I hate admit it, but we were on the dark side for a while and worked on Bank-Owned (REOs) properties where we routinely priced them for Wells Fargo, Chase and others using Broker Price Opinions (BPOs). Each bank had their own BPO forms and requirements for adjustments varied widely among them.
These BPOs required us to find 3 sold comps and 3 active comps for the determining the subject properties value and worth. We needed to provide 3 exterior photos of the subject property and if this was an Interior BPO add one photo of each room including bathrooms, garage and bedrooms.
But all these BPOs maintained similar standards when it came to selecting Active and Sold comps that were required to determine when it came to Age and Proximity. And we were required to make adjustment on other criteria such as floor plan, age, lot size and amenities. The common criteria to locate comps for the BPOs were:
1) Proximity to subject: All the comps have to be within 1 mile radius of the subject property. If there are no comps found within 1 mile, then we would widen the search up to 2 miles maximum. Some banks insisted on up to 2 miles and make necessary adjustments due to school district and other criteria that would define the new boundary.
2) Age of Subject Home: The comps have to be within 5 years of subject home. If the comps were built 10 years ago, then ALL of the 6 comps have to be within 5-15 years of age. We needed to make adjustments if the comps fell outside of this range, but the adjustments could not exceed more than $10,000.
3) Living Space: The comps have to be within 300 sqft of subject size size and adjusted accordingly. If the subject property has 3,000 sqft the selected comps had to be within the range of 2500-3500 sqft in size.
4) Lot Size: Less important that the initial 3 criteria sited; but if a subject property was located on a 2 acre lot, then the comps with 8,000 sqft lot would not be acceptable.
5) Floor Plan: Total number of rooms and the ratio between Bedrooms and Bathrooms had to approximate the subject property closely. For instance if a comp qualified based on size but had 3 more bedrooms than the subject, then it had to be dismissed because of significant difference floor plan.
6) Amenities: This criteria includes a wide ranges of items such a Wine Cellar, Pool, Solar Panel and varies with each bank on how much value they would allocate in the BPO report. But most banks limited the adjustments to $10,000 which is absurd.
Yes, I am certain you are ready to pull your hair out that no one in their right mind would be able to build an above-ground pool for $5,000 but if we allocated $50,000 to a pool, the banks routinely reject these valuations and return them for correction.
Bottom line is finding your home’s worth is a combination of art and science. And you need experienced help to price it right. And using Zillow or Trulia might not get you to the right value either.
Contact Us if you need help to determine your home’s worth?