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I am starting to feel like every time PCV Murcor calls me, instead of emailing me, to complete an interior BPO, its because another agent turned it down and its a nightmare report.
Completed an interior BPO the other day. House is knock down. Fire damage with a giant hole in the ceiling. I can maybe find 1 active and 1 sold (its over a year old sale). Its also located in a major flood zone and can't be rebuilt as is. It would have to be rebuilt with a 9 foot elevation. Its priced well below anything else in the area.
Do you ever just tell the BPO there aren't enough comps in a given area to complete a credible report?
I went back 2 years for comparables and over a mile. Can't even find a land comp.
What would you do?
You've got to call them and tell them and ask what they want you to do. Period
I'd let them know ahead of time that you may not have a true comparable. Some will ask you to cancel the order and some will give you the greenlight to "do the best you can". To me, that means use the best comps available and make sure your adjustments are supported by the market. Even if you have $40,000 condition adjustments across the board, you are putting forward your best estimate of value.
I enjoy taking on the challenging (nothing like this in the market) BPOs and have had a few turn in to listings down the road because the Asset Managers have realized I'm a valuation god. ;-)
I did end up speaking to them after I posted this. They requested I send over the pictures of the fire damaged house. Still waiting to hear what they want to do. For $80 for an interior with no chance of getting a listing out of it, I don't want a challenge.
Normally in cases like yours, they would want you to first confirm if the property is a tear down or if it can be repaired for less than the value of the property if it were in marketable condition.
If you were to conclude it is a tear down, you would include the cost of demolition in the repairs and then perform the BPO based on land only.
If the property can be repaired at a reasonable price, you would select comps that are in similar condition, e.g., boarded homes, homes needing extensive repairs to roof, foundations etc. Then comps do not necessarily need to be those of fire damage. I hope this makes sense.
Thanks for your response Pam.
I ended up giving a 'as is' and repaired value. No comps within 6 months. Had to use ones with a similar flood zone setting and was able to find a few in rough shape. Came in $100k over the current list price but I could't find any comps to justify a lower value.
Considering not taking any more BPOs from them, as its not worth the money for all the work it takes to complete their reports.
Here's what I had to tell RRReview AFTER I accepted a rare high priced interior and BEFORE I even went to look at it:
"I’m sorry but I cannot complete this order. There are no comparables within the city of Barberton (Ohio) or within 5 miles of the subject. The pricing suggests that there is major damage and is in need of a contractor inspection in order to assess the cost of the repair. I am not qualified to estimate those costs."
The house was 3500 sf and listed at $44900. There have never been any interior photos in the MLS, was originally built in 1907 and apparently has had numerous additions although blended nicely from the exterior. The MLS included the verbiage "This property needs repairs. Looking for a skilled handyman who can take this project on. The after-repair value is estimated to be $135,000."
OMG. If the after value is only $135k, that is ridiculous - even in Barberton Ohio.
There are only 6 sold comps ever last 10 years within 15 mile radius. Most recent is XXX years ago. We expanded the distance to 50-100 miles away in the same State. We believe the valuation is best comp.
This is the same rational as SC County Assessor used Hearst Castle to compare a huge estate in San Mateo County and determined they are overcharging property tax by $50,000 a year.
I stayed out of Santa Cruz rural neighborhood completely....
When I cant find comps in the same condition before you start work call your coordinator and explain to them there are not any comps in the same conditions as your subject property and they will usually get back with you to go on GLA and just do adjustments.
I had this situation after hurricane Ike and many beach homes wound up located on public beach and were not allowed to be rebuilt or even sold for any amount. The bpo companies (after much discussion) told me to 'pretend' the property was sellable and what would be the value if these problems didn't exist. I think they were just wanting to know the dollar amount of the loss for the investor. Of course some of these orders were just cancelled after understanding the situation. There were many, many of these types of bpos I did due to the enormous amount of destruction.