BPO stands for "Broker's Price Opinion." They are what another real estate agent (Broker) thinks a property is worth. Basically the agent gives their opinion of the value of the property. "I think it is worth 300k", they put on the report. Lenders accept or reject short sale offers based on the BPO value.
If the agent has given a value of 300k, then a short sale lender will not accept a sales price of 250k. The problem is that, in my opinion, sometimes the values are inaccurate. I have seen agents drive 50 miles away to evaluate a property. They go to a place where they do not sell real estate. As a result they are not familiar with the local marketplace.
Because of this I always try to meet the agent doing the BPO at the property. I explain the market value to them and tell them what is happening with the property. I explain exactly why the property is selling for the sale price. I tell them what buyers have said about the property and why it isn't selling for a higher price. This helps them to give an accurate value. The lender gets an accurate value and is able to make a better decision on the short sale.