Insane bank practices
If you are considering a Short Sale, you are playing a Poker Game with the bank and they already have seen your cards!! Allow us to explain. In order to determine Value of your Home, the Banks use Broker Price Opinion (BPO) which is a condensed version of a Real Estate Appraisal. The banks have contracted Asset Management Companies to hire a local Realtor to determine that value of your home.
Brokers are required by the banks to find at least 3 matching Sold comps and 3 matching Listings that meet the following criteria:
Proximity: All the Selected Comps by the BPO Agent have to be located within 1 mile radius of your home. If there are no comps found in this range, the BPO Agent can the search up to 2 miles and make necessary adjustments due to school district and other criteria that would define the new boundary.
Age: The comps selected by the BPO Agent have to be within 5 years of your home. If your home is built 10 years ago, the ALL of the 6 comps have to be within 5-15 years of age.
Size: The comps selected for the BPO have to be within 300 sqft of your home’s size and adjusted accordingly. If your home is a 3,000 sqft newly built home; a comp with 2,500 sqft of living space can not be used to determine it’s value.
Lot Size: The Lot size has less significance unless we are talking about residential properties in Rural parts of the Country where the lot size is Less important that the initial 3 criteria sited; but a home on a 2 acre lot can NOT be used as a comp for a home with 8,000 sqft lot!
Floor Plan: Total number of rooms and the ratio between Bedrooms and Bathrooms have to be comparable to your home. But ironically most banks won’t allow more that $1,000 to be used in adjustment for one extra bedroom and $500 for a bathroom which is absurd; but that’ s a topic for a different blog.
Amenities: This criteria includes a wide ranges of items such a Wine Cellar, Pool, Solar Panel,….etc and varies with each bank on how much value they would allocate in the BPO report.
But despite the most Bank’s efforts to come up with standard techniques for valuations, each Asset Management company retained by these banks have their own criteria for Comp selection and adjustment. In addition the final results of the valuation boils down to the BPO agent’s familiarity with the area.
So, to protect yourself from prolonged discussion on Value with your Short Sale Negitoator at the bank, follow these recommenations:
1) Meet the the BPO Agent at your property.
2) Make sure he’s from a local agency which has an office in your town. Some times BPO agent’s retained from remote areas where the BPO Agent has no clue about the Local Market activity.
Finally, since the Bank will NOT share their BPO information with you, it’s up to you to find your OWN home value that you can provide to your bank, in case you decide to challenge their BPO value. So, click below and get you OWN Free Home Value Report which includes Foreclosure activity, Recent Sales….etc.
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