BPO Fact and Fiction

    Financial Institutions - If you are relying on BPOs to provide you with a "real" look at the market, you are not getting what you need.  On average, Asset Managers offer from $40 - $75 for a BPO.  And on average, our internal cost to produce a "solid" BPO is $250.  
    Honestly, what do you think you get for $40 - $75?

    The Asset Managers that share the REO listing with the BPO providers have an advantage when it comes to getting higher quality BPOs.  But the Asset Managers that funnel REO listings to friends, family or convenient agents, are lowering the overall quality of the BPOs you receive and rely on.  The same holds true for companies that only do BPO work with no REO work.  If you're paying for those BPOs, you might as well by PowerBall tickets.  And here's why . . .

    What Goes Into A "Real" BPO - When a BPO order comes in we pull the official tax record from the Property Appraiser's office, and the tax record through the MLS system, and the listing - if listed, and the sold, pending and expired listings from the MLS system.  That's before we even get rolling.  This takes about 30 minutes.
    Once we review the data, we send out an associate to photograph the property per the order.  If it is an interior BPO we need to call for access to the property, get in, take shots, and lock up.  Interior BPOs take about 45 minutes longer for the interior work and the hoops we often have to jump through to get access to a property. A drive-by BPO takes about 1.5 hours from the time we leave the office.  So we have 2.0 hours of time in, and we have not even started the paperwork.        
    Back in the office we load the photos into our computer and start our research.  We pull Active comps, and Sold comps and do a few extra things we don't generally share with anyone except our clients.  If you're doing the comp work properly, this takes about 45 minutes to screen the comps and truly come up with accurate comps.  Most agents don't even understand what an accurate comp needs to be.  
    After we pull the comps we print them and convert them from the MLS system to PDF files so we can email them to our clients.  Only now can we being to enter data into the BPO form provided by the Asset Manager . . . and they are all different.  These can take between 20 minutes and one hour.   Once complete the BPO is reviewed and we have a follow up system to make sure we are paid.
    Overall, we have a minimum of five hours in any BPO we do.  If it was a high end $75 BPO, that averages out to $15 per hour, not including gas and office overhead including MLS fees, utilities, bookkeeping, etc.  Let's just figure $20 for gas and overhead.  The hourly fee is now just $11.  The lowest paid employee on staff is $15 per hour, but on top of that I must pay taxes, benefits, etc.  So you need to ask yourself, what kind of BPO are you getting for $11 an hour, when you're dealing with independent agents.

    FACT 1 - Knuckleheads - We run into the agents doing the $11 an hour BPOs, and it is a sad group of folks that are not even sure why they are doing them.  Moreover, when I hear some of the questions they ask me, I realize they have no idea what they are doing or how to go about a proper BPO.  For the asset manager sitting in an office a thousand miles away, they often don't understand why the BPOs vary so much.  On the other hand, we've seen some orders where all three BPOs are wrong, but they are consistently wrong, so they move through the process.  The end result is a losing proposition for the lender that owns the property.
    FACT 2 - BPO Forms Differ - There are a broad range of BPO forms out there.  Some are comprehensive so when an agent is doing a lousy job, the asset manager is still able to get enough information out of the BPO.  Other BPO forms are nothing more than a waste of everyone's time and money.  By the way, we offer a consulting service for the development of a good BPO form, with easy-to-understand instructions, and a checklist for what the asset managers need to do pre-BPO and post-BPO.
    FACT 3 - You Get What You Pay For - If you want accurate BPOs, you either need to screen the agents AND pay properly, or you need to provide the BPO vendor with REO listings to compensate them for their overall time.  My company will only do BPOs for asset managers that provide us with REOs.  If we are going to lose an average of $185 on each BPO, we need to get one REO listing for every five BPOs we do.        
    FACT 4 - Friends, Family and Convenience - There are agents out there that seem to have a connection with some asset managers that might just cross a line.  These are the agents that do NO BPO-Only orders, but still get the lion's share of REO work from asset managers.  In fact, we have quite a few of these agents that are not even within the local market.  One in particular is 120 miles away.  Another is 45 miles away.  Lenders need to spot check their asset managers when it comes to how their properties are being managed.  We offer a very comprehensive training program to show lenders what to look for, how to look and what to do.  The results are less days on market and higher sale prices AND lower expenses.

    FICTIONS - All agents are alike.  All BPO providers know what they're doing and are well trained on BPOs.  All agents are supervised by a Broker.  All agents have current market knowledge.  All agents understand how to use the MLS.  All agents are familiar with property appraiser data and tax records.  All agents are well versed in single family construction.  All agents understand the relevancy of comps and what to look for in comps.  The Easter Bunny and Tooth Fairy are alive and well.  If you believe any of these, I have some condos to sell you in Miami.

    Bottom Line - If you are a Financial Institution or Asset Manager, it is your bottom line that is at stake.  My suggestion is to spend an hour on the phone with me, or join one of our conference calls.  You can do a listen only mode, or join the group.  We do these monthly.  If you're interested, email me at Mike@MorganREO.com  

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