By Simon Volkov

BPO stands for broker price opinion and is a tool used to establish real estate value opinions. BPOs are often used instead of traditional property appraisals when homeowners enter into loan modification, mortgage refinance, real estate short sales, or deed in lieu of foreclosure.

BPO real estate value opinions are conducted by real estate brokers. There are two types of broker price opinions which include drive-by and internal. Drive-by is just as the name implies. Brokers drive by properties to gather information about the community and to observe exterior condition of houses and commercial buildings.

Drive-by BPO is often used to assess value of foreclosure real estate because opinions can be determined without requiring brokers to interact with foreclosed homeowners.

Internal BPOs require brokers to gather detailed information about the property’s interior and exterior condition. Broker reports include square footage, lot size, number of rooms, and condition of walls, ceilings, roofing, siding, fencing, HVAC unit, swimming pools, hot tubs, etc.

Internal broker price opinions are commonly used when homeowners apply for loan modification and mortgage refinance. They are also used to provide valuations when homeowners enter into real estate short sale contracts with their mortgage provider.

Both drive-by and internal BPO reports provide banks with details of property condition, square footage, and lot size, along with information about the area where the property is located.

Multiple factors are involved with determining real estate values. In addition to the actual property, factors that can affect the price include number of homes for sale and number of foreclosure properties within close proximity.

When neighborhoods are riddled with numerous foreclosure properties the value of all homes in the area can decline. Homeowners across the nation have witnessed real estate values decline by as much as 50-percent. This has resulted in millions of homeowners owing more than the appraised value and being ‘underwater’ with their home loan.

When homeowners owe more than their property is worth they might be eligible for a principal reduction loan modification through Making Home Affordable. Presently, over 100 lenders participate in MHAs Principal Reduction Alternative (PRA) program. Homeowners can learn more about PRA at MakingHomeAffordable.gov.

Homeowners with loans serviced by lenders that are not participating in Making Home Affordable should contact their lender directly to discuss principal reduction options. Although banks take a financial loss by reducing the principal balance it is less costly than commencing with the foreclosure process.

Obtaining accurate real estate value opinions is of the utmost importance when applying for principal loan reduction. Falling home values might reduce mortgage loan balances by as much as 20-percent.

It is important to note that BPO is prohibited from being used as the primary tool for assessing real estate values when the property is used as collateral to secure the loan. This rule stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is best to seek counsel from a real estate broker or lawyer to ensure broker price opinion is the accepted and legal protocol for the type of transaction involved.

About the Author: Simon Volkov is a California investor who shares an extensive real estate article library covering topics of short sales, foreclosure, and the Making Home Affordable program. He discusses the pros and cons of BPO real estate value opinions at SimonVolkov.com.

Source: isnare.com

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