To BPO or Not To BPO
In today’s current market many real estate agents have to look to other areas to help them earn revenue to augment their home marketing income. Some agents have spouses that earn a steady income that helps pay the bills during the time that listings are waiting for acceptable offers or a market campaign brings fruition with new home buyers. For myself, the decision was based on trying to find soemthing that was complimentary to my main business focus, real estate. To that End I ended up with doing Broker Price Opinions (BPOs). BPOs are very similar to Comparative Market Analysis (CMAs) except that BPOs are more detailed and are done for a fee, while CMAs are at no-cost for a home owner and prospective home seller.
After spending a considerable amount of time doing these BPOs I have come to the conclusion that they are a two-edged sword. On one hand, if you do enough of them for the right price, they are a good source of extra income. However, on the flip side, they are very time consuming and not very cost-effective to do if one does not set some initial ground rules in doing them. But the key question is – are they worth doing? Before I can answer the question, I should go into a bit more detail in what is the process of getting and completing BPOs.
BPOs can be a steady source of additional revenue if you can be assured of getting them each and every month. This may not always be the case due to many factors. One of the biggest factors is the lending institutions. I tend to work with third party servicing companies that go out and solicit business from these lenders. If they are successful, then the service company has quite a lot of orders to fullfill, which they need real estate agents (known as Field Agents) to complete for them. Basically, lenders hire these service companies to give them financial marketing information on a specific property. I can’t go into what details/services the service provides them, but one of the components is the details market analysis of the property, known as a BPO. The Field Agent (FA) is assigned an order to complete a report on. The report is very similar to doing a CMA for a home owner except there is more detail in writing. The FA must go out and take pictures of the property, view the property and the neighborhood. It is of tremendous help if the FA also knows the market area extemely well. This may sound like a no brainer, but there are real estate agents that will only focus on the money (fee paid for order), take the order, and then try to put together whatever they can to get the report accepted. So, now you have a basic understanding of the the BPO process with third party service.
So, to answer the question of are BPOs worth doing, my answer is Yes and No.
For Yes, it is as long as you can be assured of getting a relatively large number per month. Because of this uncertainty, I have relationships with many different service companies that assign BPO orders. This way I can track my revenue from BPOs each month and see how well I am doing. If one servicer is low in assigned orders for me, I can then accept orders from other service companies. Now, one of the rules that I have established for myself in completing BPOs is that I do not accept any drive-by order (referred to as Exterior Orders) for anything less the $50. Anything less is not cost effective for me to take; I have to contend with wear and tear on my car and my time in conducting the research. In that the BPO will not end with me getting a home to list, the fee is the only benefit I can expect to get from them.
The other advantage for me in doing BPOs is more of a non-monetary issue. And that is that BPOs allow me to learn, on almost an on-going basis, what the market is doing in any specific area. If I get a BPO order to complete on a luxury home in a specific development, my research gives me knowledge about what is going on within that specific market segment. This gives me an advantage over other agents in the area who rely only on doing CMAs for home owners. For one thing, the agents need a willing home owner who is interested in the agent’s CMA. Without that home owner, why would the agent do a CMA? I, on thr other hand, always have a willing recipient of my detailed market analysis with the mortgage lenders and banks.
As for the flip side of doing BPOs, the No side, is that they are very time consuming. Even though you are getting a fee for completing a BPO you still need to take the time to drive to the property to take photos and to do the detailed research that the lenders/banks require (i.e. number of vacant homes in the neighborhood, how many homes in the neighborhood are bank owned/foreclosed, the potential rental amount, etc.). This all takes time. And if you are doing a large number of BPOs each month, the time needed can add up very quickly.
So, the question remains. Should agents do BPOs or not? There is that trade-off. While an agent is spending time doing those BPOs they are not farming/soliciting new customers. Their client base can possibly dwindle. If they don’t have time to get on the phone to prospect for new homes sellers, their inventory will shrink.
On the other hand, doing BPOs is an ideal way to keep ones fingers on the pulse of the market. To be ahead of the curve as to what is going on with prices. Because as an agent does more and more BPOs they will tend to get orders from lenders/banks for homes in a cluster of areas over a period of time. I, myself, have done numerous BPOs within the same development many times over the course of a month. Don’t you think that I pretty much have the idea of what is going with prices there? I also see what other agents are doing with their marketing of the homes and the mistakes they make. I’m getting pretty good at predicting if an active listing is going to be a candidate for expiration. I also see the trend of what is happening with the short sale market and where it is heading. Not only do I have to complete the research for the market pertaining to the home I am contracted to do an valuation on, but I am expected to give a detailed analysis of that market area and the homes within there.
So, in a nutshell, it does take quite a bit of time to complete a proper BPO but it is well worth it because my experience and insight helps me serve my customers that much better. When I give an opinion of the expected selling price of their home it is because I have done numerous valuations of homes in their area and I have been watching the trends of prices over a longer period of time. Not like many of the other agents who ran a CMA in the last couple of days because they had a listing appointment. I have watched the market for months while the other agents have had to cram the data and make some verbage up so that the prospective seller will be impressed that they use all the right buzz words and have some fancy charts (that the agents really don’t know what they mean).
The whole BPO activity has only added to my level of knowledge along with my years experience in marketing to better serve my clients/customers.
Terry Iwaniw
REALTOR Associate
ReSales & Investment Realty, LLC
Off: 856-795-3111 x263
Cell: 609-417-1086
http://www.sellmysnjhome.com
http://snjrealestate.ning.com
http://www.snewjerseyhomes.com
Connect on Facebook – http://profile.to/terryiwaniw
Stumble It!