BPO Best Practices Guide

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Richard Andrews
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BPO Best Practices Guide A Step by Step Guide for

0 Published: 03/01/2011 Global DMS, 1555 Bustard

2 Table of Contents What is a BPO?...3 Why do BPOs?...3 How do BPOs Work:...3 How Much will I get Paid to Perform a BPO?...4 Who Can Perform BPOs?...4 General Guidelines:...4 Quality expectations:...4 Information:...4 Saving your work:...4 Numeric Entry:...4 Unacceptable Language:...4 BPO Completion Instructions & Guidelines:...5 Section 1 Property Information:...5 Section 2 Property Details:...6 Section 3 Comparable Sales:...8 Section 4 Comparable Listings:...9 Section 5 Improvements: Section 6 Provider s Information: Checking for Accuracy Selecting Rules, Reviewing your BPO: Selecting Rules: Reviewing your order: Copyright Information: All rights reserved. No part of this publication may be reproduced, transmitted, stored in a retrieval system or translated into any language in a form by any means without the written permissions of Global DMS. Global DMS etrac Guide 2

3 What is a BPO? A Broker Price Opinion (BPO) is similar to a Comparative Market Analysis (CMA) in that is estimates the value of a property/house. BPOs are prepared by local, licensed Real Estate Professionals (REPs) and combine information from a drive by exterior examination and an analysis from various data sources that provide previous sales data, recent comparable sales (comps), and current neighborhood listings. BPOs are given on neighborhood conditions, property assessment, various photographs of the subject property, and front photos of all comps. BPOs also include estimates of repairs to obtain fair market value and value estimates. A BPO has less detail than an appraisal and is less expensive. They are an excellent alternative for banks and lenders who need to make financial decisions on residential properties. Why do BPOs? The BPO industry is a thriving niche within the changing real estate environment, and many REPs perform BPOs as their sole source of income. However, performing BPOs has also become a reliable source of supplemental income for many REPs across the country as well. If you conduct reliable BPOs, you can both work for and establish positive reputations with many banks and lenders across the country. How do BPOs Work: 1. Financial Institutions either order BPOs from their own REPs or an independent BPO Company. 2. If they go through a BPO Company, that said company will then contact a REP that s on their list to perform the BPO. (The REP usually has 3 days or less to complete the BPO) 3. The REP goes to the property, inspects it, and takes pictures. 4. The REP then finds both the previous sales information and comps information and inputs the data into either a web-based form or printable form to fax back to the BPO Company to determine the valuation. 5. The REP submits the finished BPO to the BPO Company. 6. The BPO Company then reviews the BPO and submits the final version to the bank/lender. Global DMS etrac Guide 3

4 How Much will I get Paid to Perform a BPO? After a BPO is completed, most companies pay agents between $40 and $150 depending on how detailed the BPO is. Who Can Perform BPOs? Any Real Estate Professional with an active license in good standing can perform BPOs, including Agents/Brokers (Realtors) and Appraisers. NOTE: Some states define a BPO as an appraisal and require it to be completed by a licensed or certified Appraiser. These states are: WV, AZ, PA, UT, NV, and MS. General Guidelines: Quality expectations: When fulfilling a BPO order, you must remember that the quality of the BPO will be determined by the accuracy of the data in the report. When submitted, the BPO form should be complete, with value conclusions that are supported by both the data and logic provided in the BPO. The BPO should include comments that explain variances in values, discrepancies, and any major influences upon the value. Information: If you lack the information necessary to complete a BPO, DO NOT submit the order until all the necessary information is provided. Saving your work: To ensure that your work doesn t get lost and that you don t have to re-complete the form, make sure to save your work periodically while completing your BPO. Numeric Entry: Make sure to only input whole numbers into any dollar or currency fields. (DO NOT add letters) Unacceptable Language: Be careful not to use any language that may conflict with fair lending practices. Examples of this include references to race, sexual preference, gender, religion, and/or economic status. Additionally, do not use any comments that are considered generic, derogatory, or bias when speaking about the home, residents, or neighborhood. Examples of this include: Blue-collar, White-Collar, Gang activity, Exclusive, and/or Crime infested. Global DMS etrac Guide 4

