Ask The Underwriter: AVM versus BPO

ask_the_underwriter · #1 (**permalink**) 04-29-2008, 11:19 AM

I received a very good question recently. It brought back some memories of an underwriting team I was on in 2005/2006. For the record, It was the first time in my underwriting career the appraiser wasn't upset at the underwriters. The Realtors were on the chopping block! The question was:

AVM versus BPO: I just want to make sure I'm clear on these. Are they pretty much the same or different. If different, can you please explain?

AVM & BPO's are two different appraisal valuation tools.

An AVM is an Automated Value Model. It is an automated system that combines comparables, survey info, historical info, etc.... It can be pulled in seconds.

A BPO is a Broker Price Opinion, this is a report that actually done by a locally licensed real estate professional in the area of the property. Like an appraisal the BPO has to be completed by an actual person who has viewed the property, pulled comps, made adjustments, taken pictures, etc.. It can be done as an interior/exterior or an exterior commonly known as a drive by. There are usually 3 types of reports depending on the company offering. Like an appraisal the subject property is compared to 3 properties in the area.

Now for my two cents: I personally like BPO's. However, I don't like them when they are used as a desk review or field review for an appraisal. An Appraiser Versus A Realtor? Now there is a battle I want no part of!

D Bass

Mortgage Underwriter & Trainer
Alpha Mortgage Training, created by a Mortgage Underwriter

Erik · #2 (**permalink**) 05-07-2008, 03:15 PM

Do underwriters actually care what anyone but a licensed appraiser says about the value of a property?

Greg · #3 (**permalink**) 05-09-2008, 07:15 AM

An Appraiser is a trained professional at determining the value of a home. An appraisal should be given more weight than either of the 2 alternate methods for determining value. I think a BPO is more accurate than an AVM because of the human seeing the comparable sales. AVM does not tell you the condition of the comparable sales or if they were foreclosures.

Erik, I have had lenders use a BPO for a field review and cut back an appraisals value. I knew the area and it did not seem to be a justified reduction. However, we never get to see the BPO.