Better BPO Decisions Help Reduce Overvaluation

BPO enhancements provide more and better information to support the accurate valuations needed in today's turbulent market.

Addressing the volatility in values of the current market, Pro-Teck in Waltham, Mass., has added full Subject Listing History and a live link to Interactive Satellite and Flyover Imagery to all of it's BPO products. The company says valuation and due-diligence in the current volatile market need to go beyond a value conclusion.

The Subject Listing History provides 36 months of listing detail from the local MLS. Pro-Teck's inclusion of this information helps to highlight possible fraud and/or pricing trends that have become increasingly important today.

Satellite and Flyover Imagery has been incorporated into the Pro-Teck quality process for some time, however, market demand for access to supporting information and data behind the value has led to Pro-Teck adding a live link to the aerial imagery in the final report delivered to clients.

With access to this integrated web tool, clients have the same ability as Pro-Teck's staff appraisers to view the subject and comparables in 360-degree aerial views. The imagery can be used to better understand the impact of location on the subject as well as selection and weighting of the comparables.

Understanding the basis of a value is essential, whether it's loan origination, servicing, selling or acquisition. The company's valuation services goes beyond a solitary value conclusion and delivers the detailed information required to defend and negotiate values.

Key benefits include fewer bad loans through proper valuation and fraud detection, higher profits from lower due-diligence costs and increased internal bandwidth. The end result is a complete value and risk picture with the supporting detail needed for credibility and defense in today's market.

Asset managers should make it a point to create benefits for everyone involved in getting accurate BPOs. According to CJ Gehlke, president and founder of REO Nationwide in Newport Beach, Calif., Benefits will allow everyone to continue saving money by avoiding excessive appraisal costs and getting better values than what she says are available electronically.

"This can be accomplished by continuing to utilize real estate agents for BPOs," said Ms. Gehlke. "Put some thought into the issue. Go the extra mile and do what is possible to contribute towards a solution. Together we can strengthen the relationships between client, outsourcer and real estate agents with better BPOs as one of the results."

BPOs are often obtained and asset managers get a value in two weeks. Once in foreclosure, many get a BPO on every asset and an appraisal on properties worth more than $100,000, depending on each company's particular process. Some REO asset management companies have an appraisal network they manage. An exterior BPO is often taken and compared against the appraisal at origination. An interior BPO is done and studied relative next to the age of the home and where the property is located as well as other property values in that area. And in terms of trash outs, it's getting harder and harder to put a value on someone else's personal property.

In an ever-increasing number of states, real estate agents cannot be compensated with money for BPOs. And the person ordering the BPOs isn't always the person assigning listings. In order to keep real estate agents doing BPOs, asset managers must do everything possible to put listings back in their hands, Ms. Gehlke says.

Take a serious look at the available outsource options, she advises. How important are BPOs? In her opinion, electronic options do not reflect the entire picture, and appraisals are still expensive. "If we choose to retain BPOs as an option, we must clarify the benefit to the real estate agent so they will continue to provide us with BPOs in the future.

Real estate agents want listings and they want to know that we clearly understand this request. You can choose to work with an outsource company that lists property. If you can, list with them.

If you cannot control the listing activity from your department, at least use an outsource company that lists assets from some of their other clients."

Loan servicers facing potential defaults in an unstable market are feeling increasing pressure to decide between forbearance and foreclosure and to act quickly.

Robert Walker, executive vice president of collateral solutions for First American CoreLogic, says traditional automated valuation models assume properties are in average condition, leading them to overvalue distressed properties, often considerably.

"BPOs are more expensive, time consuming and can be equally problematic, in part because they are generated by real estate sales professionals who may possess a natural bias toward higher values," said Mr. Walker.

"Though more accurate, property appraisals simply take too long and cost too much."

Mr. Walker said ValuePoint 4 Default applies refined methodologies, including a patented analytic process, to historical, public and proprietary data to deliver property values with unprecedented accuracy.

The ValuePoint 4 tool, designed for servicers, is a specialized AVM that recognizes that AVMs designed for the origination segment are prone to overvalue distressed properties and uses advanced algorithms to adjust for conditions typical to delinquency. Although the product can be used for a variety of applications, Mr. Walker says it will "absolutely not replace BPOs.

Larger servicers say they are embracing technology. When ordering BPOs, searching for pictures and listing prices, they say electronic modules makes things easier. Servicers, brokers and property preservation companies can develop some sort of schedule to monitor the sales price to try and get activity as sell the property.

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