What is a Short Sale BPO?

Back in the olden days of real estate, before short sales in Sacramento, you almost never heard the term BPO if you weren’t working in the REO market. The REO market means “real estate owned” and it’s an acronym. Refers to bank-owned foreclosure homes. But BPO can also apply to a short sale.

The way it works is this: When a Wall Street bank worth billions wants to know how much a Sacramento home valued at multiple hundreds of thousands is actually worth, instead of hiring an appraiser — a person most likely with a college degree, who has specialized training, knowledge and the experience to conduct real estate appraisals and receives a fee of $400 to $500 for this service — this bank instead might hire a Sacramento real estate agent, a real estate agent who quite possibly could have dropped out of high school and never sold a lick of real estate a day in her life, and pay this agent fifty bucks to do a BPO.

This is the infinite wisdom of our banks that helped to get us into this miserable state of affairs in real estate to start with. What what are ya gonna do?

Now that we have short sales, banks use the same principle to determine value. They hire a real estate agent to do a BPO. This acronym stands for Broker Price Opinion. Whether the home is valued by an appraisal or by a BPO understand one thing: they are both a matter of opinion. Albeit the appraisal is a bit more complex and calculated, but it’s only as good as the comparable sales that are used, in the opinion of the appraiser.

You ever notice how two people can look at the same thing and see completely different things? One person might look out the door and say, “It’s raining.” Another person might see clouds on the horizon, the sun peeking through and say, “It’s a beautiful sunny day.”

Nonetheless, the bank will accept the short sale BPO and base its decision, in part, on whether to approve your short sale on this price. But it’s only good for 3 months. After 3 months have come and gone, that value vanishes and becomes questionable, so the bank will want to acquire a new short sale BPO. A really clever bank negotiator who never wants to close a file can continue to let BPOs expire and drag the file on and on and on into infinity and beyond, Buzz Lightyear.

Elizabeth Weintraub

About Elizabeth Weintraub

40+ years of experience in real estate, Sacramento real estate broker working at Lyon Real Estate in Midtown Sacramento. Author of The Short Sale Savior. Home Buying Expert at About.com. Top Producer, ranks in the top 1% of all real estate agents in Sacramento Region. Life Member of Master's Club awarded by Sacramento Association of REALTORS.
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