We are real estate investors and work extensively in the pre-foreclosure market. Many times sellers are financed 100% or close to it and there is no deal to be had so we try to negotiate with their lender to do a short sale or short payoff. As part of the process the lender needs a BPO to determine fair market value.
What is a BPO? A Broker’s Price Opinion is a market value assessment usually performed by a licensed real estate agent or broker. These are most often done on properties that are in foreclosure. A lot of times when the property is not sold before or at auction, the BPO that did the opinion will get to list the property. Sometimes it can be a full time appraiser looking for extra work that may do the BPO. Because of the fact the agent may eventually get a listing they tend to sometimes give a high appraisal.
Now realize that market value generally assumes a home in great shape needing no repairs. 90% of retail buyers will not buy a home that needs any repairs. Many lenders will not finance a home that needs wood replaced or roofing done.
What is a Drive By? A drive by consists of a BPO going to the house and stopping in front, taking a picture of the outside and driving off. They never get out of the vehicle, never to see the inside or any damage or repairs needed on the property. Comparable sales, past appraisals and tax records will be used to determine the value of the home without taking needed repairs into account. A lot of houses have good curb appeal, once you step thru the front door it’s a different story. We have had the BPO agent miss the fact that a tarp was on the roof to stop the rain from coming in the house because the holes in the roof were on the back of the house and the agent never stepped out of their vehicle.
How can I get an accurate BPO Appraisal? Be there early. Bring pictures and the list of repairs from your first visit. Develop rapport and become best friends with the appraiser. Do your homework on the neighborhood. Look for true comps. Example: If you are looking at a stucco home and the rest of the neighborhood is brick. You can’t find true comps. For future reference if you are in a mid to high humidity area, get a moisture test on the stucco and bring the results with you.
How can I keep from being a victim? Arrive 45-60 minutes before appt. Do not allow the home owner to greet the BPO instead of you. Stay where you can see the road. If you see a vehicle pull up and stop, jump out and holler politely,” Would you like to see the inside of the home”? To make the experience better for yourself and the BPO offer help. Tell them what you have found. Don’t take it personally if they don’t want help from you. Do your homework. Don’t let the homeowner show them around as they will try to point out nice things. Your job is to point out the flaws of the house and drive the appraisal down. Make sure the lender knows you are the point of contact for the BPO agent and to contact you to set up the appointment for the BPO. The pictures that you took on the first visit need to be printed out; if digital take them to a kiosk that makes prints. Have 3 copies made. Put two to a piece of paper, go with colorful construction paper, yellow is a happy color, go to your local office supply store and get printable file folder labels. In detail tell what’s wrong in the picture. Give the BPO agent 1 copy. Let them know what you have found wrong with the house or yard. Give them a repair list. Any true comparable sales you have found within a 5 mile radius will also help. Always pick the lowest comps. You will document a lot more problem area’s with the house than the BPO will see. This will be the difference of making 30k or 5k on a house.
Honesty in Flipping – What to Disclose
By: David Reinholtz
This article is about flipping short sale properties, and the parameters associated with this are much different than other types of property sales and investment and should not be assumed to apply to other, more traditional forms of sales. Short sales, as most people are now aware, occur when a property owner is behind on his or her payments and makes an arrangement with their mortgage lender to sell the property for less than its assessed, or true, value in order to avoid foreclosure, the stigma that goes along with it, and the credit damage that can come from it.
If your client, or someone you know, is in the business of short sale investing, meaning they intend to purchase short sale homes and immediately turn around and resell them for a profit, there are legal questions that go along with the process, many of which have never been addressed, but will undoubtedly come to light in a court of law at some point in the foreseeable future.
While buying a short sale home at a bargain and turning around and selling it at its regular price, or slightly less than its assessed value is completely legal, the term ‘fraud’ is being tossed around lately and it may behoove the serious investor to make every effort to offer full disclosure, or at least a modest modicum of disclosure to all parties involved.
The scenario
Imagine this scenario: You’re a homeowner who has fallen on hard times. You or your spouse may have lost his or her job and despite your best efforts, you can’t keep up with the mortgage payments. You are facing the barrel of foreclosure and work out an agreement with your lender to go ahead with a short sale. You know your home is in great shape, the lawn is meticulously maintained and you added a new kitchen and bathroom.
