I am writing on behalf of the Real Estate Valuation Advocacy Association, an alliance of member companies dedicated to the maintenance and further development of high quality standards within the real estate valuation industry. This will clarify the many misconceptions found in David Berenbaum's June 2 Viewpoint, "Broker Price Opinion Invites Abuse."
The REVAA is made up of companies that produce and deliver real estate valuation products needed by mortgage investors, servicers, originators and borrowers. These products include appraisals, broker price opinions and automated valuation models. We believe that homeowners, the mortgage lending industry and the economy as a whole are best served by a diversified array of real estate valuation products.
To clarify for your readers, a broker price opinion is an estimate of the probable selling price of a property. A BPO is performed by a licensed real estate broker or agent who includes an inspection of the subject property, and review of the neighborhood by a professional with experience in the local community. A BPO will also contain local and regional market information and trends, and a listing of comparable properties in the area. Local brokers are keenly aware of their local markets and are often the best source for information on local real estate matters.
Additionally, BPOs have a proven track record of reliability, accuracy and cost-effectiveness, and their use is long established in the mortgage industry because of it.
The use of BPOs has been clearly articulated in federal programs designed to stem the housing crisis and manage the growing number of troubled mortgages. Member companies of the REVAA perform substantive service to the housing and mortgage industry through their innovative development and delivery of valuation services.
Most important, the argument that real estate agents commonly engage in fraudulent "property flopping" appears to be based on mere anecdotal evidence and hearsay. The fact is: oftentimes BPOs are used in the industry as a check against fraud where values may have been artificially inflated or manipulated by other parties. The assumption that the real estate agent who prepares the BPO also gets the listing or otherwise indirectly benefits on the property is false. The standards and guidelines for BPOs address conflicts of interest and require lenders and servicers strive to obtain a BPO where the agent has no financial interest in the property to ensure objectivity.
Finally, the writer suggests that companies should "follow the lead of more than 20 states in limiting the use of BPOs to realty listings and prohibiting their use in short sales." Such a suggestion reveals a serious misunderstanding of the facts as state laws are generally not interpreted as restricting BPOs for use beyond listing purposes. The data and information contained in BPOs for the lending and servicing community is vital to the rebuilding and maintenance of a sound mortgage and housing industry. Innuendo and anomalies should not be driving policy. Good sense and facts should be our guide.
Donald E. Kelly
Real Estate Valuation Advocacy Association