Today’s REI Classroom Lesson

Brian Meara discusses how to properly influence a BPO (broker’s price opinion) to support your value.

REI Classroom Summary

Brian shares the importance of pointing out any negatives for the property so that adjustments can be considered. He also shares how to do a value dispute.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Brian: Hey guys this is Brian Meara from The Investor Entourage, today’s host of the REI Classroom. The topic we’re going to discuss today is why valuation is everything.
Mike: This REI Classroom real estate lesson is sponsored by, FlipNerd’s private investor coaching program and your blueprint to investing success.
Brian: You know, one of the biggest questions that I get all the time specifically dealing with short sales is “Brian, how do I determine that I’m going to get a good valuation?” There are certain things that you can do that we’ve discussed in the past. You want to properly prepare for the valuation. Whether that’s a BPO appointment or a full blown appraisal, you want to bring your supporting data, guys. You want to make sure, first of all, you as the investor don’t want to go meet them there. That could kind of be conceived as a conflict of interest.
So the most natural person to let the person in, if you will, the BPO agent or the appraiser, would be the listing agent. Because you’re always going to have to have the property listed. There’s always going to be a listing agent. We simply train our listing agents to be that point of contact. They meet them there. They explain the situation. They give them the three lowest comps which is what we determined our initial starting offer on. They give them a repair estimate always. Some of you may be thinking, “Well, what if it doesn’t need any work?” Well, every house needs work. Every house needs a little bit of upkeep. I don’t care if it’s just some fresh paint and carpet. It’s built into our deals.
You can then add in other data, maybe local crime statistics. You could look at registered sex offenders in the area. That’s kind of extreme. Yeah, but the reality is guys anything that detracts from the value of the property the bank needs to be made aware of. The investor who owns the paper, who holds the note, needs to be made aware of these things because they’re not chances are letting in that town. They’re just reading data on paper, so it becomes critically important that the valuations are done properly.
If the valuation comes in too high, they counter you and it’s a full retail offer, which guess what, that’s where it normally begins. What do you do then? Well, you can challenge it. You can do a value dispute. You have every right to do that, and in fact, you should. But, sometimes you reach the point where you’re going along and you’re just not getting anywhere and you have to decide what do I do.
Well, the reality is it depends on the nature of the deal. Standard procedures are if it’s a BPO they will do a new BPO every 90 days. What do you do? You basically write it out. Because by the time they do the first BPO let’s say and then you have God knows how long, two to four weeks most times for them to actually get back to you with a counter, you enter the phase where you’re going back and forth. You’re going to get close to that 90 days anyway, so a lot of times what we’ll do is we’ll simply just close the file and then resubmit it.
We’ll resubmit it fresh. The good news is you have most of the paperwork. You’re not starting from scratch. You’re just reinitiating the file. This does a couple of things. You want to generally do that on day 91. It’ll restart the file again. You’re probably going to, 99% chance, that you’re going to get a new negotiator assigned to the file. That new submission will trigger a new valuation, in this case a BPO.
The only time that doesn’t work and I’ll tell you is when it’s an appraisal when it’s an FHA loan or a VA loan. Here is the reason. Those valuations are locked in stone for six months. You’d literally have to ride it out six months before they’ll even consider doing another one, and there’s no guarantee they will which makes it even more important that the initial valuation is done properly.
The best way to do that would be to properly train your listing agent. Give them the supporting data they need. Give them the ammunition they need so that everybody wins. You as the investor get a good fair price that you can make a profit. You save the homeowner from foreclosure. The listing agent gets paid. And, the bank doesn’t have to take back another house and board it up. All right? So guys, until the next time, I hope that helps. We’ll talk to you soon.
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