What is a BPO?

San Clemente Real Estate, BPO, What is that?

Well San Clemente Real Estate is obviously about doing Real Estate in San Clemente. BPShortnds for Broker Price Opinion. When do you need a Broker Price Opinion? A Broker Price Opinion is needed every time you buy or want to sell your home. I will talk about Court fs talk about BPO’s now and let me explain how come they are so important right now in this Real Estate Market.

Why do you need a BPO when buying? The reason is in the offer that you present to purchase a home. Right now in southern California we are in an inclining market. The offer that the seller takes has to be what the market will bear. That used to mean what the buyer was willing to pay. Unless it is all cash offer that is not true. Although I am seeing a lot of all cash offers right now it still is not the norm. So the real offer is based on whato theirouse will appraise for. The BPO of a home if done correctly will identify the price of the home the Bank will loan on it. Does that mean you can not offer more than the house is worth. Of course you can but you have to be cash strong to make up the difference.

Example: Your Realtor has their broker complete a BPO on a property and establishes the Bank will loan $100,000.00 on the property. There are going to be multiple offers. You want to offer something over the Market Value to try to get the home. Let’s just say you offer $103,000.00. So now simply you have to be prepared to pay extra $3,000.00 cash for that property and you can not include that in what you were going to put down and what is going to be financed. So if you were going to put down 20% or $20,000.00 you need to have the additional $3,000.00.

When a Broker is advising a client which offer to take he is not only looking at the highest price. He is looking at the financing and the reserves the offer has to make up the difference between the BPO price and the Offered price. Different types of Financing will help the Realtor determine which offer is stronger. Make sure your Realtor knows the difference because that is going to help a seller make an offer and a buyer accepts an offer. One of the biggest reasons homes go into escrow and do not close is because the house did not appraise for the offered price and there was not enough cash on hand to make up the difference. Nobody wants to go through a long escrow to have it fall out in last minute. 

How are the banks using BPO's?
Today banks are hiring Real Estate Brokers to preform BPO's to determine values of homes which are being foreclosed or short sold.   Short sale is where the bank will agree to sell the house for less than the amount owed.  Banks will do this on highly leveraged homes. More often the bank will let the house be foreclosed  on and sell it at auction.  Many times the bank will take the house back (at auction) and sell the house back on the open market.  It seems every bank has their own strategy which constantly changes.  What one bank did on one property last month they will do something different for this month. I have had two occasion where we were negotiating with the bank on a purchase price and they sold the property at auction while we were waiting for their response. Keep in mind the property was on hold status in their system.  They told us to wait for there responses.  They would get back to us in seven business days.  During those days it went to sale in an auction.  The first time I heard about this I thought the agent and or the negotiator did not not know what they were doing. Well sometimes it just doesn't work. If your trying to buy a short sale make sure your have an experienced short sale negotiator.  Ask them if they know what "navigator" is and if they use it. If not they do not know what they are doing. 

Thats a subject for next time. Contact me if you need help selling or buying your home.