A broker's price opinion is the process used by a hired sales agent to determine the potential selling price or estimated value of a real estate property. A BPO is popularly used in situations where a financial institution believes the expense and delay of an appraisal is unnecessary.
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Involved parties
Broker's price opinions are initiated by financial institutions. Examples are banks, mortgage companies, and loss mitigation companies.
The BPO is performed by a real estate professional who is acting on behalf of the financial institution. Such a professional could be a real estate agent, a real estate broker, an appraiser, or other qualified person. Through BPOs, agents can improve their skills in property inspection, market evaluation, and property pricing. At a price of US$50–150 per BPO, the work can provide side income or steady income for real estate agents. Agents may also create working relationships and a rapport with financial institutions. Some BPO agents work through a BPO company that provides a single point of contact to the client and oversight of agents and their reports.
Uses of a BPO
A financial institution may order a BPO for:
Overview of the BPO process
A real estate agent or a broker is hired to complete a BPO report on a property. A BPO may be occasionally requested without a fee in hopes that the financial institution, bank, or lender will receive a sales listing for the property.
The BPO professional then conducts the investigation. Many factors affect the price of a property:
The result is a brief report, usually two or three pages in length. This report includes analysis of the property and neighborhood, photographs, comparable properties ("comps"), and local and regional market information.
Types of BPOs
A broker may do a drive-by BPO or an interior BPO. In drive-by BPOs, the professionals do not have access to the interior of the property; they rely on exterior appearance, neighborhood information, comparables, and other documentation. The interior BPO is more in-depth; it requires advanced contact with the property's inhabitants, evaluation of the interior and exterior, measuring to verify room dimensions, and additional photographs.
Comparison to other kinds of value analysis
In an automated valuation model (AVM), a computerized mathematical model evaluates basic features of the property, compares to area sales, and determines a rough value. The calculation takes into account information about property size, bedrooms, and bathrooms. An AVM is a basic evaluation – "just to make sure that the property value is in the right ball park" – and may be replaced by a full real estate appraisal. Because an AVM does not involve a site visit, it does not include factors such as condition or upgrades.
An individual who is looking to sell or purchase a home might request that an agent perform a comparative market analysis (CMA) to determine a reasonable listing price or offering price. The process of deciding a CMA price is similar to a BPO. However, a BPO – whether the exterior drive-by BPO or the full interior BPO – is more thorough than most CMAs.
Unlike a BPO professional, a real estate appraiser must be licensed or certified in most countries. A BPO is less thorough than an appraisal, although the process of deciding a price is similar to a residential real estate appraisal.