The way it works is; after an offer gets submitted to the lender, the bank will then order a BPO.. AKA [Brokers price opinion] on the property.
This person will usually be a local realtor that will go out to the property, and after doing their research on recent sales in the neighborhood, will give the lender their opinion of what the property is worth.
Whatever, the BPO comes in at will be the negotiating point between the lender and potential buyer.
Does it matter if the house needs repairs?
Yes, it does matter and that is something that they are supposed to take into consideration when giving their estimation of value.
After they do the BPO there are 3 things that can potentially happen that will dictate what follows.
1- The BPO comes in at a fair number that everyone is happy with and we proceed to closing.
2- The BPO comes in too low and the bank insists on another one being done.
3-The BPO comes in so ridiculously high that the buyer threatens to walk. Now when this happens, the agent must do whatever it takes to prove to the bank, that the BPO agent got it wrong.
We do this by preparing an in depth report of our own called a CMA which is also known as a comparative market analysis. This report contains even more information than the BPO agent provided them with.
What a CMA basically comes down to is a list of Active, Pending and Sold properties in the area. And the whole purpose behind this is to get the lender to order another BPO or if we’re lucky they’ll just use ours.
In the end, after all the dust settles, the lenders are the ones that decide how much they are willing to accept for the property.