:
Real estate licensees may complete BPOs for buyers and sellers of real property for the purposes of listings, sales, exchanges, options, purchases, rents or leases, but never for lending or appraisal purposes
Hire an experienced agent and get a BPO. $100. a pop for a reasonable job.
Suggest rewriting your arrangement. Seller has to leave price at the quoted price for thirty days and has to give the city another shot if the price goes down more than 3% in a month. Self driven honesty it is called.
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