Why are these Realtors' evaluations of this property so different?

[Justin Todd]

Hey, guys.

I've got a question about some BPOs I had a couple Realtors send me on a property I was considering picking up financing for to flip. Why are their numbers so drastically different? I'm hoping to get a response from somebody with experience in flipping properties, but any advice is welcome. It's bothering me because I don't want to pay the $650-700 for the HML to gather their own evaluation of the property if it stands the chance of coming in below what they cover, because if it does, I'd have just thrown that money away. And also, the biggest issue, is being confident in the value to be able to sell for a profit after purchase.

I ran a CMA myself and brought the property in at roughly $124,000. This wasn't anything too comprehensive, just the general stuff: +/- 20% square footage, same stories, close to the same year built, within half a mile, within the past 3-6 months, all that jazz.

For some reason, though, their numbers are coming in at anywhere from $102,000-133,000. That's a huge difference! I don't have access to the BPOs any longer, but is it just safe to assume that somebody was using the wrong comps? If so, that's confusing, considering I didn't grab any "newbies." They're all seasoned realtors in the town the property is located in, with plenty of sales and experience under their belts. (I'll mention that one of them was using blatantly wrong information to acquire one of the lower end numbers, in that they'd listed it as a 2 bed 1.5 bath when this has never been true, so it's not even like it was outdated, just simply wrong).

Am I reading too much into this? If I'm going to start investing with financing rather than just wholesaling for a fee, I'd like to be extremely confident in the numbers... but with this kind of feedback from seasoned professionals, it's got me a little nervous, to be honest.

Thanks in advance,

Justin

[Joel Owens]

It swings both ways. I have seen appraisers that totally messed up the values. The broker tends to be more in tune with what is transacting and market conditions. That is if they do a good amount of business. Many of these agents are not selling so they do the reports to get by and I can see where they have no clue about market conditions except what data they pull from the MLS.

BPO's I haven't completed those in about maybe 6 years. I actually cannot remember when. I did thousands of them before. Interior, Exterior, property inspection reports, PMI drops, etc.

They used to pay in around 100 or more for a report. Today it is the "crack" for brokers and agents that either can't sell or do not want to sell. They get paid by speed and what will pass the quality control department at the BPO mill. The mills pay little to nothing like 45 bucks or something now.

You could before have 5 days to complete a BPO and you would STACK them. So you wait from different BPO mills to get orders in the same area. Then go out in one shot and take all the pics. These days they want 1 or 2 day turns for 45 bucks. You end up going out constantly using gas and putting miles on the car.

Urban core it is not as bad as comps are easy and driving distance is minimal. When you get into the suburban to rural areas then is when it gets really intensive. Comps are not as prevalent and you get kick backs from quality control on why this isn't in guidelines etc. These QC people as sitting states away with no clue about the area. After going through days of QC the report finally passes.

So you learn over time they do not pay anymore for the far out or hard to comp reports. Maybe 5 or 10 bucks  to 60 all in but it is not worth it versus a quick submittal and approval for 50.

I wouldn't put too much value into a BPO these days. The forms used to be fairly easy. These mills trying to get business from one another started offering more in depth reports to provide value to their clients. They did not however pay the brokers and agents more to complete that additional work. So now you have low fees, fast turn times, and more data required on the reports. While it is not an appraisal some of these reports are pretty close with some BPO mills. 

I did commercial ones as well. When the BPO mills first came out for commercial they promised 400 a report. Then why they started doing it the clients wanted to pay a few hundred. It wasn't worth it because some of these small balance mom and pop mixed use properties are a real bear to do a report on. The time to do one of those you could do 10 SFR bpo's and make 500 instead of 150 to 200 on the commercial ones.