Why Real Estate Agents Should Take Advantage of BPOs Right Now Learn what BPOs are and how to generate regular, reliable income by completing them.
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Most people are familiar with how real estate agents get paid, i.e. earning a commission when they sell a house and the escrow closes. But what if I was to tell you that wasn't the only way to generate income with a real estate license? You may have already added property management to your portfolio of services as a way to generate regular consistent income in real estate, and why not? Agents can earn a percentage of the rents that they collect every month. This is a far cry from relying on commissions that often fluctuate from month to month.
However, there is yet another way to generate immediate, consistent income with your real estate license: completing broker's price opinions (BPO) for banks, lenders, corporate institutions, insurance companies and hedge funds.
If you have had your real estate license for a while, you have probably heard the term BPO. You've probably heard other agents or brokers dismiss them as not profitable and time consuming. Like anything, it depends on perspective and one's ability to scale. Selling a few 99-cent items doesn't sound glamorous, but selling a million 99-cent items will change your life. I have met real estate agents around the nation that have been able to grow their BPO divisions into businesses that generate an extra $10-20,000 in gross revenue.
What a BPO is and why it exists
A BPO is an estimate of a property's worth completed by a real estate agent or broker. The forms are usually completed online, although I have submitted many BPOs using a Word document as well. These estimates are often used to help corporate entities decide what they are going to do with a property or the loan associated with a property. Most people associate a BPO with some type of foreclosure proceeding or short sale, but they are often used in bankruptcy and divorce proceedings as well. They are not appraisals and are more in depth than a comparable market analysis. Depending on how good you are at finding comparables to the property, completing a broker price opinion can take up to 30 minutes per form to complete.
When I first learned about BPOs in 2005, I was shocked that I could get paid to do something that I was doing anyway for free. I am referring to completing comparable market analyses (CMA) for current and prospective clients. How many CMAs do you complete per month? How much do you get paid for that? You already know the answer to that — you aren't compensated. All you get is the expectation that when a client buys or sells, they will use you. That same expectation applies to a BPO. Your name and license number is associated with that completed report, and there is always the possibility that whomever ordered the BPO will use you, if and when they decide to sell the property. The only difference is, with a BPO, you are at least compensated for finishing the report.
BPOs cost less than an appraisal and are nowhere near as detailed. They are a quick and cost effective way to get a professional estimate of a property's market value. As agents, you can expect to be compensated anywhere from $25-250 per BPO you complete, depending on the distance and complexity of the report. The average price is typically $45. It doesn't sound like much, especially when you are talking to a real estate agent who is used to generating double digit commissions on one sale, but having a BPO division can be a lucrative, and more importantly, consistent stream of income you can have with your real estate license.
Most states require that all fees, including BPOs, be paid directly to the broker, and the broker is held responsible for compensating the agents. It is important that you abide by the laws mandated by your state's department of real estate.
When I first started doing BPOs, I accepted anything that was within a 60-mile radius of me, which wasn't smart. Back then, we were using BlackBerrys (mobile phones for those under 30 years of age) and would sit by our phones waiting for mass emails to go out distributing BPO work. It wasn't uncommon for a valuation company to start distributing orders on a first come, first serve basis at 8:00 a.m. EST — which meant I would wake up at 5:00 a.m. PST just to click on an email link to accept work. Those were crazy times, and fortunately for you, you don't have to do that anymore.
These days there are companies that can auto-accept the orders for you for a small fee per report. Use these auto-accepting companies at your discretion as some providers do not like 3rd party software accessing their systems. The best method of guaranteeing work is to establish relationships with the BPO providers and the vendor managers for each state or region that you want to work. These vendor managers do get shifted around, and unfortunately, even let go from time to time, so it's important that you make personal contact at least once a month and remind them that you are there to serve.
Each BPO requires that you visit the subject property, take photos of the exterior, and compare it to three sold properties and three active listings. Take the best photo you can from the sidewalk or street. Do not go onto private property or step foot onto the actual property unless it's an interior inspection and you have coordinated access to the inside with the property owner.
