Professional Documents
Culture Documents
Vendor Training Manual
Vendor Training Manual
714.520.5737
www.lres.com
Objective
LRES understands that our vendors are the foundation of our success. By educating our vendors on client requirements, we hope to establish long-standing partnerships which will essentially benefit both our clients and vendors. By producing quality products, LRES strives to remain an industry leader and your partner of choice. The tips provided in this course will assist brokers / agents in completing detailed and accurate BPOs according to Freddie Mac guidelines. Upon completion of this course, the vendor is asked to sign an acknowledgment and complete a short quiz. In passing this course with an 85% or higher, you will be eligible to receive residential Freddie Mac valuation assignments in your area.
Contents
The contents of this course do not review BPO basics but detail general guidelines and objectives to allow for easy data validation and quality control. The following subjects will be examined: Comp Selection Mindset Tips for Commentary Market Conditions Valuation Requirements Rules to Abide By FAQs Things to Remember
Comparable Selection
Comp selection
The comparable sales must represent market alternatives. The subject market should dictate BPO comp selection. Many markets are a mix of fair market and REO sales, the agent must first determine the dominant influence. It is recommended that a 2 to 1 comp ratio is provided, with emphasis placed on the dominant influence. Example: If determined that the subject is located within a REO driven market, then at minimum 2 REO comps must be provided.
Required Commentary
Each BPO needs to read as if it were telling a story about the subject property. Each comment section provides necessary support for an engaging plot. When the support is clear and substantiated, the story ending, or in this case, the BPO value makes perfect sense.
Market Conditions
Stable Market
When home values remain constant or have recently stabilized, it is considered a stable market. Even homes listed on the market for longer periods of time will not experience dramatic changes in value. If the property was previously listed within the past 12 months and did not sell, the agent must comment on the issues that may have prevented sale at the time. This could include but is not limited to inaccurate pricing, condition, market, saturation, etc.
Market Conditions
Appreciating Market
In an appreciating market, property values tend to increase over time. In this volatile market, the increase can be reflected in the recent listings but not necessarily be supported by closed sales. The agent needs to be able to describe and support the appreciating market scenario. Selling above list, multiple offers, etc. The most common indicator of an appreciating market occurs when demand is greater than supply. Economic conditions having an impact on an appreciating market include interest rates and inflation, which serve to increase the value of homes in an area.
Market Conditions
Declining Market
Indicators of a declining market are when home values depreciate over time. In a declining market supply is greater than demand This type of scenario is most commonly referred to in the real estate world as a buyers market. The longer a property stays on the market, the higher the probability the price will need to be adjusted down in order to find a buyer. In a BPO, it is important that you explain the reasoning behind your opinion as to whether your local market should be considered stable, appreciating, or declining.
The following ten Valuation Requirements must be adhered to in order to comply with quality control criteria (see checklist). The purpose is so that every BPO is cohesive and well-supported.
Valuation Requirements
Agent Integrity
The BPO signature should always represent the agent / broker that inspected the property and completed the BPO. All agents need to operate as silent parties. Communication with the access contact should remain respectful but pertain primarily to access scheduling. Example agent response: I apologize but I am not at liberty to discuss this property or estimated value with any interested parties. There should be no additional communication with any interested parties such as the listing broker, selling agent, homeowner, servicer, prospective buyer, family member and so forth regarding the BPO value or related analysis. When the agent is presented with any type of property documentation, especially in regards to a latent defect or hazard issue, it can be reviewed and utilized with discretion but should be discarded if irrelevant to the BPO analysis. Please see Valuation Requirement 2 and 8 regarding adjustments.
Valuation Requirements
Visible vs. Unseen
The expectation is that the BPO condition rating and / or value should not be negatively or positively impacted by unseen damages or upgrades. A drive-by BPO should not take interior factors obtained from MLS or previous inspection into account. Agent should assume exterior condition is representative of interior condition. An Interior BPO should not incorporate adjustments for hidden or suspected damage. Examples of hidden damage that should not be adjusted for: Methamphetamine contamination Unseen mold Lead paint Asbestos Radon gas Defective dry wall. Examples of hidden upgrades that should not be adjusted for: New copper plumbing New carpet padding New wiring Added insulation in attic The servicer will complete testing or inspection when needed. The agent should provide comments regarding suspected damage. Adjustments can ONLY be applied to damages or upgrades that can be visually identified by agent at time of inspection.
