BPO Accuracy

Are BPOs Accurate

BPOs have been used for many years by the lending industry and mortgage servicers.  BPOs have proven to be accurate and reliable.

Based on the continued and increasing use of BPOs within the mortgage default and mortgage servicing industry, we knew that BPOs must be accurate and reliable.

An industry-wide study involving multiple valuation companies who perform both BPOs and appraisals was conducted in an effort to determine BPO accuracy.  Properties were randomly selected which were sold and had a BPO and an appraisal conducted on the same property.  Side by side comparisons was conducted which compared the BPO and appraisal price/value to the sold price of each property. The individual valuation companies’ results were rolled up to represent an industry sample.  The aggregated studies indicated BPO accuracy is as accurate as appraisals.

Appraisers rely on information derived by Agents and Brokers:

To complete an appraisal, appraisers rely heavily on the sold prices of comparable houses.  When a house goes on the market to be sold, an Agent or Broker determines the listing price as well as the final selling price of a house. Agents and Brokers determine the selling price for houses. The historical prices of houses are used by Appraisers to determine a valuation. An agent or broker’s longevity in selling houses is predicated on their ability to get a good list price on their listings.

Few will argue Agents and Brokers can’t sell houses.  To imply a broker can determine a price which goes to market, but can’t determine a price for a BPO is a stretch.  To discredit a broker/agent in their ability to estimate a price is essentially discrediting the appraisers who rely on the sold prices which were initially determined by the brokers.

Buyers (or lack of) determine and drive any market (including real estate).  To truly know the buyers’ mindset is to truly know the market.  This is especially true in the real estate market.  A seller can be wishful thinking and put any price that they want on a house, but if it isn’t reasonable, nobody will BUY it and the house will stay on the market.  Even in a market which favors sellers (a seller’s market) the overabundance of buyers creates this type of market and the sellers are still responding to the buyers’ mindset.  In any market, sellers need to know what the buyers are willing to pay and sellers determine the selling price based on that.

A significant portion of Agents and Brokers is to interact with home buyers. No other real estate professional is as close the home buyers than Agents and Brokers. More than anyone else, Agents and Brokers know the mindset of home buyers.

NABPOP provides a directory of Brokers and Agents who spend most of their time with real estate buyers – evaluating, pricing, and advising – giving their pricing opinions.

Furthermore, NABPOP formally trains agents and brokers on how to complete accurate and timely BPOs with fundamentally sound valuation techniques.  NABPOP administers a stringent BPO certification process for performing BPOs.  Additionally, organizations who order the majority of BPOs, BPO and REO companies, have a vetting process which ensures only the best brokers can provide BPOs not to mention that these organizations have a QC process that each BPO submission is subjected to before being returned to the customer.  Brokers are put through the paces to ensure quality and accuracy between the certification process, the vetting process, and QC processes. NABPOP works closely with BPO organizations to ensure the most comprehensive and effective BPO training course and certification process is available to Agents and Brokers.

BPOs have been used for many years by the lending industry and mortgage servicers.  The industry has developed a self-policing mechanism which ensures quality.  Servicers realize the importance of basing their decisions on reliable information prepared in a professional and thorough manner.  They require BPOs to meet stringent quality assurance metrics before they are accepted.  If BPOs did not prove themselves to be accurate and reliable over time, BPOs would not get ordered.

The longevity of the BPO industry is a testament to the accuracy of a BPO.

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