Magic BPO Success Secrets. Cory Ph.D Boatright
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Certified Appraisal. Use the same techniques on the FHA Appraisal that you would for a typical short sale deal.
Memorizing the Percentages
For example: If an appraisal came for a VA loan for $200,000 the lender would consider accepting $164,000 for it. Keep in mind, the $200,000 may or MAY NOT be the actual value of the property, but it will be the value the lender uses to determine how much they can discount. In this example that would be 82%.
Here are more percentages you need to memorize
* VA 82%
* FHA:
Net 88% first 30 days a property is listed
Net 86% for a property listed 31 - 60 days
Net 84% for a property listed 61 - 90 days.
* Freddie Mac (FDMC) 88 - 92%
* Fannie Mae (FNMA) 85-88%
* Conventional Loans 80% (no set limit)
IMPORTANT: Understand that these are NET percentages to the bank. If you have your offers padded with things like Realtor commissions, closing costs and additional fees, these need to be included for the final NET settlement.
SECOND EXAMPLE: The BPO on one of your deals comes in $100,000. Offers that may be accepted based on the above criteria would be:
*VA 82% = $82,000
* FHA
Net 88% = $88,000 first 30 days a property is listed
Net 86% = $86,000 for a property listed 31 - 60 days
Net 84% = $84, 000 for a property listed 61 - 90 days.
* Freddie Mac (FDMC) 88% - 92% = $88,000 - $92,000
* Fannie Mae (MNMA) 85 - 88% = $85,000 —$88,000
Something else to consider is some LOCAL banks, usually the smaller ones, will almost always NOT ALLOW more than a 10% -15% discount off the property depending on the amount of repairs needed to fix it. Local banks tend to be more conservative in their approach to discount the property. This is partly due to the network of local affiliates the bank can call to get more than one opinion of repairs needed or value of the property.
OK... now you know more than 90% of Real Estate investors about the BPO, let's keep moving and discuss the major differences between an appraisal and BPO.
The Major Differences between Appraisals and BPO’s
-A BPO is done by a real estate agent or a real estate broker, who are usually inexperienced.
-An appraiser is usually hired when a bank wants to foreclose. They are more experienced, and therefore, usually harder to influence. You will need to do different things to influence an appraiser, because they are more thorough in their work.
-The main differences are in the amount of liability, why each report can be used, the cost to conduct each report, the amount of detail in the two reports, and how they find comps and make adjustments.
-Licensed Appraisers are governed by state requirements. So, even though a BPO must carry Errors and Omission insurance, the liability for an appraiser is much greater and more enforceable.
-A BPO is a required to be a licensed Real Estate Agent, Broker, or Appraiser who possesses an active license. They must be in good standing within the state in which they perform their services. Each state has their own set of regulations and standards by which a BPO can be employed, so it would be a good idea to search these regulations by the state specific to you.
Paying for a BPO
The BPO work doesn’t pay much money at all. In fact, the average BPO, who does strictly BPO work, can make anywhere from one thousand to ten thousand dollars a month! The BPO field has become quite competitive over the past few years. Thus, why many lenders that outsource their BPOs will only stick with the BPOs they are familiar with and will rarely go to a new vendor. The barrier of entry can be tough for new agents.
Nearly always, a BPO will be less expensive than a APPRAISAL, because the amounts of information that goes into the report, and the type of reports they are required to fill out differ, being that a BPO has less work to do, and the appraiser has their hands full. The appraiser is going to fill out much more paperwork than a BPO agent too.
Take a look at this great resource Online to see some different types of BPOs, as well as the charges associated with them. It’s definitely recognizable the difference in an interior and exterior type BPO price.
http://www.bposonline.com/order.aspx
Here is something to keep in mind. The BPO agent will only make a percentage of these charges. Other factors determine how much they will be paid, such as how quickly he BPO can be completed and the distance to travel to take photos of the property and how desperate a company might be to get a BPO completed for their client. They usually want the BPO done YESTERDAY!
A secret dealing with BPO’s to getting your short sale accepted is getting the bank to order a FULL INTERIOR type BPO. That way you will have a better way to communicate with the agent and are more likely to influence the outcome of the BPO while they are at the property. This is why it is so important to make yourself known as the contact for the property, so that you might speak with the BPO agent directly. You want to know when the agent is planning on evaluating the property in the CMA. This gives you more opportunities to build your case for your short sale and communicate with the agent to better justify the offer you are proposing to purchase the short sale property.
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