Valuation Requirements
Repair Estimates
Cosmetic repair issues for items which are otherwise functional should not feature a cost to repair or upgrade. Any clearly visible substantial damages must be adequately described within the comments section and at minimum 1 photo of area must be provided. In the instance that a property is condemned, the agent should make every reasonable effort to determine why and provide explanation within report. Any repair estimate noted within the box marked as OTHER must always be clarified with commentary. Substantial Visible Damages: Mold Structural Water / Flooding Condemned
Severe Disrepair / Vandalism. A BPO with a repair total exceeding $15,000 is considered to have material damages. A property deemed as such must have at least 3 damage photos of the 12 allowed. Excessive individual repairs will be scrutinized. Data source of repair estimate must be provided for repairs over $1,000.
Valuation Requirements
If the property condition necessitates more than three damaged photos, please ensure the BPO had adequate photos showing primary rooms and the exterior. Refer to Valuation Requirement 9 Photos, for additional direction. The overall property condition rating should be consistent with the repair estimate. Condition ratings used on the BPO form are for general designations, so there is room for interpretation, especially since there is no average rating available. It is also important that the agent use personal knowledge of what is perceived as good in that area when choosing a rating.
Condition Rating Key: Excellent: New construction / fairly new (1 3 yrs effective age) with no condition issues. Substantially upgraded for the market. Good: Average condition, some cosmetic repairs, minimal or isolated substantial damage (such as minor holes in drywall, needed paint touch-ups, leaky faucets, etc), upgrades normal or slightly above average for market. No significant neglect. Fair: Below average condition, major cosmetic repairs, some substantial damage. Typically no upgrades. Poor: May not be inhabitable or partial structure, serious substantial damage throughout entire property, environmental issue.
Valuation Requirements
Land Only
If the structure is missing or the agent determines based on the amount of needed repairs that an existing structure has little to no contributory value, a land only value can be assessed. If the BPO is completed as land only, the majority of comps utilized should represent land only sales. Comps with existing structures can be used to establish the repaired value (see 2/1 ratio from Valuation Requirement 6). The as-is value reflects the land value minus estimated costs to remove any existing structure and the as-repaired value reflects the cost as if the structure were in good condition. If the BPO is completed as land only, include a cost per acre in the addendum comments. When supplying a land only value for Hazard Distressed BPOs, include a cost per acre in addition to the land value.
Valuation Requirements
EXAMPLES #1The subject was involved in a recent fire. The structure has no contributory value and will likely have to be removed. The cost to remove remaining structure should be adjusted for IF the comps used did not feature a similar structure to be removed. Agent would adjust for the cost to demolish and remove structure from property. #2 A destroyed or missing condo is never completed as land only. Typically, there is $0 value so the BPO is completed with an as-is value of $1 (system will not accept $0), and the as-repaired value reflects a hypothetical structure in good condition.
Valuation Requirements
Neighborhood
It is important to include relevant location influences that have a significant impact on the subjects marketability or that of the neighborhood. The agent should be clear regarding the location influences of each of the listing and sold comparables. Include a photo of important influences, when applicable. All comments and adjustments must be non-discriminatory and consistent with fair housing practices. View is an extremely impactful amenity for condos. For condos, always note what type of view for the subject unit and all comps and include a photo for the subject view. Examples include ocean, garden, atrium, parking lot, back street, etc. Common Location Influences: Waterfront Golf course Industrial Resort Busy thoroughfare school. The agent should note whether the area is rural, suburban or urban along with other appropriate commentary in this section.
Valuation Requirements
List History
If the subject is currently listed, pending or accepting back-up offers, it is important that the accurate list price and list dates are represented on the BPO as found in the local MLS. If the subject has no MLS data available, then agent must note No MLS within addendum. The agent can also include expired listing information, if he / she feels it is relevant to the current list price. This information does not feature a required field on form and is frequently lacking on the BPO.
Valuation Requirements
Comparables Grid
For a Fair or Poor condition property, a 2/1 comp ratio is preferred. Two similar condition comps and one superior condition comp. It is always assumed that the Repaired value is the subject adjusted to Good condition. The superior condition comps validate the Repaired value. If unlike condition comps are selected due to lack of availability, this always needs to be clarified in the BPO Addendum. When proximity to subject exceeds one mile (urban), three miles (suburban), five miles (rural) detailed comments must be provided within the addendum explaining comp selection.
Valuation Requirements
Adjustments
It is important that adjustments are reasonable for the local market and consistent across the board. Agents should apply adjustments based on a determined market response to the added feature or lack thereof in comparison to the subject. Example: Comp 1 and 2 sold for the same price within the same month. With the exception of a pool, both properties were considered model matches otherwise the agent applying an adjustment for the pool would not be supported. If the market is declining as evidenced by dated sale comps (3+ months) and / or list comps with extended days on market, adjustments for depreciation should be made, when appropriate. Example Comp Comments: **Sale 1, SS, 156 miles from subj, rural, - 5k garage, + 5k fence, -12k lot, -10k age, +5k bathrooms.
