What is BPO and Why Is It Important?

What is BPO and Why Is It Important?As a real estate investor, you’ll more than likely be dealing with BPO’s, or Broker Price Opinions, especially if you’re working with short sales or foreclosures. A BPO is simply a licensed real estate broker or agent’s opinion of the value of a home based on various comps. It’s something like an appraisal, yet not quite as thorough.

Banks hire brokers to perform a BPO to get an accurate estimate of the value of a home. They hire out for BPO over appraisals, because BPO’s are much cheaper. If you’re planning on investing in short sales or foreclosures, learning how you can influence BPO is a must.

Interior and Drive-By BPO’s

There are two types of BPO’s – an interior and a drive-by. An interior refers to interior photos and a quick glance inside. A drive-by is simply exterior photos. While lenders do place value on either type, many times market value is going to be influenced more by comps over pictures.

Why BPO is important

The broker will assess the value of the property you’re interested in and provide a professional opinion to the lender of the value of the home. The BPO is crucial because it will influence the lender’s decision as to what that home is worth. Most commonly, BPO’s are in conjunction with short sales, so to lose the least amount of money, the bank is relying on an accurate BPO.

Now, there are ways you can influence the outcome of a BPO, such as:

  • Be present during the BPO appointment. Let the broker know that there’s no lockbox and you’ll be delighted to meet them there. This allows you to represent yourself as a professional investor who’s done their homework. Don’t be afraid to let the broker know that you’ve done your homework on the neighborhood. Share how knowledgeable you are about the comps and so on. You’ll come across educated and in the know, perhaps causing the broker to value your opinion over anything else.
  • Take pictures. Shadow the broker and take your own photos of the home.
  • Build rapport. Make an effort to build rapport with the broker, as a favorable impression of you may help.
  • Be sure property is empty. If there are tenants, be sure they are not present when the agent arrives.
  • Do your due diligence. Be sure you’ve compiled comps for the area, as well as other research that may justify a lowered price on the home.
  • Ask for a ballpark figure of the sale price. Don’t be afraid to ask the broker for a ballpark figure of what they think the house will sell for.

Granted, banks don’t have to accept the BPO as fair market value and can increase the price of the home if they choose. But many times, BPO does matter and influences the lender’s decision. Good news is that there are things you can do that will help shape that BPO in a way that works in your favor.

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