You have no choice but to let go of this home because you want to buy another one as soon as you recover from your financial setback, so the short sale seems fair. Several interested buyers flock to your house immediately and within a few days, maybe even that same day, you have an offer on it. The bank agrees and you sell the home, getting out from under your financial burden.
Two weeks later, you learn that your home suddenly sold for near full value. Perhaps forty thousand dollars more than you sold it. This is enough to feel as though you were taken advantage of. Maybe it’s enough to consult a lawyer. After all, if your home sold for its assessed value two weeks after the short sale, you could have made that sale directly.
Putting yourself in someone else’s shoes is the best way to determine what level of honesty should be used during the process.
Letting the homeowner know the truth
In most cases, homeowners who partake in short sales don’t have a choice, so whether you are going to turn around and sell their home at a profit or not, they don’t have the luxury of hanging onto any longer. Being upfront may sting for the homeowner, but you are protecting yourself legally.
The same holds true for the lender. Mortgage lenders make loans based on long-term earnings through interest rates. If they are aware of the intention to flip the house, there are some lenders that would not be willing to make the loan. Posting a statement of your intentions within the contract (which, as we all know, can be upwards of 100 pages or more), will cover you legally. Remember, loan officers don’t tend to read the contract thoroughly. You’re covered nonetheless from any legal action that uses the phrase ‘fraud’ in the future.
No legal obligation
While investors intending to flip short sale homes are under no legal obligation to disclose their intentions, most, if asked, wouldn’t want to become the guinea pigs in a legal dispute over a fraud allegation. Full disclosure is always a safe bet.
David
About the Author
David is the Founder and CEO of LoanOfficerSchool.com, an approved education provider for The Conference of State Bank Supervisors and The National Mortgage Licensing Systems’ (NMLS) required pre-licensing education and continuing education.
(ArticlesBase SC #3040471)
Article Source: http://www.articlesbase.com/ – Honesty in Flipping – What to Disclose
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When you sell your home, the process is almost like going to a job interview. Selling a home involves presentation, which is one of the key factors that determine the outcome. Although this may sound a bit weird, presentation is a way of life in the world of real estate. Buyers in today’s market look for good presentation – many basing their final decisions on it.
If the property you are selling comes with a garage, you’ll need to go through your garage before you sell your home. Chances are that you store things in your garage, which can easily pile up over time before you realize it. If your garage is in a messy condition, you’ll obviously want to clean it up. Buyers look for homes that are in perfect condition, and anything less than perfect will look bad in the eyes of the buyer.
Most homes have some truly outstanding features inside of them. You should always do your best to highlight the best features of your home, instead of just hoping that the buyer understands what they are. The ideal way to bring out the best features of your home is to use the proper lighting. If your home is clean, you can use lighting to bring out the best features in your home, and ensure that they stand out to the buyer.
When a potential buyer first pulls up to your home; the first thing he will see is your lawn. If your lawn is trimmed and well taken care of, he will get a good impression right off the bat. If your lawn is a wreck, he may immediately pull away. To give the best impression to the buyer, you should put some thought into how things look. You can always plant flowers around the walkway and throughout the yard, which will look great to a potential buyer.
You should also make sure that the entrance into your home is a positive as well. The front door should be in great shape, as well as the entry area into the home. You can add some plants, paintings, and rugs to ensure that your buyer gets a good impression. When the buyer walks through the entry way into your home, you should make sure that the view he or she takes in is a good on. Your biggest goal when showing your home is to ensure that the buyer is pleased.
Keep in mind that it may take some time to sell your home. These days, homes can sit on the market for months at a time before they actually sell. If you are having trouble selling your home, you can always reduce the price or simply go back to the basics. Eventually you will sell your home – although it may take more time than you think.
| Filed Under: Articles Tagged with estate marketing real, Final Decisions, Flowers, Foreclosures, Great Shape, Ideal, Job Interview, mortgage marketing leads, Paintings, Plants, Presentation, Proper Lighting, Real Estate, Right Off The Bat, Rugs, S Market, Selling A Home, Walkway, Way Of Life, Xima, Ximausa.com, Zima |
