Kenneth Harney’s column in the Washington Post today posits that Broker Price Opinions may be helping perpetuate a downward spiral in home values:

Are low-balled value estimates on short sales and bank-owned foreclosures artificially depressing property values in neighborhoods across the country?

Growing numbers of appraisers and consumer groups think the answer is yes ¿ and are demanding that Congress or state regulators crack down. Their complaints focus on what are called “broker price opinions,” or BPOs, which substitute for appraisals.

Unlike standard property valuations performed by licensed appraisers, which can cost hundreds of dollars, BPOs often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight. Real estate agents defend BPOs, arguing that their extensive knowledge of local market trends equips them to render accurate estimates.

BPOs have become a booming business as foreclosures and short sales have risen sharply. When banks that own foreclosed houses need to put values on them for resale, increasingly they order BPOs that can be delivered quickly at rock-bottom fees.

Also this:

One problem: Selling BPOs to value houses violates the law in 23 states, according to appraisal industry leaders. In other states, BPOs may not be prohibited, but critics say they may be far off the mark in accuracy, typically coming in below appraised values. That’s partly because agents who perform the BPOs may set the value extra low to ensure quicker sales.

And this:

Why would agents low-ball their BPO valuations? Crabtree argues that there are inherent conflicts of interest: “They want to sell the property fast” to make bank asset managers “look like heroes” to their bosses. They may also want additional BPO and property listing assignments from those same bank managers, yielding them commission dollars. Many of the properties are snapped up by investors at the depressed prices driven by BPO valuations. Those sales then become “comparables” for appraisers, “which simply intensifies the downward spiral,” Crabtree said.

What say ye? Are you seeing this trend (and effect) in your market?