Over the past two years, the broker price opinion (BPO) market has grown significantly. Your experiences with BPOs have probably been that you were either an agent completing a BPO or an agent waiting for another agent to complete a BPO on a short sale transaction to further your negotiation process. Many agents who are new to the real estate industry, or have never been involved with BPO, are probably wondering if the market is too saturated or if there is still room for new agents. The answer to that question is that there is still a lot of room in this market if you are interested in being a part of it.
The BPO industry is a niche industry that has been a major source of income for real estate agents in the United States for the past few years. In the last 12 months, 2.87 million homes received default notices, repossession auctions (foreclosures). Of those nearly 1 million homes were foreclosed on in 2010. Each and every one of these foreclosures required one or more BPOs to be completed at some point during the pre- and post-foreclosure periods. According to RealtyTrac, Inc., “The number of American households receiving a foreclosure application will increase 20 percent in 2011, reaching a housing crisis peak, as unemployment remains high and banks resume foreclosures.” after a slowdown. That means 1.2 million homes will be foreclosed in 2011. Since 2006, banks have foreclosed 3 million homes and their 6 million homes are expected to be foreclosed by 2013.
Lenders order BPOs to get an idea of what the current market value is (what a buyer would pay for the property in 90-120 days) or distressed value (what the property would sell for in 30 days). In other words, it’s a fancy way of putting together a comparative market analysis (CMA) that a broker would do for a listing presentation. BPOs help lenders make decisions about whether to accept a short sale transaction, eliminate private mortgage insurance (PMI), or what actions a lender should take when a property is in repossession.
The compensation a real estate agent should expect for completing an exterior/auto BPO is typically $35.00 to $60.00 per order and $50.00 to $100.00 for an interior BPO. Additionally, most states require a real estate agent to be a licensed broker or associated broker. Agents should check with their brokers and the state real estate department for more details.
One of the main reasons real estate agents work in the BPO industry is that they wait to receive the listing to market the property from the lender after the property is foreclosed on. These listings are known as real estate listings (REOs). The act of completing a BPO for a lender can be compared to submitting a resume to that lender. The more BPOs you complete, the more lenders will become familiar with you. Response times, reporting quality, and accuracy (ratio of your BPO value to actual sale value) are vital to building a good relationship with lenders.
There are dozens of BPO companies that are helping lenders solicit real estate agents to complete BPOs. Some of these companies only ask for BPOs, while others ask for BPO and REO listings. It’s important that when an agent signs on with these companies, the agents keep the two separate in case they decide they’d rather work towards REO listings or not. These companies can be a great source of income for your 2011 business model. They can even generate a few thousand extra dollars a month.
Whatever your business plan for 2011, I recommend that you consider adding BPO to it, as this industry will continue to thrive over the next couple of years.