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Broker price opinion (BPO) reports are used by financial lenders and institutions to determine the value of a distressed property that is on the verge of going through foreclosure or a short sale. Real estate brokers write these reports based on the local market data such as recently sold properties and the current inventory of properties on the market. A BPO report is not necessarily difficult to write, but it does require intensive research, usually including a visit to the property, and accuracy is of the utmost importance. Among the information necessary to write a BPO report are the size of the house, its condition and the prices of comparable houses in the area.
A BPO report generally is created by a real estate broker who is hired by a bank or mortgage lender to determine the value of a property that is in the portfolio of the financial lender. This generally is the case when a distressed property is facing foreclosure because of delinquent payments. In this scenario, the lender will seek to gain a BPO report to avoid the cost of obtaining an expensive appraisal on a property that is already losing money because of its delinquent status.
Writing a BPO report is generally a simple task for a knowledgeable broker. There is an enormous amount of data that needs to be collected to write a thorough BPO report, but this data might not be readily accessible depending on the house and neighborhood. The BPO report will require that the broker visit the property and gather all pertinent information relating to the property, including the total floorspace of the house, the number of bedrooms and bathrooms, repair estimates and photographs. After the broker has acquired this information, he or she will then need to assess the neighborhood and the other comparable properties that have sold in the area. Upon gathering this data, the broker can then write a report that informs the reader of the value of the property and the factors that determined the value.
A BPO report is critical to the successful management of a financial institution's real estate portfolio. As bank and financial institutions become of aware of properties that are in delinquency, it is important that they are able to determine the value of the property quickly and at a reasonable cost. By doing so, lenders can determine the best course of action in resolving the defaulted real estate mortgage through a variety of strategies, including foreclosure or allowing the property to be sold for less than the mortgage amount, which is known as a short sale.
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