All Forum Posts by: Joel Owens

Bryan and others I can help you understand this more.

When I worked on the residential side I completed thousands of BPO's over the years.

BPO's are completed for many different reasons such as bank bulk sale of regular,non-performing,or a pooled mixture of loans,mortgage insurance drops,insurance damage claim,refinances,short sales,etc.

A BPO can be an exterior bpo whereby a broker or agent is asked to take 1 pic of mailbox,1 of street,and 1 of the subject and give usually 3 actives and 3 solds with pics and occasionally the comps are without pics.
This report usually pays only 30.00 to 65.00 depending on how fast the BPO mill wants it turned in.Usual turn around times are 3 days and rushes are in 24 to 48 hours.

An interior BPO is where you do everything listed above but also go inside of the property at take at least 8 interior pictures including any damage noted.An interior usually pays from 60 to 105 per order.

The reason BPO reports take so long is say I get a bpo interior order for 50.00.The turn around time is 3 days.If everything goes perfect I turn the order in to the BPO mill who then puts through a quality control review. The bank or investor who owns the property wants the report to meet certain guidelines or controls such as comps within a 1/2 mile radius.

In many cases though there might not be recent sales that close unless it is an urban market but many of these bpo's are in suburban to rural markets.

So what usually happens is you go back and forth with QC who is an hourly paid employee for the mill and after putting in a ton of remarks it gets passed.

From there the BPO mill puts everything in a nice little package and send of to their customer.

I will try to make the rest of this post short but can take this much deeper in detail if anyone has interest.

Usually from the time of ordering the BPO it will take a few weeks to get back to the bank.Banks use BPO mills because they do not have the time to locate agents all over the country.Instead they pay a certain amount per order to the mills and the mills pay a reduced fee to the brokers/agent completing them.

There are hundreds of mills out there to work for as a broker/agent and you are an Independant Contractor cutting checks every 2 weeks to a month.

With BPO's you will here these investor guru's touting these strategies that they will work and the BPO can come back in plus or minus ten percent which on a 400k property could be 440k or 360k which could be an 80k swing in value when the bank makes a decision.

The reason you hear off and on information is because of the following.

When the market was hot 5 to 6 years ago banks and mills had to beg brokers/agents to do bpo's.Most brokers and agents were doing many sales and didn't have time for them. sales and comps were easy to find.I could do a 24 hr exterior rush on a new subdivision home sale and get paid 130 to 150 bucks. Report took me 30 to 45 minutes to complete.

Fast forward 5 to 6 years later. Now bpo's are the crack cocaine for struggling broker/agents trying to feed their families.

I know some that make 10k to 14k a month doing volume.Then there are the majority who do say 10 to 20 a week and if they didn't have orders from being click monkeys online they would be out of the business.

You have others such as myself that might do now 4 to 5 orders a month just for kicks.I only do them for long standing clients who will pay me my fee.

Now when we do a report now used to some brokers/agent would send out others to inspect the properties or take pictures.Now many mills have electronic signatures at the end of the bpo's stating you have visited the property,taken the pics,and valued yourself the property at hand.

So when a broker/agent goes to do a interior bpo they might do them full time with thousands a year,they might be a brand new agent who got in with a mill and can be influenced,or they might be an agent in between who knows values but will at least take your papers to see if you are just puffing or have valid properties to consider.

Where many agents mess up is the estimated repairs which can cause the bpo to come in high.Also may agents falsely believe if they value the property high it will foreclose and they will get the listing from the bank.

The departments are separate and have nothing to do with each other.Occasionally an AM will see the agents name on the report and they might pick up business that way.I have seen investors show up at properties and tell the agent if they get the value to come in at XX then they will rehab it and give to the agent when they resell it to make a commission.

Hope this helps

I sent you a package on the property check your e-mail.

Thanks

I am the listing broker of this 60 unit apartment complex.

Just received back updated appraisal from bank and environmental.

Units rent for 400 a month,operating expenses total about 55%.

Occupancy 50%.

This is a short sale.I need a cash offer but bank will sell cheap compared to mortgage balance.

Let me know.

Paying a real estate attorney a few hundred to research for you is well worth saving you from a HUGE mistake.

You need to know what you are or ARE NOT purchasing.

Did you not see these units from the inside before purchasing??

Many times the seller will just say something like insurance inspectors are here to take a few pics etc.

If the adult is not there do not enter the property.Do not even step one foot in there.

Did you review the rent rolls,vacancy loss,turnover frequency,late pays,strength of the existing leases,etc.???

It sounds like to me you bought a second position. Many times a lender will try to foreclose on a second to see if a sucker (inexperienced investor) will buy it.

Many fail to ask if they are buying a first position or a second.

You said you know the property has plenty of equity even with the first.How do you know that???

The first could have 1 to 2 years of back payments accumulated over time from making a payment one month,then going for a loan mod,then going for a short sale,or filing a BK.

Over time they could be tens of thousands behind and then you add in penalties,fees,and interest,back escrow,and attorneys feed.

Now the principal balance on the first has ballooned up really big. This doesn't even account for additional liens etc. that can be added on after the second is bought.

Since the first is still on the property many liens can be attached.

Contrary to popular belief the the 1st and the second are 2 different loans with different payments and numbers.The asset manager on one loan has the duty to limit losses for that one loan while the other AM handles the first.

So the first and second positions have different goals in mind.

Many seconds are worthless.

Example had a customer call the other day.

4 bed 3 bath bought in 2006 for 160,000.1st 130,000 second 30,000.

Now properties are selling foreclosure for 89,000 REO. The first is owed about 152,000 with back fees. The second isn't going to spend 152,000 to get an asset worth 89,000 to try to recover 30,000.

They will just sit and wait,or try to sell the note off to a sucker,or sell the note off for a discount and tax write off the rest.

If foreclosed and they get nothing they can sell to an asset recovery company. Options available will depend on state foreclosure laws and collection practices.

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Thanks

Hey don't trust a REALTOR....I resemble that remark! LOL Just kidding.

It's true that some brokers/agents will make something appear rosy to get you to buy.

Even if you are just selling off the property for a quick 5k it would be wise to have a folder to give prospective purchasers about the property.

With the pool does it dominate the yard? Is it in the middle,off to the side,etc.

The corner lot is it fenced?? If not buyers will worry about people cutting through their yards. Is their a power pole close by? That can also make buyers nervous.

Corner lots also depending on if in a subdivision or side street can be nosy with stop and go traffic.

You have to make sure the external features are just as appealing as the external.

When I would drive around with real estate developers for site acquisition would would put every location through a process.

We would start out with say about 10 and then on the map have a checklist of positives and negatives.When we wittled down the list we got down to around 3 properties and they purchased 1 to 2.

Thanks Ted.

One more question. So then if I have cash buyers why wouldn't I just forgo transactional funding and assign my contract for an option fee??

I put it under contract at say 55k and option to them at 60k making 5k??

I know some banks won't allow assigning without their approval.I would think banks wouldn't be excited either about transactional funding to an unknown C buyer where the deal can fall apart.

I have found with my sellers listings they would rather wait on a direct buyer than give blanket assignment rights and if the buyer doesn't line up an end buyer the seller gets nothing.

I know many buyers will try to tie up for say 500 bucks or 1,000 but the seller would rather sell than get a measly 500 for 30 days of the property being off market.