5 BPO Completion Instructions & Guidelines: The following sections provide step-by-step instructions on completing each phase of a BPO order. To ensure that you always fully complete a BPO order, and that it always adheres to the best practice guidelines, we advise following these steps and referencing this guide whenever necessary. Section 1 Property Information: Property Address: Enter the address of the property you are completing a BPO for. Loan Number: This field remains blank. Order Number: Enter the order s number in the field provided. 90 Days As Is Value: This field is your opinion of the value based upon a 90 day marketing time. This may or may not be typical of the marketing times in the subject property s neighborhood. Broker Estimated Market Value: This is your value conclusion, assuming typical marketing conditions for the area. This estimate assumes a marketing time that is consistent with the typical ranges for the neighborhood. (Reflects an As Is value) Estimated Repaired Value: This is your value conclusion, assuming that all noted repair items for the subject property have been completed as of the date that you re conducting the BPO. This is usually higher than the As Is value. If the sum of the Cost of Repairs plus the As Is value is less than the Estimate Repair Value, it may indicate that it isn t feasible to make repairs or that the valuation opinions may not be credible. Typically, some allowance for profit and risk is given when purchasing a property in need of repair. For Example: Assume that the repair costs are $7,000 and that the As Is value is $100,000. The Repaired Value should be greater than or equal to $107,000. ($100,000 As Is plus $7,000 Repair Costs). Property Is Field (Neighborhood Description): Please use the following definitions that are from the Appraisal Dictionary (which was published by the Appraisal Institute) when completing the Property Is Field: Rural: Pertaining to the country as opposed to urban or suburban; land under an agricultural use; signifies areas that exhibit relatively slow growth with less than 25% development. Suburban: Describes a neighborhood that contains complementary properties with less concentrated population than is typically found in an urban neighborhood. Urban: Describes a neighborhood with a concentrated population that s typically found within city limits or a neighborhood commonly identified with a city. Global DMS etrac Guide 5

6 Section 2 Property Details: Condition: Use the following guidelines for rating the condition of the subject property: Poor: This should be reserved for properties that exhibit deferred maintenance, damages, and/or structural problems that are obvious in several areas. The deferred maintenance or damages may have caused secondary damages, such as the need for new attic framing due to roof failure, exterior siding and rafter replacement due to lack of paint, ceilings replacement due to water damage, etc. Fair/Poor: Homes in fair condition exhibit above normal deferred maintenance and damages in several areas, but secondary/structural damages are not obvious. NOTE: Checking Fair/Poor or Poor will require input in the Upkeep area of Section 5 Average: Homes in average condition may exhibit minor deferred maintenance or damages. Interior and exterior components may be older and out of date or fashion, but are still serviceable. Good: Homes in good condition generally have had most short-lived items replaced recently and exhibit no significant items of deferred maintenance or damages. Homes that have been extensively renovated or remodeled would also fall into this category. Information Source: Input your source of information for the subject property the source should be verifiable. DO NOT complete a BPO without a reasonable basis for the description of the site and improvements. Square Footage: The square footage of the living area should be stated in the BPO. Indicate in the comments area if this figure includes areas below grade (i.e. a finished basement area). Finished Basement?: If the subject property has a finished basement, then state Yes. If it doesn t have a finished basement, then state No. The square footage of the finished area and its room count should be stated in the comments area, and the selection of the comparable sales should be consistent with the subject property. Bedrooms/Baths: This should be the total number of bedrooms followed by the total number of bathrooms. For Example: 3/2 would be a three bedroom, two bathroom home. Lot Size: State the subject property s lot size in acres. Please round to the nearest two (2) decimal places and include the zero (0) placeholder if the subject property is under one (1) acre in size. For Example: A 5,000 square foot site would be inputted as follows: (5,000 SF / 43,560 SF = ) Round = 0.11 Acres. Age: The subject property s actual chronological age should be reported. Garage: If the subject property has a garage, then state Yes. If it doesn t have a garage, then state No. Indicate the type of parking 2 attached, detached, or built-in in the blank field to the right of the Other checkbox. Other: If the subject property has onsite parking other than a garage, please check this box and indicate the parking type in the adjacent field to the right. Global DMS etrac Guide 6

