BPO Instructions - Login

1 Page 1 of 5 BPO Instructions Updated 7/19/2016 Please determine a fair market value/price (FMV) for the Subject As Is : Fair Market Value/Price means: The amount for which a property would be sold between a buyer and seller, neither of whom is under any obligation to buy or sell. A typical arms-length transaction. This is why we ask you to refrain from using Short sale comparables if possible. REO comps should be used only if they are the most comparable to subject s condition and there are no other fair market sales in similar condition. Short sales and REOs are distressed sales where one or both parties are under duress, and not typically motivated. If there are no FMV sales or listings in the Subject neighborhood, then one Short Sale and one Short Sale Listing are acceptable. However you will need to comment regarding the use of the distressed sales, and why no FMV sales are available.

2 Please make that comment in the Addendum. The use of Short-sale listings are discouraged completely, as they are routinely misleading. The only exception to this is if most or all comparables in a PUD, condo or townhome complex are short sale or REO. In this case please use comps within subject s development and upload a single line MLS of sold and list comps in subject s complex to the bottom of the COMP PHOTOS/MLS tab. Subject construction type and construction quality: Use similar construction type comparables: Frame: Stick built, UBC/IRC Modular Manufactured: HUD Manufactured Homes built between 1976 and current year. Trailer: Pre-HUD Manufactured Homes built before 1976, and specifically single-wide homes should only be compared to other single wide homes. Condo: Condo Townhouse: Townhouse Co-op Co-op Multi Family 2-4 Unit Multi Family.

3 Preferably similar style and the same # of units, but if not available use multi-family comps (2-4 units) as opposed to SFR comps. Note: Loan/mortgage programs are different for different property types. The interest rates change between property construction types. Mixing property types will result in questions from the review analyst and Client because they almost always have a different value. If comparable data is limited and using different construction types is necessary, please explain the market and value differences in the addendum. Also, be careful to match Subject Construction Quality The finish quality of a home can alter the value significantly. An all brick exterior home usually has a better market appeal than a lap board sided home. Page 2 of 5 Subject style match: Please try to match Subject style: ranch to ranch, two story to two story, ranch basement to ranch basement, tri-level to tri-level.

4 Differing style s typically have different buyers. Especially between ranch and any multi-level style. Comparing multi-level style to another multi-level style is better than Ranch to any of the multi-level styles. In rural areas, we understand it is necessary, but in that case, or any case where you must use dis-similar property types, a well written addendum which pulls all the data points together is necessary. Comparable sale and listing proximity: Distance to comparables guideline: (These are guidelines, not requirements) Urban Setting: mile Suburban Setting: 1 mile Rural: Prefer < 5 miles. 10 can be acceptable with good comments. Over 20 miles is rarely acceptable. If necessary, describe in the addendum why you had to exceed these guidelines. Valid reasons for expanding proximity and not using the nearest comps are: waterfront, exceptional views, multi-family, acreage, lack of sales/listings, etc.

5 Otherwise, please stay within the immediate neighborhood if possible. Any sale/listing within a block or two of the Subject should be at least mentioned in the report/addendum. Rural comparable issues: Please understand the importance of being able to view the Subject improvements, and be cautious in their valuation when improvements are not accessible; please note sources used to identify the subject improvements that are not visible or accessible. When distance > 2 miles is necessary, pay attention to rural vs suburban characteristics ( well and septic vs public utilities) Lot size and land value are more critical in rural areas. Be aware of what drives land values in rural areas, and what drives the overall values (wooded vs pastoral, topography, production, bodies of water, etc.) Value of outbuildings can be significant, you must identify these types of characteristics in the comparable remarks sections of the report, and discuss their effect on subject value.

6 Please do not utilize comparables from other small towns unless income, population, and school district ratings are similar and supportable. If absolutely necessary please add an addendum comment discussing the value trend differences between the towns. If Subject is rural, do not use suburban comparables. In rural areas, provide more market trend comments as the data will be sparse and limited. The agent s comments are critical. Understand legal descriptions. Most lot size errors occur with rural properties. It is advisable to search county assessor sites by borrower/owner name, if possible, in addition to address as this search can lead to uncovering additional parcels included as the collateral. If you do locate additional parcels and need to clarify the collateral, email for assistance. Page 3 of 5 Condos: All data from the Subject complex within the last year should be utilized.

7 Even if Short Sales or REO s. Agent should be trying to glean if the Subject or comp s HOA s are in foreclosure. If there are no comparables in the Subject s complex, we need to know WHY (is there a problem within the complex?). Include last MLS sale/list history from the complex in the addendum section. Subject and comparable condition is critical: Subject: On an exterior report, it is best to consider/assume the Subject interior condition matches the exterior condition. Average Exterior = Average Interior; Good Exterior = Good Interior. Try to find support for any assumption of condition, MLS or other credible on-line sources. See also Exterior Orders where the Subject is in Fair, Poor, or Damaged Condition: on the next page. Comparables Read all MLS/Agent remarks. Do not just put AVERAGE in condition for all the comparables or the Subject, this is inaccurate and misleading most of the time.

8 Enter the most descriptive remarks into the comparable comments field. Focus on key words such as fixer-upper, needs TLC, updated, granite/SS etc. Use comparables of similar finish quality. Pay special attention to the quality finish of kitchens and bathrooms. Solid surface vs granite counters. Custom vs Standard or original cabinets. Tile vs Vinyl flooring. Comparables do not need to be the same condition as the Subject as long as you adjust for the condition, quality of construction, location etc. and can support the adjustment. Condition definitions: Excellent Condition New Construction or extensively rehabbed to the highest quality of construction. Good Condition Rehabbed, revitalized, remodeled, restored or modernized. Average Condition Cosmetic or minor repairs only, maintained home with typical wear and tear.

9 Qualifies for FHA. Fair Condition Significant work or repairs needed to be move-in ready, suffers from obvious deferred maintenance, lacks updating. Poor Condition Borderline habitable, excessive deferred maintenance, neglect and abuse. Damaged Condition Uninhabitable, severely vandalized or affected by natural disaster. Interior orders when the Subject needs repairs to get it to marketable and/or financeable condition: Please use: (as comparable sale & listing #1 & #2) 2 sales which match the Subject's current condition. 2 listings which match the Subject's current condition. The "As-ls" value needs to be based off these four comps. Please use: (as comparable sale & listing #3) 1 sale in good marketable condition. 1 listing in good marketable condition. The "Repaired" value needs to be based off these two comps.

10 Page 4 of 5 Repairs: Please identify the repairs necessary to bring the Subject property to typical marketable condition. Take a photo of each repair. Please exclude remodel / renovation costs, and simply fix/repair what is there. Please refer to the appearance of mold as discoloration instead of using the word mold. The repair estimate details should be based on local contractor cost, not DIY cost. The As Repaired value conclusion should be supported by at least one comp and one sale on your report. Please note: The As Is plus repair cost estimate does not typically equal the As Repaired value because of the hassle factor or entrepreneurial incentive. $10,000 in repairs may increase the value of the house $15,000 for example. We do not expect those # s to always add up, however, do be conscious of the ROI.