Low Appraisals of Bank REO Properties by Real Estate Agents
June 2nd, 2009 by 
Joseph Smith
Real estate agents are known to perform broker price opinions (BPO) to give appraisals of properties. Because of this practice, lenders who want to quickly unload their bank REO properties prefer to hire real estate agents in lieu of licensed appraisers to appraise properties.
According to industry experts, hiring real estate agents to perform appraisals is a way for lenders to reduce costs. They explained that usually, real estate agents have an interest in selling REO properties and they tend to reduce price estimates that created a market with artificially low-priced houses.
Unlike licensed appraisers, real estate agents do not have regulatory oversights of their property valuations. And lenders are attracted to BPOs because they can cost from $40 to $65, which are significantly lower than the $350 for a property appraisal.
However, critics pointed out that most real estate agents have this desire to earn commission for selling bank REO properties later.
David Teacher of Superior Residential Appraisals pointed out that decreases in valuations in Florida could be prevented if all lenders stop using BPOs and shift to appraisals. He explained that some bank REO properties were given 1997-level values which he believed is quite absurd.
Real estate agents believed that BPOs are a great opportunity to cope with the impact of the housing crisis. Proponents of BPOs argued that real estate agents are in a better condition to give accurate price valuations because they have knowledge of what would entice buyers.
Lisa Rose Mann of Principal Real Estate and Auction criticized the misconception that real estate agents could not give accurate price estimates. She said that she has never taken listings because of her BPO work.
It is legal in Florida to use BPOs but the practice is illegal in 23 states. Some organizations, including the National Reinvestment Coalition, call on states to prohibit the use of BPOs as substitute for appraisal of bank REO properties.
The number of BPO deals spiked when foreclosures dominate the housing market. The increasing use of BPOs has prompted some regulators to question the practice. Lenders use BPOs to ensure that they are getting a fair deal when they approved a short sale.
They also used BPOs if they want to determine the price of bank REO properties.