Valuation Requirements
Photos
Photos should be clear and of good quality. Blurry photos should never be included. Agents should take a wide angle room approach versus zoomed in, so more of the room is visible. For a drive-by, it is not necessary for the agent to leave the car but to inconspicuously and safely capture a clear shot of the front of the property. If the property is located down a private drive off the main road, the agent should not continue onto private property. It is appropriate for the agent to take a photo of the drive or no trespassing / privacy sign and provide comments. Suggested photos for a typical property (damages or atypical situations may warrant additional photos): Front Exterior Address Verification Neighborhood / Street Kitchen Living Room Master Bedroom Master Bathroom 2nd Bedroom or Dining Room 2nd Bathroom Improvement, Damage or Additional Room Improvement, Damage or Additional room.
Valuation Requirements
Suggested List Price
The Probable Sales Price should indicate a 90 to 120 day fair market value as supported by the BPO comparable data. If the area is REO or short sale driven, a 90 to 120 day value indicative of the local market should be provided. The Probable List Price is the value the property should be listed at anticipating a 90 to 120 day marketing time. Both values should never be the same value. And should never be 0. (What you would list if for vs. your opinion of what the eventually selling price would be after negotiations). If an atypical property situation or local market factors support a non-standard marketing time or variance, this should be substantiated within the comments. If the determined 90 value exceeds the subjects current list price (if applicable); agent must provide detailed rationalization.
The following Rules to Abide By are additional valuations tips with examples of problems / solutions which will provide the agent with a broad understanding of BPO requirements.
Rules to Abide By
Ideally, all subject characteristics must be bracketed within the comparable sales selection. Sales over 12 months are never acceptable regardless as to whether commentary has been provided. If the determined 90 day value exceeds the subjects current list price (if currently listed); the agent must provide detailed rationalization. Comparable Sales range should provide the reader with a reasonable idea of what is going on within the subject market. Lot sizes should be considered. It is not typically reasonable to compare property located on multiple acres to one which is located within a standard subdivision. The proximity to the subject must be identified in mileage as the crow flies or straight line mileage. Neighborhood boundaries must be considered during comp selection. City boarders should not be crossed if other sales within the city are available. Natural and man-made landmarks often define a market areas boundaries. Pay attention to major highways, lakes, rivers or clearly visible zoning changes.
The below Frequently Asked Questions are to provide the agent with further information regarding the LRES Valuations Process
FAQs
How are orders assigned? Using an Auto Assign system, vendors are notified by email when work becomes available. We do not have auto accept; however, our system is mobile friendly and orders can be accepted via smart phone. Vendors are chosen based on quality of work, location, turn-around time, and fees. Once an order is available, you will be notified by email with instructions on how to confirm or decline the assignment. Freddie Mac orders require vendors to be located within 5-10 miles of the subject property (exception- rural areas). To be eligible to receive assignments, please be sure your vendor information is current and up-to date. Will there be volume in my area? LRES is a nationwide company. Orders will be dispersed throughout the country; however, at this time we cannot predict the areas of concentration. Volume of assignments will vary per month. How can I be eligible to receive assignments? To be eligible to receive assignments, please be sure your vendor information is current and up-to date. All agents / brokers interested in completing Freddie Mac BPOs will be required to review training material, sign acknowledgement document, and pass a quiz with an 85% or higher.
FAQs
Can another person inspect and take the photos for the BPO? No, the BPO signature should always represent the agent / broker that inspected the property and completed the BPO. Failure to meet these terms could result in reassignment, non-payment, and inactivated status on our vendor panel. What information can be shared with the contact person? Communication with the contact person should remain respectful but pertain primarily to access scheduling only. Example agent response: I apologize, but I am not at liberty to discuss this property or estimated value with any interested parties. Who can I contact if I have any questions? For questions or concerns regarding a specific BPO order, contact your account manager whose information can be found on the engagement letter. For questions regarding your vendor profile, please contact Vendor Management.
Things to Remember
Always read the BPO engagement letter and closely follow instructions! If the BPO is ordered as a drive-by, only complete a drive-by. Be aware of due dates, client requirements, and order instructions. Communication is key! Ensure that your Account Manager is always updated as to the status of open orders. Understand that you will be required to agree to an Attestation of Compliance before submitting a Freddie Mac BPO. Return correction requests / client conditions within timely manner. Remember we are a team! The LRES valuations staff is here to answer any and all questions. It is our common goal to satisfy the client requirements in order to create an on-going and successful relationship.