7 Was Property Previously Listed?: If yes, the DOM, Listed Price, and Listed Dates need to be filled in. DOM: Indicates the number of days the subject property was on the market. Listed Price: Indicates the last listing price. Listed Dates: Indicates the beginning listing date. Is property Currently Listed?: If yes, the DOM, Listed Price, and Listed Dates need to be filled in. DOM: Indicates the number of days the subject was on the market. Listed Price: Indicates the last listing price. Listed Dates: Indicates the beginning listing date. Close to Industry?: Is the subject property within an hour of employment centers? Close to Commerce?: Is the subject property within an hour of shopping and supporting services? Vacant?: Is the subject property vacant? Vandalized?: Does the subject property appear to have been vandalized? Secured?: Does the subject property appear to be secure with intact windows and doors? If it isn t fully secure, DO NOT take action to secure the property. You are NOT authorized to do so. Damaged?: Does the subject property have obvious damaged? If you indicate that it does, the How field to the right should cite the source of the damage. (Input will also be required in the Upkeep area of Section 5) Is prevalent financing typical in your area?: What is the typical financing for the neighborhood? Type: Chose the financing type that applies from the drop down menu (VA, FHA, Conventional, etc.), and mark Yes. You must then input the full dollar amount of a typical loan in the neighborhood using whole numbers only. For example: If $200,000 loans are typical in the neighborhood, input DO NOT include dollar signs, commas, or decimals. Type (Property Type): This section is used to indicate the subject property s property type: SFR (Single Family Residence): State if the property is detached or attached in the comments area. PUD (Planned Unit Development): The ownership usually has a lot in addition to a percentage ownership of the common area. Multi-Unit: Two to four Unit apartments. Number of Units: State the number of units in the Multi-Unit building. Condominium: Ownership as a condominium usually a unit is defined (with no lot) and a percentage ownership occurs in the common areas. Dues Per Month: State the monthly HOA dues for the PUD or Condominium. Multi-Unit PUD: A multi-unit building under PUD ownership. Mobile Home: Check Yes if the subject property is a Manufactured Home. Per HUD guidelines, manufactured housing has a steel chassis. If possible, cite the HUD plate information in the comments area. Global DMS etrac Guide 7

8 Attached: State if the Mobile Home is attached to a permanent foundation. If unknown, state this. Comments: Please provide any necessary clarifications within this area, such as project descriptions, neighborhood comments, market conditions, economic changes, etc. Indicate any unusual characteristics within this section. Indicate the type of inspection that was performed (i.e., interior or exterior) within this area. Section 3 Comparable Sales: A conscientious effort should be made to select comparable sales with major features that are as similar to the subject property as possible, such as location, age, condition, and living area. You should also identify any major positive or negative value influencing features that the subject property possesses, such as a view, busy street, water front, etc., and try to use comparable sales with the same or similar features. Address: Input the comparable sale s street address. Zip Code: Input the zip code of the comparable sale. Condition: Choose the condition of the comparable sale from the drop down menu using the same general condition parameters that were previously explained in the Property Details Section on page 7. If the condition of the comparable sale is different than that given for the subject property, please explain. Subject Proximity: The proximity should be the distance from the subject property to the comparable sale. If the neighborhood is Urban or Suburban, the comparable sale should be within 1 mile of the subject property. Please input all distances as two (2) decimal places a zero (0) must be used as a place holder for distances that are less than one (1) mile. Square Feet: Please insert the gross living area of the comparable sale, and be consistent with respect to finished basement areas. If the subject property has a finished basement area that s included in the gross living area estimate, then you must include it in the gross living area for the comparable sale as well. The comments area should indicate the square footage of the finished basement area. NOTE: Keep the living area of the comparable sale within 20% of the subject property s gross living area. Number of Bedrooms/Baths: The report should state the total number of bedrooms followed by the total number of bathrooms. As with the living area, if basement rooms are included in the room count for the subject property, then they must be included in the comparable sale s room count as well. The number of basement rooms should be outlined in the comments area. Lot Size (Acres): State the comparable sale s lot size in acres. Garage: Input the type of parking 2 attached, detached, or built-in for the comparable sale. Global DMS etrac Guide 8

