Real Estate Mentor Student Gets A Lesson on Reverse BPO Values.

My real estate mentor student did everything correct when he met with his appraiser. Even after 40 years in real estate investing we are always finding out new things. Recently an FHA appraiser and home inspector did an appraisal for one of our real estate mentor students and said he had always been fascinated with how investors find deals. The Student invited him to our next club meeting and he showed up as he had promised.

At the meeting I was speaking about how to get massive discounts on deals we have under contract and discussed what I refer to as a "Reverse BPO". A normal Broker's Price Opinion (BPO) is typically ordered by a lender for either a short sale or for an REO to determine Fair Market value (FMV). In the "good old days" banks got appraisals on each property but decided the cost was prohibitive and resorted to grossly underpaying Realtors® to do the same work for $45 to $75 versus $250 to $350 for an appraisal.

Almost always the real estate agents compare only the highest comps without consideration for the interior condition or possible rehabs that may have been done illegally. They never take into account what the costs are to remove or repair these illegal additions. Some agents never even see the property, a few will do a drive-by, and even fewer will meet with the seller or buyer and tour the property. Sometimes the comparable sales cross neighborhood boundaries and the property comparisons are not apples to apples.

I have never seen a Realtor® properly estimate repairs even when they know they have to be done. It is entirely the investor's responsibility to meet the BPO person and give him/her a Repair Estimate to submit with their BPO to the lender. This doesn't illegally influence the BPO and it's only fair to a perspective buyer.

The Reverse BPO is the exact opposite of using the highest comps. In this case the lowest applicable closed comparable sales are chosen to determine a market value. As I explained the process at the club meeting the FHA appraiser was on the edge of his seat. We use the Reverse BPO for listing agents who want to see how we got our offer before they will submit our offers to their seller and for sellers who want to know the value of their property. After my presentation, he come over and said that he had been doing Reverse BPOs for many years!

He went on to explain that FHA (Federal Housing Administration) has him do two appraisals on a property one of which is not shown to anyone but FHA. This much lower value is used internally for risk management calculations and is appropriately called the Liquidation Value. The point is to determine if a property has to be liquidated for whatever reason and what the FHA can expect to get by selling it.

The next time you do a Reverse BPO and an agent tells you that you can't do it, explain that if it's good enough for the Government (FHA) it should be good enough for you! Using the Reverse BPO directly with a seller is a very powerful tool to get a better initial price before you start talking about needed repairs. Your report should include closed comparable sales, lowest active listings (wishful thinking by listing agents that are not selling) and the "Depressed" properties in a one mile radius of the subject property. Depressed by definition here doesn't necessarily refer to the property's condition but rather properties that are already REOs or have had a lis pendens delivered to the owner. These properties will likely be coming to market within a year – all of which are competition for the subject property being sold at full market value. Information like that is taught to our real estate mentor program students so they understand real estate investing to the fullest capacity.

change your life mentoring click button j 300x236 1To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.

Real Estate Mentor Student Gets A Lesson on Reverse BPO Values.

My real estate mentor student did everything correct when he met with his appraiser. Even after 40 years in real estate investing we are always finding out new things. Recently an FHA appraiser and home inspector did an appraisal for one of our real estate mentor students and said he had always been fascinated with how investors find deals. The Student invited him to our next club meeting and he showed up as he had promised.

At the meeting I was speaking about how to get massive discounts on deals we have under contract and discussed what I refer to as a "Reverse BPO". A normal Broker's Price Opinion (BPO) is typically ordered by a lender for either a short sale or for an REO to determine Fair Market value (FMV). In the "good old days" banks got appraisals on each property but decided the cost was prohibitive and resorted to grossly underpaying Realtors® to do the same work for $45 to $75 versus $250 to $350 for an appraisal.

Almost always the real estate agents compare only the highest comps without consideration for the interior condition or possible rehabs that may have been done illegally. They never take into account what the costs are to remove or repair these illegal additions. Some agents never even see the property, a few will do a drive-by, and even fewer will meet with the seller or buyer and tour the property. Sometimes the comparable sales cross neighborhood boundaries and the property comparisons are not apples to apples.

