What Is Involved in an Internal BPO or Broker Price Opinion?
We can begin by stating that all the requirements of a drive-by BPO would also be a part of an Internal BPO. However, an interior BPO might require that you verify things like square footage and room count rather than estimate them. Of course, there will be a requirement for photos of the interior rooms of the home. Often the lender will also require photos of any significant damage or necessary repairs.
The lender's representative orders the BPO from a local real estate broker, sets a time expectation for its delivery, and mandates specific forms and photo requirements. They are very specific and will not pay for the BPO unless the forms and photos meet requirements. The internal BPO isn't ordered unless the lender is reasonably certain that the borrower is no longer occupying the property or they have given specific permission. A hostile encounter isn't anyone's goal. Even so, a real estate agent should verify that the owner has given permission and is expecting them or has abandoned the home.
Unless the home is unoccupied, an internal BPO will likely involve contact with the homeowner or a tenant. If the BPO is for refinance purposes, this likely will not be an issue or problem. However, if a pre-foreclosure situation exists, care must be exercised in personal contact situations. Different lenders and loss mitigation companies will have different policies in this respect. Obviously, the best situation would be that you are expected and treated with courtesy.
As we said, you will definitely be doing all of the tasks involved in a drive-by BPO, and add some or all of the following:
- Individual room measurement. There are procedures with which real estate agents are familiar to measure rooms. Normally this would be on a previous appraisal and not required, but sometimes the lender wants to make sure no significant interior changes have been made.
- Overall square footage measurement. It is possible that the borrower may have added on square footage that could make the home more valuable. The lender will want to know this.
- Inspection of interior features conditions. This is the most important item, as sometimes when a borrower knows they're going to foreclosure, they can vacate the home and tear out fixtures and things they can sell or take to another property.
- More thorough value adjustments in comparables. If the agent is required to provide comparable property sales in their documents, they would do so and may be asked about adjustments they made to sales prices. Often a complete formal CMA, Comparative Market Analysis, is required, but adjustments must be made for damage or significant repair requirements.
- Individual photos of the interior damage. Any damage will be documented with photos.
- Repair estimates. Sometimes the agent will be asked to get repair people out for estimates to fix the damage.
- Cleaning or trash-out estimates. An estimate will be needed of the cost to remove personal items and trash and clean the property.
Of course, in internal BPOs, more work is required so the compensation is greater. The ordering company may require other services, so it's hard to estimate what you would be paid. However, the range of payment for internal BPOs is frequently between $100 and $175. Additional services that might be required, frequently prepaid by the broker, are:
- Re-key locks.
- Trash removal.
- Lawn care and snow removal.
- Damage repairs.
- Secure the property.
- Boarding up the property.
Generally, BPO customer will require that the real estate broker pay these expenses out of pocket. Reimbursement can frequently take 30 to 60 days. When foreclosures are at a high volume, a great many real estate professionals generate excellent income from BPOs. The broker should have good billing practices and follow-up in order to maintain profitability.
Often, real estate professionals do not like doing BPOs, but they do them to have the inside track to get the listing from the lender after the foreclosure. This definitely puts some extra pressure on the real estate professional to do an accurate BPO. If they later get the listing and recommend a very different listing price, it can be a negative for their relationship with the lender.