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

Tags: bpo, broker price opinions, cma, comparative market analysis, home prices, home sellers, market prices, market trends, marketing research, prices

Are You Hunting For A Bargain?

Whenever the consumer feels the financial pinch, they tend to cut back or put off major purchases such as a new car, appliances, or some high-end electronic items.  But they tend to come back when there are bargains involved.  Home purchases are not that much different.

Nationally, interest rates are down to near record lows, housing inventories are at 20-year highs, and house prices nationwide have softened.  The “consumer comfort” index, according to ABC News and the Washington Post, shows that only 30 percent of consumers polled believe it’s a good time to spend their money. Hmm, that’s the lowest percentage for the index in 14 years.  The Consumer Conference Board found the same thing through its widely quoted monthly Consumer Confidence Index. The Expectations Index plummeted to 68.7 percent in November from 80 percent in September, which explains why the ABC/Post index was down for the first of December.

But are the housing bargains out there?  Absolutely!!  How do we know that?  We watch the housing market in many areas that we help home owners sell their homes and from different associations within our industry.  The Mortgage Bankers Association survey recently conducted showed that loan applications more than doubled from the previous period.  This was due to near record interest rates and the Refinance Index increased over 56 percent.

What does this suggest?  That there are housing bargains out there and that buyers know them when they see them.  We know our market areas and we help our clients find those bargains. 

Tags: Buying, Finances, Marketplace, prices, Real Estate, Selling

Buyers Looking for Stability in the Housing Market

According to the NATIONAL ASSOCIATION OF REALTORS®, potential buyers are still holding out buying homes until they see more stability in the housing market.  This is evidenced by the slight easing of home sales in May.

NAR senior economist, Lawrence Yun, said “I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,”.   Yun also said that household formation has slowed dramatically since late 2006, implying that many people are adding roommates or moving in with parents.  Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — eased by 0.3 percent to a seasonally adjusted annual rate of 5.99 million units from an upwardly revised pace of 6.01 million in April. Last month’s sales were 10.3 percent below the 6.68 million-unit level recorded a year earlier.  The national median existing-home price for all housing types was $223,700 in May, a 2.1 percent drop from May 2006 when the median was $228,500. The median is a typical market price where half of the homes sold for more and half sold for less, but there is a temporary downward distortion in the current national comparison because sales have shifted away from many high-cost markets in the past year. “The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” Yun says.

Basically, this means that the buyer is in the “driver’s seat”.  Total housing inventory rose 5.0 percent at the end of May to 4.43 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.4-month supply in April. More homes are staying on the market longer.

In regards to mortgages, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.26 percent in May, up from 6.18 percent in April, according to Freddie Mac. That compares with a rate of 6.60 percent in May 2006.  This translates to the fact that this year is a better year to buy a home then last year.

“Although mortgage interest rates are trending up, they are historically favorable,” Pat V. Combs, NAR President, said. “The good news is buyers have more negotiating power with a fairly large supply of homes available in much of the country. Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area —if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.”

Again, what does all of this mean to buyers in Southern New Jersey?

Homes are still increasing in price, although slightly.  Existing-home sales in the Northeast rose 5.8 percent to a level of 1.10 million in May, but are 3.5 percent lower than they were in May 2006.  The median existing-home price in the Northeast was $282,700, which is 0.5 percent higher than a year ago.  Do you wait?  No.  Although home prices are slightly higher, sellers are beginning to realize that they must be in a position to negotiate with potential buyers.  Sellers are slowly begininng to accept the fact that their homes must be priced to sell.
<span style=”font-size:78%;”>Source: Daily Real Estate News    June 25, 2007</span>

Tags: Buying, market, prices, Real Estate