9 Basement: Input the total square footage of the comparable sale s basement area. Indicate the total square footage of any finished basement area in the comments area. Age: Input the actual chronological age of the comparable sale. Sale Date: Indicate the contract date of the comparable sale, if known. If this is unknown, then use the closing date instead. NOTE: Be consistent with the dates i.e. either utilize all closing dates or all contract dates. DOM: Input the total time the comparable sale was on the market from the list date through the contract date. Final List Price: Input the last asking price for the comparable sale prior to it being sold. Sales Price: Input the subject property s Net sales price. If seller concessions were given, please deduct from the sales price to reach the Net sales price. Indicate any concessions in the comments area. Comments: Please provide any necessary clarifications within this area. Explain the reasons for any large variances in values, and indicate which comparable sale best represents the subject property s value. The subject property s value conclusion should fall within the general range of values given by the comparable sales. If it doesn t, please indicate the reason for concluding above or below the reasonable range. Section 4 Comparable Listings: The same general parameters that were used for the selection of the comparable sales in Section 3 should also be utilized for the selection of the comparable listings. Listings are used to help determine current market conditions and the expectations of buyers. Listings can help determine stable, declining, or appreciating market conditions, and illustrate the subject property s current competition. In the comments area, please explain if the subject property s concluded value is above the average asking prices represented by the comparable listings. Global DMS etrac Guide 9

10 Section 5 Improvements: Construction: Please indicate the subject property s basic construction type. NOTE: For mixed construction or exteriors, more than one check box may be selected. Upkeep: Please indicate any damages or deferred maintenance that was noted during the inspection. This should also have been discussed in the comments area of Section 2. Access: Please indicate if the subject property s access street is paved or not. Sub-Structure: Please indicate the subject property s foundation type. NOTE: If it s a manufactured home, please indicate the foundation type in the comments area. Estimated Repair Costs: Please indicate the total estimated repair costs needed to bring the subject property up to marketable condition. Any repair costs should have been discussed and itemized in the comments area of Section 2. Correcting these problems will result in a repaired value of: Please indicate the subject property s As Repaired value in this section. Ideally, the As Repaired value should be supportable by at least one of the comparable sales used in the BPO. NOTE: If repairs are noted, this valuation scenario will typically be higher than the As Is value. Section 6 Provider s Information: Fill in the required information. If your office is located over 10 miles from the subject property, please include a comment in Section 2 that summarizes your experience and competence in the subject property s area. Global DMS etrac Guide 10

When you create rules, your report will be reviewed before it is sent out to make sure it fits your specified guidelines.

11 Checking for Accuracy Selecting Rules, Reviewing your BPO: Selecting Rules: Selecting rules allows you to be sure that your reports are thoroughly completed. When you create rules, your report will be reviewed before it is sent out to make sure it fits your specified guidelines. To select rules, go to the bottom of your Profile page and click the link that says Select Rules. Go through the list and select which rules you would like to include, along with their priority level. When you re finished, click the Save button Global DMS etrac Guide 11

Reviewing your order: Before you create PDFs of your reports, it is a good idea to review your file. From the Gear menu, click Download this file to work offline.

12 Reviewing your order: Before you create PDFs of your reports, it is a good idea to review your file. From the Gear menu, click Download this file to work offline. From the available pages, choose which ones you would like to download. Use the Move Up and Move Down buttons to configure your order. To make sure that the report follows all the rules that you established in your Profile Settings, click the Run Review button before downloading. If your report complies, the review results box will say Review Complete. Please look on the following page to see a screen shot. Global DMS etrac Guide 12

13 Click the Download and work offline button A PDF file of your report will be created and will appear in a new window. Global DMS etrac Guide 13

SIRVA Mortgage Order Instructions

SIRVA Mortgage Order Instructions Appraiser Trainees: This client does not permit Trainees to sign the appraisal report, however USPAP requirements apply when significant assistance has been provided by