Created a Quality Control Process for An Institutional Asset Manager to Ensure Accurate Bidding on a Loan Portfolio
•Reviewed Broker Price Opinion (BPO) asset values, identifying unreported property damage and estimating repair costs
•Gave a private equity firm leverage to renegotiate a loan portfolio bid
A large private equity firm bid to acquire a pool of 1,400 distressed residential mortgages. A number of assets were foreclosure-pending, posing a risk that they might be in worse condition than described in broker price opinions (BPO) reports provided by a third-party. BPOs are characterized by high-volume, fast turn-times on highly variable assets. Agents/inspectors quickly drive by, take exterior photos, assume average conditions, and value using local data. Photos may be taken by someone other than report writer, who never views property, missing damage that would cost tens of thousands to repair.The investor needed a third-party audit to verify the quality and veracity of the BPO reports. Specifically, it needed to identify if asset values were inflated because damages captured by the photos went unnoticed and were not included within the report. This would give the investor necessary leverage to renegotiate pricing during post-close diligence and ensure an accurate bid.
The client came to SitusAMC, to do a Damage List Reconciliation Review of the assets and review the assets through a more thorough lens. SitusAMC brainstormed with the client to identify damage issues of greatest concern and integrate customized questions into its Q Capture technology platform. Q Capture is part of SitusAMC’s internal private web-based platform that allows the creation of custom questions and answer fields, tailoring work scopes for staff and reporting to clients. SitusAMC’s analysts, who are licensed appraisers and real estate agents, reviewed the BPO reports and then independently researched foreclosure auction sites and other online databases to validate the data.
Q Capture allowed analysts to flag properties based on severity of damage and indicate whether structural issues were extensive enough to warrant demolition. Meanwhile, the analysts collaborated with SitusAMC’s REO Asset Management business line, which provides property management and maintenance for clients, to determine how much it would cost to fix the issues identified. In the end, SitusAMC identified an estimated $4 million in damage that had been unreported, allowing the investor to renegotiate pricing during post-close diligence.