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External Circular
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 1 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
BPO Reporting Requirements “Lead Your Reader to your Conclusion”
Circular No.: 2012-28-E Date: October 16, 2012
Distribution: LandSafe BPO Providers Vendor Management Companies
Effective: October 16, 2012
Purpose: This circular is intended to assist LandSafe Broker Price Opinion (BPO) Panel Providers by providing support clarification and examples of commentary expectations in a BPO report. The current risk environment has focused the need for a BPO report to contain comments to allow the reader to easily understand the support for the BPO reports’ conclusion(s). BPO Providers will need to adhere with
these quality requirements. This circular provides examples of commentary that allows your reader to understand the final conclusion.
Unacceptable BPO Practices (UBPs)
BPO reports completed for LandSafe are measured by the following criteria, and may be returned to the BPO Provider for correction if the following conditions are not adequately addressed:
7) Comparables are not selected or analyzed reasonably or appropriately:
a. All, or a majority of, comparables presented are outside subject neighborhood, when relevant comparable sales/listings were available within the subject neighborhood
b. All, or a majority of, comparable sales/listings are dissimilar in physical and/or site characteristics, when comparable sales/listings were available with similar physical characteristics when compared with the subject
c. New Construction - All comparable sales were sold by the subject builder/developer d. Unsupported location analysis or lack of necessary location analysis when comparables outside
reasonable neighborhood boundaries are used e. All comparable sales/ listings are dissimilar to significant characteristics of the subject property resulting
in the lack of bracketing of the subject property characteristics and not explained and supported f. Analysis indicated by market data is inappropriate/omitted g. Dated sales were used when more recent and relevant comparable sales were available h. Inappropriate selection of comparables (not specified in 7a, 7b, 7g)
Note: The term comparable means the property is physically similar, has similar external influences, is located in the same or similar market area and has the same basic appeal to the market participants as the subject property. A comparable must be a property that competes with the subject property for potential buyers. If comparables are selected from competing neighborhoods, the BPO Provider must indicate the comparables are from a competing neighborhood and address any difference between the subject and competing neighborhood. The BPO Provider must also provide an explanation as to why the specific comparable sales were used in the BPO Report and how the competing neighborhood is comparable to the subject neighborhood.
8) Price Opinion not reconciled when the price opinion is: a. Not within the sales price range of comparable sales b. Not supported by the majority of comparables or most relevant comparables presented in the BPO
report
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 2 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
c. More than 20% different than the predominant comparable sale price reported in the comparable sales section Example: The subject is ranked at the high end of the market without a reasonable explanation.
d. More than the 15% different than the subject’s pending sales price and/or the subject’s current list price
Neighborhood Analysis
Subject Neighborhood Description o The BPO Provider must inspect the subject neighborhood and include in the BPO an adequate
description and analysis of the subject’s neighborhood to support the conclusions. The inspection should include, but not be limited to, the following:
Observation of location influences such as airport, commercial businesses, golf course, lake, views, etc. and how these influences affect price and/or marketability
Observation of property types and property characteristics to determine overall similarity to the subject property
Neighborhood boundaries that represent primary borders to assist in selection of comparables Observation of listing or sales activity in the subject’s neighborhood
Price Trending/Supply and Demand o Provide factual data; include data source, actual numbers and/or percentages to support
comments.
Average Marketing Time o The Average Marketing Time of sales in the subject neighborhood must be specifically indicated
in the Comments field in the Neighborhood Analysis Section. This information should be obtained from a primary market data source such as MLS and is a requirement on all reports.
REO Activity/Short Sale Activity
o When the subject property is located in a neighborhood where REO and/or Short Sales strongly influence market pricing, the BPO Provider should consider providing at least two (2) comparable sales along with active listings that are marketed as REO or Short Sale transactions.
o Provide factual data; when reporting a strong REO/Short Sale influence; include data source, actual numbers and/or percentages to support comments.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 3 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Neighborhood Example # 1:
This analysis is an example of reporting statistics to help support the presence of REO and Short Sale properties. It also shows there is a shortage of inventory in the marketplace.
Neighborhood Example # 2:
In addition to average marketing time, the analysis identifies the number of sales and listings that are REO and Short Sale and fair market properties.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 4 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Subject Property and Comparable Sales Comments
BPO providers are expected to provide detailed analysis in the comments that are specific to the comparison of the sale to the subject property.
Utilizing “canned comments” such as “sale is superior due to greater GLA” should be avoided.
Avoid subjective comments that could result in erroneous or inappropriate conclusions.
BPO providers must not cut any information about the subject, neighborhood or comparables from MLS
remarks and paste it into the comments section of a BPO report.
BPO providers should utilize their original, independent comments in order to give a reasonable
description and an adequate analysis that is free from possible Fair Housing violations. Many
Fair Housing issues would be eliminated by ending the practice of cut and paste transfers from
MLS remarks.
For additional feedback including extended example comments, please review the recent circular titled, “Fair Lending Valuation Reporting Practices” published July 31, 2012 by following this link: 2012-21-E Fair Lending Valuation Reporting Practices
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 5 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Subject/Comparable Example # 1:
The sales history is included for each comparable and the comments indicate how each sale is superior/inferior or similar to the subject. All sales were confirmed as similar style homes which bracket the subject property in most physical characteristics.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 6 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Subject/Comparable Example # 2:
The comments below provide specific detail as to how each sale is superior/inferior or similar to the subject property in terms of various physical characteristics including detailed information about the basement.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 7 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Subject/Comparable Example # 3:
Each sale has detailed comments on the type of sale, the amount of closing costs paid by the seller, how the comparable was inferior/superior or similar to the subject, and the listing history was provided.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 8 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Value Conclusions Section
Support for the Price Opinion Conclusion o The comparable sales utilized should indicate sale prices above and below the price opinion
conclusion to allow for bracketing and support. When comparable sales have sale prices that are ALL below or above the price opinion conclusion, it is critical to provide additional analysis for each sale; i.e., the reason for selections, the differences, and the support it lends to the price opinion conclusion.
The Value Conclusion comments should Lead Your Reader to Your Conclusion for the as-is
price opinion.
Value Conclusions Example # 1:
The Value Conclusion comments reference prior analysis in the report and detail how the comparables are similar to the subject. The comments also provide explanation why the 25% variance in the price range was exceeded. Note: Exceeding typical parameters requires such further explanation by the BPO provider.
2012-28-E BPO Reporting Requirements – Lead Your Reader to Your Conclusion
Page 9 of 9 © 2012, LandSafe, Inc
LandSafe Proprietary
Should you need additional clarification or have questions, please contact the Vendor Relationship Management Team at
[email protected] or 888.626.8454.
Value Conclusions Examples # 2:
The comments below identify which comparable sale best supports the price opinion and why.