Note investor tape review AVM vs BPO
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
7e investments53 Reviews
Note investor tape review AVM vs BPO
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Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
7yNot a note investor, but I'd like to comment on the AVM vs. BPO discussion. If the BPO was contracted direct w/ the agent, its much more valuable compared to one done through an appraisal/bpo management company. Having performed a TON of BPOs, I've experienced that many times these firms have a preconceived number based on an AVM, and will only accept BPOs within a certain % of that AVM result.
For example, multiple times I've toured a home previously because it was on the market or the owner wanted to sell. I included that info in my "exterior only" BPO, which was then rejected because they wanted me to match the interior inspection to the exterior (which was much better than the interior) and ignore my knowledge of the interior. Another time I fought tooth-and-nail was because their records showed the property as a SFH and the listings, tax records, zoning, and personal knowledge showed it to be a 2-unit. And many other times, I've had to fight that even though a supposed "comp" might fall within the mileage restriction, it was outside of the immediate neighborhood and not at all a comp. Each time the final number they wanted me to hit was close to the Corefact AVM.
While I personally wouldn't back down (which is one reason why I do very few BPOs now for the big management companies), I know MANY agents doing BPOs will just find comps to match the # the companies want to see so they can get their $40. So the value of a BPO as compared to an AVM isn't what it seems when these valuation management companies are involved. Further, many of the bulk-BPO agents just use "assistants" in India who pull photos from Google Maps and the like and overlay a fake timestamp, so even then you can't be sure eyes were really put on the asset.
8 Replies
- Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes7y
I find it helpful to know what the seller thinks the collateral value is, regardless of accuracy. If our own valuation in higher than the sellers number and the bid is based on value, that’s an advantage in the bidding process because the bid can be stronger and more competitive. If it’s the other way around, we may not bid at all.
- Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes7y
Not a note investor, but I'd like to comment on the AVM vs. BPO discussion. If the BPO was contracted direct w/ the agent, its much more valuable compared to one done through an appraisal/bpo management company. Having performed a TON of BPOs, I've experienced that many times these firms have a preconceived number based on an AVM, and will only accept BPOs within a certain % of that AVM result.
For example, multiple times I've toured a home previously because it was on the market or the owner wanted to sell. I included that info in my "exterior only" BPO, which was then rejected because they wanted me to match the interior inspection to the exterior (which was much better than the interior) and ignore my knowledge of the interior. Another time I fought tooth-and-nail was because their records showed the property as a SFH and the listings, tax records, zoning, and personal knowledge showed it to be a 2-unit. And many other times, I've had to fight that even though a supposed "comp" might fall within the mileage restriction, it was outside of the immediate neighborhood and not at all a comp. Each time the final number they wanted me to hit was close to the Corefact AVM.
While I personally wouldn't back down (which is one reason why I do very few BPOs now for the big management companies), I know MANY agents doing BPOs will just find comps to match the # the companies want to see so they can get their $40. So the value of a BPO as compared to an AVM isn't what it seems when these valuation management companies are involved. Further, many of the bulk-BPO agents just use "assistants" in India who pull photos from Google Maps and the like and overlay a fake timestamp, so even then you can't be sure eyes were really put on the asset.
- 7yDan DeppenBusiness MemberErie, CO · Member since 2017 · 274 posts · 267 votes
I think they can be helpful as a starting point, but I take any value the seller provides with a big grain of salt. Although as Mike pointed out when the seller BPO is lower than what I think the value is that can be an advantage.
- Investor · Parker, CO · Member since 2014 · 42 posts · 44 votes7y
Interesting topic, Initially I would say there is a big difference between a BPO and AVM with the logic behind someone has put eyes on the property if only from the exterior. Also mentioned it is a helpful to know what the seller is using to gauge value and what the pricing expectations are.
I found @Matthew Olszak post regarding the AVM vs BPO, insightful and in some instances may not be a big difference in terms of accuracy between the two depending upon who is pulling the BPO.
I think it validates the ideas of trust but verify and importance of having a reliable team in place in markets that you can rely on, especially considering the amount of information you can obtain is inherently limited to exterior of property.
- 7yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
@Chris Seveney
I can’t comment on residential BPOs, but commercial BPOs value is identifying and describing the property, the value analysis is worthless. Since being a commercial real estate appraiser takes an enormous amount of education, knowledge and experience, believing that someone with what’s essentially a light to medium dose of those attributes can accurately evaluate property where direct comparable are often not available is more than wishful thinking.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes7y
I guess I am being anal but its frustrating when they say BPO and its an AVM because I have boots on ground in several areas where they say its a $75,000 property and the properties are vacant and worth less than $40k. So basically its not worth bidding on them because the UPB is $90,000 (which its a FC) but if I bid off the $40k the seller will not even consider it even if I send pics (From past experience) and if I bid off their value I alreaddy know I am fading the bid and why waste time on OE and BPO if they do not agree with my BPO.
7e investments53 Reviews - Los Angeles, CA · Member since 2018 · 17 posts · 9 votes7y
@Chris Seveney
Ok I’m not in the business yet, so take my opinion with an appropriate dose of salt. HOWEVER, when I see a report on a note and the listed “BPO” value somehow seems to match the property’s “ZEstimate” I wouldn’t call anyone “anal” for thinking that’s deceiving.
- Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes7y
@Chris Seveney I definitely would prefer to see a seller label their column, "AVM Value," if that's what they used. We'll exchange BPO reports with our sellers, if it makes sense to do so, and it would be weird if our seller didn't have the back up if they indicated that their value was from a BPO. Totally agree with @Mike Hartzog, a difference in idea of value can make your deal better or your offer stronger. It works the opposite, though, too, which makes it not worth bidding.
My observation is that our sellers put most of their faith in their BPOs and aren't willing to abandon that value unless presented with clear evidence that their value is not supported. Most of the time, it's not worth it to fight too much over value and just kick the loan. This faith in BPO gives the individual or smaller investors an advantage in that we're willing to do more work to get a better idea of value. A loan trader that only sees what their screen shows them and whose time is limited is at a disadvantage to a motivated investor that wants to see a profit on every deal.
I have a recent example where this price differential helped us. We are in due dilligence on a condo in CA that the seller thinks is worth $80k. I happen to be very familiar with the area because I have 19 rentals in the immediate area, including 4 that are in a "D" neighborhood about 3/4 mile away from the subject condo. From experience, I know that the subject condo, which is in a "B" area, was worth about $120k. I was surprised when our BPO came back at $80k as well. When I looked closely at the BPO, they used all of their comps from condos in the "D" neighborhood because there weren't recent ones from the "B" neighborhood. From the BPO agents perspective, the "D" condos were only 3/4 of a mile away and should be good comps. Only because of my local knowledge, I knew that there was a huge difference in value, which gave us a big advantage during the bidding process.
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