Sometimes a homeowner wants to know how much their property is currently worth. When considering the sale of a home, or for many other purposes, a Broker Price Opinion is helpful to know what the market really is for that house, condo or other property. | ORDER
Different real estate valuation products are appropriate for different situations. Real estate professionals are often asked to provide a comparative market analysis before listing a home for sale, often as a free service to the client. Getting a home loan to buy a property requires an appraisal from a license real estate appraiser. Required by most lenders, an official appraisal is typically paid for by the home buyer. But, there are many other situations in which an owner or a financial institution requires a professional estimate of property value, but not an official appraisal. This more affordable written valuation is called a Broker Price Opinion, or BPO.
Some California real estate brokers offer written opinions about the price of real estate without being licensed as appraisers. Mortgage lenders may order a specific type of valuation method for borrowers before the loan is approved.
Broker price opinions are defined by federal law (12 U.S.C. § 3355, enacted as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act) as an estimate prepared by a real estate broker, agent, or sales person that details the probable selling price of a particular piece of real estate property and provides a varying level of detail about the property’s condition, market, and neighborhood, and information on comparable sales, but does not include an automated valuation model.
The definition in the law is broad. BPOs are not an estimation of a property’s value by a neighbor or long-time resident of the community. The operative term defined in the federal law, however, is “prepared.” Broker price opinions are more than just off-the-cuff “guesstimates” of selling prices — they are carefully prepared analyses. There are two main types of opinions regarding the price of property that are prepared by real estate brokers or agents. A BPO looks at the characteristics of the property itself, and is an opinion on the price that could probably be received if the property were sold in a regular arms-length transaction. The laws in some states do not distinguish broker price opinions from comparative market analyses. A comparative market analysis looks at the prices obtained for comparable real estate in the same area. And the value is based on comparisons with similar properties.
Agents complete BPOs either through a drive-by or internal viewing of the property. A drive-by BPO is more detailed than its name would imply, and involves estimates of a number of things about the property, including the number of rooms, room sizes, and square footage. An internal BPO requires all of the information in a BPO, plus verification of the number of rooms and measurements of the square footage. Photographs of the interior of the property are also required. In most states, “allowing” broker price opinions merely means that the state does not prohibit BPOs. In thirty-eight jurisdictions, there is minimal state regulation of BPOs beyond a distinction that real estate brokers are exempt from the laws requiring licensure as an appraiser. Additionally no training is required beyond the normal educational requirements for a real estate license.
A BPR is different from an appraisal. A BPO is not necessarily performed by a professional state-licensed or certified appraiser. A BPO is typically prepared by a real estate broker, and is another tool that a lender might use to evaluate the collateral for a loan. A BPO, as originally intended, does not comply with USPAP Uniform Standards of Professional Appraisal Practice. BPOs were designed for brokers to assist home buyers and sellers in arriving at a list or purchase price, or purposes other than mortgage financing.
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Often taking less than 24 hours, a Broker Price Opinion is cheaper, faster and easier to schedule than a licensed appraisal, and can sometimes include additional information that may not be provided with an appraisal, such as: pros and cons, building report, county assessor record, investment opinion sold properties report and area lenders report. The BPO may be requested for any kind of property, including single family home, condo, multi-family, commercial property or land.
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Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Realty Source Inc, DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.