Getting the BPO to Come In Low...

I have seen numerous questions on how to get the BPO to come in lower than FMV. There really is no one way, but here are some things that can help.

Always have one of your team meet with the BPO agent. Strike up a conversation and see if you can befriend them. The agent's job is to bring in a BPO to the lender, so you have to try and get them on your side. You should never do anything unethical, but if the agent decides they like you, the price might shift in your favor.

Conversely, if it appears they do not want to talk, then leave them alone. Just as becoming friends with them can tilt the BPO in your favor, irritating them can do the opposite.

Either way, the property should not be your conversation starter. Start your conversation with a question. Find out what interests the BPO agent. The more you know about the agent, the easier it is to make them feel comfortable with you and see you as a person, not just a potential buyer.

You will point out any problems with the house, but this particular property is not the end game with the BPO agent. Remember that you very well might see this agent on the next property. We just had a BPO done on a property by an agent that had done the BPO on a property we bought at the end of December. He remembered us because of our approach at the first BPO.

You should have done your homework before the BPO, so that when you get there, you have repair estimates, COMP's, a sexual predator's list, crime rate studies, etc that you can provide the agent. Any little thing that you can provide could be the trigger that gets the agent to lower the BPO. If there has been any crimes on the proeprty recently, then make sure you get the police report and provide that.

One of our properties has been broken into while the homeowner was there twice. It is not in a bad neighborhood, but there is one bad family there. The two brothers were both caught and are sentenced to jail (third strike in Florida), so neither will be able tocause this homeowner any more trouble. But, just the fact that this happened twice should result in a lower BPO. When the BPO is done on this property, we will provide the police reports and a letter from the state attorney general, which stated that the homeowner was no longer allowed to stay in the property because the two who broke in lived just two doors down and were out on bail.

Once you have walked the property with the agent and pointed out all of the problems with the property, this is the time to let the realtor know you have run the comp's for him/her. All of your research should be in a file you can hand over to the agent, so just give them the file. It would be in your benefit to explain that there are other documents in the file than just the COMPs.

Many will state you only need to provide three comps, but in our situation, we have found that if you can provide more, provide as many as you can at the price range you want the BPO to come in at. Some areas do not lend themselves to multiple low COMPs, but others do. Do not provide the higher comps, but if you can find six or more that will help drive the BPO lower, thenprovide them all, especially if the property in question is actually in better shape than the majority on the neighborhood.

Remember when pulling COMPs that they should be within one mile of the property, should be built within +-10 years of the property, should be +- 200 sq ft of the property and have comparable bed/bath. If the agent looks at your COMPs and finds that they do not meet the criteria, you will most likely have burned a bridge with that agent.

Now, these are some things we have found that work, but they are definitely not all of the ways to get the BPO lower. I welcome comments on other way to get the BPO to come in lower.

Our First Rehab

There are a good many people who are on this site who do not post very often. That is the case with my partner and myself. We found this site and were able to answer numerous questions we had in the area of investing that we chose, specifically Short sales.

We have been performing short sales now for over a year, but we never deviated from the short sale/flip model until recently. We closed on a property on December 30, 2009 and decided to keep this property and become landlords. Our main focus is still short sale/flips, but when a good deal comes along in an area that is good for rentals, we believe it would be good to diversify our business.

Before we go any farther, we want to give a tremendous thanks to James Ward of Crosswind Properties, who has been our mentor since we started our business. He is a tireless mentor and has been willing to answer all questions, whether they were intelligent or not.

Now, to the meat of this post. The property we bought was worth $65,000 FMV at closing. It had a 1st and 2nd mortgage. The 1st was owed $118,000 and the 2nd $12,000. We were able to negotiate the 1st down to $29,250 and the 2nd to $2,750 for a purchase price of $32,000. Unfortunately, since this was our first rehab/rental, we did not take any pictures/video of the property before we renovated, but in the two videos below, we show the property after renovation and go over some of the mistakes we made, as well as where we were able to save money. Don't worry, I'll recap after the videos to give a better idea of the prices we paid.

We apologize in advance for the quality of the video and the dry delivery. The narrator (me) is not very good when talking to a camera. :o)

Now, to the nuts and bolts, the prices. We already stated that the property cost $32,000 and was worth FMV $65,000. Well, the property is now worth approximately $75,000 and our total outlay was just over $3,000, which also included the tools we needed to rehab.

The biggest expense in the property was the carpet. We spent $1,016.00 on new berber carpet. We got it from Home Depot for $0.54/sq ft and the padding for $0.48/sq ft and it took 907 sq ft to cover the areas we decided to carpet. It cost $97.00 to install using Home Depot installers.

The paint was where we lost some money. We wanted to go inexpensive, so we bought 10 gallons of America's Finest brand paint for around $180.00. That was a nightmare. We used it for one room and it took over 5 coats to cover the previous paint. At that point, we decided to buy a different brand. We took the advice of the Home Depot (we used them for almost all of our rehab) and got 10 gallons of Behr paint for $200.00, which we used to paint the hallway, living room and middle bedroom.

We also discovered that they have paint which was mixed incorrectly that they sell called OOPS paint. This paint can be any brand (ours were all Behr), but it was mixed incorrectly and was not the shade that the original customer wanted.They sell this OOPS paint, which was normally $40/gal for $5/gal. We used two cans to do the master bedroom, while we used a different color and on can to do another bedroom. The bathrooms were done in a thrid color and used one can between them, so between two bedrooms and both baths, we were able to get them painted for $20.00.

There were two windows that were broken and the frames were not standard. We thought we would have to replace both of them for a total cost of $400.00 plus installation, but were found a way to replace just the broken glass. This cost $9.72.

We replaced the hot water heater for $200.00. We also called out a plumber because the main water shutoff valve was broken. He replaced it, then checked all of the faucets. During this time, we could hear what appeared to be a leak somewhere. He stated that it was in the slab under one of the bathrooms and the whole house would have to be re-plumbed. He stated he could do it for $2,800.00. We decided to call in a different plumber as we stated in the videos. He found that the problem was in the toilets and it cost, parts and labor, $150.00 to fix.

There were drywall issues, but luckily, the person we purcahsed the property from was a drywaller by trade, so he had drywall sheets in the garage that we were able to use to fix the holes, so it only cost us for drywall tape and the drywall compound.

We replaced the stove for a cost of $100.00. We found one in a yard sale that we tested and it worked perfectly. It is actually better than the one in my home (but that's a different story). In the video, it stated that the stove is all we replaced, but the refrigerator just died. We will be purchasing a refrigerator today for $175.00 to replace the existing one.

We purchased two ceiling fans, one for the living room and one for the kitchen, for a cost of $80,00. The dining room light fixture was regularly $160.00, but we got it for $30.00, while the hallway fixture was normally $60.00 and we got it for $8.80. These were closeouts at Home Depot.

Other than the carpet and the plumbing, we did all of the work, so that saved us quite a bit in labor. The entire job took approximately two weeks, but that was more due to the carpet not being in stock at Home Depot than anything else. Our new tenants moved in on January 21, 2010 and we are getting right at 2% in rent on this deal.

We welcome any comments and if you have any suggestions that might help us or any other new rehabber, they would be appreciated. As I stated in the opening paragraph, our main focus is on short sales and negotiations. But, when we find a poperty that we can reach or exceed the 2% rule, we will most likely use it to diversify and expand our real estate business.

Hometown America Properties, LLC

Getting the BPO to Come In Low...

Our First Rehab