Performing A Broker Price Opinion (BPO): Step 2

Picking up from where we left off, let’s begin with “Subject Property”.

SUBJECT PROPERTY:
Here you will enter the details of the property that you’ve been assigned to do the BPO on. The obvious would be to enter the data directly from your Public Data Center or the county’s public information about the property. The tricky part is how do you determine things like “# Rooms”, and “Bsmt (%fin)”? The answer is…..talk to a local appraiser. Why? Because it’s different in every area. For instance, in Denver we constitute # Rooms being everything above grade only (or main floor and above). Whereas in the mountains, they tend to count the basements too.

COMPARABLE PROPERTIES:
For the most part, all you’ll do here is “plug and chug”. Enter in the requested data after printing off the comparables. How to obtain the comparables will be discussed in a separate blog. For now, utilize the information provided on UniversalREO.com. Some suggestions here are: stick to comparables within ‘blocks’ versus miles. ‘Owner’ was the last person on deed and can be found in public data. ‘Finance type’ refers to the type of financing the last owner used to buy the house. Do not say “yes” to ‘Personally Inspected’ unless you walked through that comp. For ‘Condition’ please refer to the fist blog (Step 1). ‘DOM’ stands for “Days On Market”. Be sure to look ALL THE WAY BACK into the record. Some agents are sneaky and “refresh” data to make a house look less ’stale’. ‘Original LP’ is the Original List Price that the home was listed at. Whereas ‘LP at Sale’ refers to the price the home was listed at when it went under contract. And finally, you have the ‘Sale $’ or sales price….what did that puppy sell for in the end (not including concessions…this is to be entered in the next line).

The next section of fields (“Homes most Comparable to Subject”, etc.) are a continuation of the first set of comps. The funny thing about this field is that they are asking you to re-rank your comps based on which ones are most similar to your subject property. In other words, #1 = very similar to subject, #2 = next most similar to subject, and so on.  Under the “Comments” section you can now indicate the traits of each property that make it less/more valuable than your subject property.  HERE IS WHERE CONCESSIONS ARE ENTERED.  First of all, if you don’t know what a concession is, go back to real estate 101.  Secondly, if you do know what a concession is, you understand that it effects the overall bottom line or NET worth of the sale.  For instance, if a house was sold at $250K, but there were $5K in concessions (closing costs, pre-paids, non-allowables, etc) you would have a NET of $245K.   Things to mention here are:  finished basements, sprinkler systems, oversized lot, oversized garages, swimming pool, hot tub, mountain/water/golf course views.

The “Comparable Listings” are identical in almost every way to “Comparable Sales”, so we are going to jump into  “Marketability of Subject”.  Just like the name indicates, we are evaluating the pros and cons of the property and how that effects the potential for this little doozy to sell.  In this section some items to hit on are “Functional & Economic Obsolescence”.  To understand what to enter here, you must first understand what each of these terms means.  Functional obsolescence is related to the function of something on the property that changes value.  A good example of this is a one-car garage in a community where most families have 3 cars.  Economic obsolescence on the other hand has to do with the surrounding community and its effect on a home’s value.  Examples include airport noise, toxic waste, nuclear power plants, freeway noise, dust and air pollens, changes in zoning, and more.  This also ties into the “Positive/Negative site/location influences.  You have to consider with a golf course, or a sweeping view might do to a property’s value.  You must also consider what a new freeway in the backyard might do to value.  Regarding “Resale Problems” you’ll want to indicate here if there are limitations to selling this property right away.  For instance, if you’re in a small town of a few hundred people, your chances of selling that has may be lower than if you were in a metropolitan area.

Lastly there are fields for “types of financing subject will not qualify for and why”.  The rest of the material is self-explanatory (“probable purchaser”, “possible hazardous conditions”, and “items left on premises”) so we won’t waste space on these.  However, I’ll share with you an example of a financing limitation that I came across recently.  The REO was a $600K listing that was in pretty good condition.  Upon doing some research and drawing on my past experience as a buyer’s agent it occurred to me that an FHA or VA loan would not cover the full amount of the loan (there was around a $300K limit on each loan in that area – go to the FHA or VA home website to find out the limits in your area).  This was critical information considering the probability was high that had we not caught this an offer would get made by someone going FHA or VA and the lender would catch it after time had passed and the bank/asset manager was expecting a closing.

Thanks for tuning in to Part 2 of Performing a BPO.  I’ll have Part 3 ready soon!