BPO's have more than one value in them. They include generically As Is, As Is Repaired, Quick Sale. They are not one number reports like appraisals.
It is possible the BPO is off, but do not under estimate the person looking at the BPO. Perhaps send some comps to the listing agent and see what they can do. Perhaps the seller thinks the BPO is correct and you are under valuing the property.
Value is what a buyer is willing buy for and a seller is willing to sell for, it is not a science it is an opinion. Which sometimes two opinions are not the same.
My last 3 SS I have helped my clients aquire I have had to send comps to the LA/Negotiator to forward to the lender because the BPO was too high. That proof alone influenced the bank to come down a bit to a more realistic number. Hopefully there are comps that help your case. Good luck.
If we have a bad BPO the first thing we do is tell the negotiator we need to dispute. We then run comps and find the lowest comps for the subject property. The next thing we do is get repair estimates for all the damages. You can get several bids from different companies. You can have a general contractor bid, or you can have bids for area's of specialty such as the roof, furnace, windows, etc.
The next thing the bank does is collect all the data that you sent in and they usually will send everything over to a valuations dept for further review. In almost all our cases we get the bank to reduce the value.
You also need to know what type of loan you are dealing with. If it's FHA or VA those have an appraisal. A VA appraisal will stick to a property for 6 months and they are very hard to dispute. An FHA Appraisal can be disputed with a variance to HUD. They can also order a new appraisal sooner than 6 months.
If its just a BPO with a conventional loan then the bank does do multiple of these and don't have to wait the 6 months like for a VA appraisal. If you still don't get anywhere with the BPO, see if the bank can order a new BPO or wait a little longer and submit the short sale package in again. Usually submitting a package in again will trigger a new BPO.
Go visit the property and take lots of pictures of repairs needed. Document all repairs needed. Have a GC come out and give you an itemized bid to complete all repairs. Don't forget major things like HVAC, etc. Sometimes I've had BPO's come in where the house still had an A/C.. then 2 weeks later when we get an offer someone steals the A/C. This drops the price of the home. The asset manager has never been there and never will be there. Give them a detailed packet on why the price is justified (comps, pictures of comps, map of comps, etc). The last BPO I challenged I had the price dropped from $65,000 to $42,000 - but I did have a 23 page report.
Kent, Monica and Danny are all correct. You can get a BPO lowered if you can justify it. We've done it many times. Of course the best thing is to get a proper BPO in the beginning!