Smile, your home is on candid camera!

Have you seen people in your neighborhood drive up to a home, pull out a camera and take some pictures? You might wonder if they’re casing your neighbor’s home, or if they’re terrorists. Certainly, it may seem disconcerting to have strange people take photos of homes in your quiet neighborhood. Who are these people and why are they taking pictures?

Most likely, these nosey folks are just your neighborhood real estate agents preparing a broker price opinion (bpo). A broker price opinion is a report that a lender will ask for to determine the marketability of a home in which they are the mortgagee (the lender). The report is used to assist the lender to understand market conditions by having the real estate agent provide recent sale and listing comparables for the home. Additionally, the lender asks for photos to note the condition of the home and the neighborhood.

A bpo is not an appraisal and should not be confused with one. An appraisal is provided by a licensed appraiser to ascertain a home’s value. A bpo, on the other hand, is provided by a real estate agent or broker with the intention of assisting buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real property. (There is a controversy within the industry over the use of bpo’s.)

The lender uses the bpo for a number of reasons which include selling mortgages, eliminating private mortgage insurance, and loss mitigation. Although we now have a bad taste for the bundling and selling of mortgages on Wall Street, nevertheless this is how a majority of mortgages are sold. The broker price opinion is often used by investors to place a current market value on the mortgage asset by interpreting the bpo.

If you have asked your lender to reduce or eliminate your private mortgage insurance, there is a good chance your lender used a bpo in their decision process. A lender will look at current market conditions and recent sales to decide if a home has the potential of falling below the 80% loan to value threshold.

In the current market environment, loss mitigation is a more common reason for a bpo. Every lender has a loss mitigation department to determine how much they may lose if the home goes to foreclosure. Believe it or not, your lender may order a bpo if your payment is one week late!

Additionally, the loss mitigation department is the office you would communicate with in order to ask for a short sale on your home. So if you are asking for a short sale, you may see these surreptitious agents driving by and snapping photos. Sometimes, the lender may ask for an interior bpo, and you will have to invite the agent in your home.

So, if you see these folks poking around your neighborhood taking pictures, it is likely to be your local real estate agent; however, to be sure you should ask for their card. In taking their photos and inspecting properties, they should be law abiding (which means they do not peek into windows nor should they trespass). However, the police should be called if you have doubt about their identity, or you feel unsafe.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 1, 2008. Copyright © 2008 Dan Krell.