I have never seen a Realtor® properly estimate repairs even when they know they have to be done. It is entirely the investor's responsibility to meet the BPO person and give him/her a Repair Estimate to submit with their BPO to the lender. This doesn't illegally influence the BPO and it's only fair to a perspective buyer.

The Reverse BPO is the exact opposite of using the highest comps. In this case the lowest applicable closed comparable sales are chosen to determine a market value. As I explained the process at the club meeting the FHA appraiser was on the edge of his seat. We use the Reverse BPO for listing agents who want to see how we got our offer before they will submit our offers to their seller and for sellers who want to know the value of their property. After my presentation, he come over and said that he had been doing Reverse BPOs for many years!

He went on to explain that FHA (Federal Housing Administration) has him do two appraisals on a property one of which is not shown to anyone but FHA. This much lower value is used internally for risk management calculations and is appropriately called the Liquidation Value. The point is to determine if a property has to be liquidated for whatever reason and what the FHA can expect to get by selling it.

The next time you do a Reverse BPO and an agent tells you that you can't do it, explain that if it's good enough for the Government (FHA) it should be good enough for you! Using the Reverse BPO directly with a seller is a very powerful tool to get a better initial price before you start talking about needed repairs. Your report should include closed comparable sales, lowest active listings (wishful thinking by listing agents that are not selling) and the "Depressed" properties in a one mile radius of the subject property. Depressed by definition here doesn't necessarily refer to the property's condition but rather properties that are already REOs or have had a lis pendens delivered to the owner. These properties will likely be coming to market within a year – all of which are competition for the subject property being sold at full market value. Information like that is taught to our real estate mentor program students so they understand real estate investing to the fullest capacity.

change your life mentoring click button j 300x236 1To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Frequently Asked Questions

1. What Should I Do If a Seller Ghosts Me?

If you feel you have been ghosted, act decisively and quickly. If you have tried texting and calling, it's time to drive by the seller's location. I always take the recorded Notice of Interest or Memorandum of Contract to leave, so the seller knows it exists. Go by at a time when you know they will be there and don't be confrontational, just get the facts.

In our experience with new investors, the chances of losing a deal with no contract is likely over 85%. Verbal commitments do not apply in contract law; get everything in writing, especially contract changes.

Different 'gurus' have different opinions, but our experience is finding motivated sellers and then a buyer for your deal. Ideally, you should be finding motivated buyers from day one, so you are ready when you find a seller. Buyers are easier to find as you can see at https://davedinkel.com/products/

Prevention only comes about by thinking a Black Hat wholesaler will be coming after your deal. First, educate the seller that an unscrupulous investor may come by and illegally offer more money, have the seller sign your "Notice to Homeowner," stating that he understands he cannot accept another offer.

There is nothing illegal about changing their mind, it is called seller remorse and occurs about 25% of the time. However, if they have signed your contract, it can't be cancelled for any reason unless acceptable to the investor/buyer.

If price is an objection, you need to find out how important it is to sell fast and for cash. If the seller isn't under a time constraint, has a money issue, or has a personal dilemma, he may not agree to the price you need. Offer to help move and build it into your price before you make your offer. However, never give the seller money; only pay the moving company, and only after closing (escrow with a closing agent). If fear is the seller's issue, break it down into what the real problem is and answer their objections one at a time.

You can get to the root of motivation for a seller by asking a few questions. First, "Why are you selling?", "How soon can you close?", and Are you ready to sign an AGREEMENT today, if not, what do I have to do to make you comfortable?'. The answers to these questions will determine the truth about your seller's motivations.

The best times to involve your attorney in your deals are to have him review your contracting, review the signed contracts from the seller and end buyer, have him open escrow and start the title work, negotiate with city or counties for lien reductions or mortgage payoffs with lenders, and to close the transactions." Your attorney is not the adversary; it's the opposing party's attorney who is a deal killer, and having your attorney allows him to help overcome this obstacle.

The key to successful prospecting and bringing back deals that didn't close is to follow up until the property is transferred in the public record. Some of our deals have been where the seller came back to us months and years later because they felt comfortable with us and not the other "pushy" investors who contacted them.

Your contract's most important clauses are inspection period (as long as possible), when the EMD must be deposited if at all, your ability to access the property, any added clauses specific to the property that will protect you against seller claims later that were verbal only.

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.