Foreclosures, BPO, REO, and Me

In case you hadn’t heard, foreclosures are on the rise. For years, buyers have been asking me about foreclosure opportunities, but up until the last couple of years, there really haven’t been a lot of them in Santa Cruz County. This is owing to the fact that there was such a rapid and steep rise in property values. Virtually all owners who found themselves getting behind on their payments could either easily refinance, or sell their home for at least their outstanding loan balance (plus closing costs, such as commission).

But things are certainly different now! I have begun working with a couple of colleagues at Thunderbird Real Estate, and together, we have formed “The MSE Group” (MSE being Mike, Seb and Ed – clever, eh?). The three of us will together be working with sellers who find themselves in foreclosure or who need to do a “short sale” (sell their property for less than the outstanding mortgage balance plus closing costs). If you know anyone who is in this situation, please contact me – we will be glad to be of assistance to them.

Another aspect of the foreclosure market is BPO (Broker Price Opinions) and REO (Real Estate Owned). There are many reasons why a lender may request a licensed Real Estate agent to perform a BPO (essentially, a mini-appraisal) on a home. One big reason is that the home is in the foreclosure process, and the lender wants to know what the property might reasonably be expected to sell for, given its current condition. Lenders pay Realtors a small fee (ranging from $30 to $90 or more) for a BPO.

A property becomes an REO when the lender has taken back title to a property. Usually this happens after a foreclosure auction on the courthouse steps, when no other bidder offers enough to cover the defaulted amount. This happens more and more these days, as the default amount often times exceeds the value of the property. It may also happen when the lender accepts a “deed in lieu of foreclosure” – the homeowner simply hands over the deed to the lender and walks away from the property. Once the property becomes REO, the lender typically does minimal repairs to the property and lists the property for sale on the MLS. There are a handful of agents in our area who regularly get REO listings – it’s a pretty tight-knit club of agents, to say the least.

It is said that a good way to get in the “REO Listing Club” is to do BPO orders for lenders. Towards that end, I have registered with several dozens lenders and “BPO Mills” in the hopes that I will get some REO assignments. Yesterday, I got a BPO assignment from ClearCapital, a “BPO Mill,” for a home way high up in the mountains of Boulder Creek.

I went up there yesterday to look for the property. Even though I have a GPS unit, and know the area fairly well, this property was difficult to locate. Fortunately, I had a contact to call – an agent from “over the hill” who will be listing this property for the lender. She helped me find the property – she told me it took her three times to find the place. She also told me to be careful, as the property had been raided by the police earlier in the summer, and 2,000 marijuana plants had been seized. Nobody was at the property at the time, she said, but they did find a loaded .22 caliber pistol on the premises. Yikes.

Access to the property was behind a locked gate. A few dozen yards before the gate, there was a relatively late-model pickup truck. It could have belonged to a neighbor, but if so, it was parked pretty far from any neighbor’s house. I proceeded with caution on foot, past the gate, and down the dirt and gravel driveway. A hundred yards or so later, the home site opened up, and what to my wondering eyes should appear…

But a junkyard. Every type of vehicle was littering the premises. Cars, trucks, a bulldozer, travel trailers, mobile homes – you name it, it was there. Cars, and garbage. Several outbuildings, with electrical wires running to them, just lying on the ground. The property itself was big – around five acres, and it was just covered in junk.

Up there in the woods, with the gathering dusk, it can sometimes feel kind of spooky – especially knowing a bit about the history of the property, and what with that mysterious white pickup truck parked just outside the locked gate. Was there anyone still on the property? Occasionally I would hear a noise – an animal? The wind in the trees? Was there somebody watching me?

The interior of the house was, likewise, a disaster. Completely trashed. Were there squatters? The pilot light for the water heater was still lit, I could hear the gas hissing and the flame sputtering. Downright eerie. I spent about a half an hour on the property, checking it out, taking pictures – and then I got the heck out of there, sweating lightly in the cooling air of sunset.

I made it out of there, and home, safely. It took about two hours of research and data entry to write up the BPO order. It was hard one – few comparable recent sales, and the enormous job of the “trash out” was hard to guestimate. I’ve had to have a few abandoned vehicles before, but just cars and light trucks – nothing on the scale of this.

All told, I put about four hours into this BPO, what with the drive to Boulder Creek from Capitola and back. All this for a lousy $90. Was it worth it? Of course not! But it sure made for an exciting day.