You can use your camera phone. A professional grade camera or a wide angle lens isn't necessary. It will take you about five minutes. Make sure the images are taken horizontally. Some reports will need the photos to be time stamped. Most reports require the following photographs:
- Address verification (curb or door or mailbox)
- Front of home (two angles)
- Left side (exterior)
- Right side (exterior)
- A view looking down the street (think Google street view)
Each BPO requires three sold comparables and three active listings to complete the report. When I got started, I was naïve and such an overachiever that I would visit the comparable properties and photograph them myself. You absolutely do not have to do this. Use the MLS photos for comparables. Do not use prior MLS photos for the subject property and don't ever use Google maps street view photos of the subject property either. They will catch it immediately and boot you from their system.
How to scale
Remember that your name and license number is on every BPO you submit. You are ultimately responsible for the quality of work submitted. Growing a business is challenging, and any time you employ the efforts of others, you run into issues with performance and quality control. This is par for the course.
It is also important to note that some providers do not permit anyone other than yourself to complete every aspect of the BPO. It is impossible to scale a business when you are the only one doing all the work. You ultimately make the call on whether you want to work for that provider or not. No one is forcing you to accept orders from any specific company.
Back in 2005, I knew there had to be a system that would allow me to complete more orders. I hired people to help me with the data entry and hired a field representative who would visit and inspect properties for me. Everyone was local and everyone worked out of my broker's real estate office.
What I had done was created a system whereby:
- I would accept the BPO orders.
- I would assign the orders to my data entry team.
- I would send my field rep to visit the property and complete the exterior photos and inspection.
Using this system, I was able to scale from doing three to five BPOs per day myself to completing between 400 and 500 BPOs per month in 2007 (with a team of about five people). That was over $13,500 in gross revenue. Knowing what I know now, I could have scaled larger back then as all I was focused on was my local market and never once considered the possibility of expanding my territory into additional counties or states. It's also important to point out that was a different era of economic crisis, but the volume of BPOs during our current reality has slowly been picking up again. Banks are always ordering BPOs.
A virtual world
The pandemic of 2020 changed things. The rise of the virtual employee has opened doors for many businesses. It doesn't matter what side of the fence you are on, working virtually is here to stay.
There are many data entry companies that offer virtual assistants both in and outside the U.S. to assist with data entry. There are also several field representative companies that can inspect and visit properties for you. Because these companies offer these services on a national level, it can be much more cost effective to use them versus hiring your own. Again, please review the terms of service that you agree to with each BPO provider as some have rules preventing outsourcing — especially outside of the U.S.
It isn't hard to run an ad on a job posting board searching for field representatives in any market, and in this Uber and Doordash world, people are more than willing to complete five-to-10-minute field inspection orders as they go about their day for extra cash.
Be the go-to person
The more reliable you become, the more valuable you become, and the higher fee you can earn. There are many BPO agents earning $65 per exterior report in comparison to the $40 average fee, and it isn't unheard of for some BPO agents to earn up to $250 per report, especially in more rural areas. I'd estimate that the average net per BPO, when you employ the efforts of other people, runs about $18 per BPO. Complete 100 BPOs per month and that's an extra $1800 of net income. I know some people who have rental property that don't make that much.
It's your job to register with as many BPO providers as possible and win them over. Being a BPO asset manager can be very stressful and real estate agents drop the ball on reports all the time. I'm sure that sometimes it's because the agent is a one person show who doesn't see the value in driving 30 minutes to inspect a property, only to then work on the report for an additional 30 minutes for $40. I get it. This is usually when a BPO agent with a team steps in and seizes the opportunity to impress.
The key here is accountability and organization. There isn't anything unbelievably amazing or unique about this process. It isn't brain surgery. The key is building a reputation as the go-to person in your city, county and state.
It's stressful for asset managers to assign orders to agents who don't perform well, and there's nothing they like more than having someone in their back pocket that they can give all their orders to.
That being said, BPOs are one of the best kept secret income streams for real estate agents I know.