HOW TO GET REO LISTINGS: BUTTON DOWN YOUR BPO’s
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by: MattCBA
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If you’re already an REO agent or want to become one, there’s one important thing you have to do to receive a continuous stream of REO listing assignments and BPO orders. And that’s to strive to submit on time, every time, a 100% accurate and complete BPO (Broker Price Opinion).
For those of you unaware of what a BPO is, it’s a tool used by lenders and mortgage companies to value properties in situations where they believe the expense and delay of an appraisal is not necessary – BPO’s are used extensively on foreclosures. REO agents and brokers are assigned to do them by the lender or asset management company, and it’s also a common entryway to actually being awarded REO properties to sell.
Doing an accurate BPO can be tricky and difficult, however, when you adjust the price of the foreclosed property against active and sold comparable properties in the gross living area. This is one of the first things the asset manager or the quality control manager is going to review when they’re auditing your BPO.
If your adjustments aren’t consistent and on the money, then you’ll be asked to do it all over again – and your quality control score will suffer. There’s a way to avoid that unfortunate situation – by using the formula below to accurately calculate the adjustment.
Step # 1: Add the sales price of all three of your sold comparables:
For example, $900,000 + $870,000 + $800,000 = $2,570,000
Step #2: Add up the square feet (above ground – do not include the basement, if there is one) of all three sold comps.
Example: 4,000 sq. ft. + 4,500 sq. ft. + 4000 sq. ft. = 12,500 sq. ft.
Step #3: Now, divide the total combined sales price of all three by the total square footage of all three.
Example: 2,570,000 from Step #1 divided by 12,500 from Step #2 = 206.
This determines your average price per square foot in the area: $206.
Step # 4: Determine your adjustment value by multiplying that average price by .25.
Example: $206 x .25 = $51.
So $51 is the amount you would use to adjust for the variance in square feet between the subject property you’re doing the BPO on and your comps.
Here’s how you use that number. Let’s say the difference in square feet between the subject property and the comp is 500 sq. feet in this particular scenario. That means you multiply that 500 by $51 – which equals $25,500. That is your adjustment figure.
So if the comp is bigger, you would make a negative adjustment by subtracting the $25,500. If it’s smaller, then you make a positive adjustment and add $25,500.
Keep in mind that you are trying to “equalize” the indicated value. Let’s continue working with the $51 per square foot adjustment figure we calculated above. Let’s say your comp is 3,800 sq. ft. and, again, your subject property is 4000 sq. ft. The difference is 200 sq. ft. We multiply that by the $51 and raise the indicated value of it by $10,200.
By making this adjustment, we are saying that if the comp were 200 sq. ft. larger (equal in size to our subject), that it would have sold for $10,200 more than it actually did sell for.
You can get more tips like these from the national trade association ASREOS, the American Society of REO Specialists, which is an important resource for those wanting to work in the incredibly lucrative REO industry. Find out more by visiting www.ASREOS.com.
About the Author
Frank Patrick began his real estate career in 2000 after a 12-year stint in corporate America as a sales manager. As a new real estate agent Frank knew that he wanted to find a niche within the real estate industry. After months of research Frank decided to specialize in REO, an acronym for bank owned foreclosed homes. Frank quickly became one of the top REO agents in the nation averaging over 100 transactions per year for the last 8 years. In 2007 Frank’s production soared to over 214 sales. In 2004 Frank and his brother Scott Patrick started a property preservation company to offer maintenance and repair services to banks with foreclosed homes. Frank’s solid understanding of the REO industry and Scott’s 20+ years in the construction business was a recipe for success. This year their property preservation business is on track to gross over one million dollars in revenue. Today Frank manages his REO Real Estate Brokerage, REO Renegades an REO agent training business, his trade association The American Society of REO Specialists and is developing a national Franchise Property Preservation company, REO ResQ. For more information please visit http://www.ASREOS.com
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