In negotiating a workout, in many situations, the conclusion is an amount based primarily on your ‘liquidated net worth’. What else could it be? It is the only reasonable measure of what the result would be in a real defaulted bank loan, foreclosure and liquidation by auction, the only kind of liquidation the bank will utilize.
So if liquidated value under auction is the bench mark, what happens when a bank orders up a BPO (Brokers Price Opinion)? They are obtaining he highest possible value without being controlled by regulated standards such as those controlling a licensed appraiser.
A BPO is the opinion of a real estate broker, licensed to sell real estate, not appraise it. Presumed market value, what it would sell for on the market in the due course of time, a year or more , whatever absorption is in this market would be, hardly a likely result if foreclosed and auctioned. But by using a BPO the bank pushes up the borrowers amount of equity and the liquidated net worth is valued with the inflated BPO and the bank has improved its bargaining position. The greater the equity, the higher the liquidated net worth and the more it will cost to settle, negotiate a workout.
Do not allow BPO’s to be used, use only certified appraisers, the truth works….opinions do not.
There could be no higher an appraisal as a BPO. It is unreliable, does not on form to any standards and should never be considered a valid determination of value, especially in a liquidated manner.
A recent example: Just heard from the bank doing a BPO , came in at $500,000. Our appraiser re-certified an earlier appraisal done months ago for $525,000 and came back saying $375,000 Clearly the BPO was exactly that an opinion.
Do not let this happen to you, offer to pay for a real appraisal, it will serve you much better and is worth every penny it costs.
