Broker Price Opinion

What is it, and why does it matter?

What is a Broker Price Opinion: #Tn+BPO+Providers; #Sevierville+BPO+Agents; #Cheap+Appraisals

In real estate, broker price opinions (BPOs) are often associated with foreclosures and short sales, but other companies such as loan asset managers (banks), collateral inspection companies, private individuals and relocation firms also order BPOs. BPOs offer a relatively fast turn time (1-4 days) compared to an appraisal 1-2 weeks. BPOs are less expensive compared to an appraisal typically $450 and up.

Broker Price Opinion – BPO, is a method which we use to estimate the probable selling price (Market Value) of a house. The estimate of price is submitted in a BPO report which includes an inspection of the subject house, subject neighborhood information, local and regional market information and trends, and comparable properties (comps) which are similar to the subject house. This method of estimating a selling price has similarities in methodology and report appearance to a residential appraisal and are much like a Comparative Market Analysis CMA.

A BPO involves a similar process as a real estate appraisal, although it is not as involved nor as complicated, which makes it a less expensive option.

We compare a minimum of three similar, recently sold and three currently active properties to the subject property needing assessment.

2 Types of BPO Reports we provide: #how+to+Do+BPO

We provide two types of BPO inspections, an interior BPO and a drive-by BPO.

The interior BPO involves an interior inspection of the subject, noting all updates/upgrades made, taking photographs and assessing the home's interior. Any necessary repair items are also noted in our report.

A drive-by BPO involves assessing the home only by its exterior. We do not enter the property. We look at as much of the house as possible from the road view. All aspects of the home may not be visible from the road perspective and that is when an interior inspection is recommended. Additionally, since the interior of the home isn't inspected during a drive-by BPO, market value is often estimated by numbers alone and does not include updates made to the home. Sometimes, we are required to relax the distance or time frame to more than 3 months in order to located suitable comps.

Drive By BPOs can be accurate to a certain degree, but do not replace interior inspections, nor a full-blown appraisal.

Why Banks Order BPOs #Tn+BPO; #Whats+my+house+worth+tn

The two most common reasons banks order a BPO valuation are for a home in foreclosure, a requested short sale or even a refinance. Banks might request a BPO from two separate real estate companies. This ballpark estimate for a range of values is designed to help the bank avoid inaccurate BPO values sometimes placed on short sales by unethical agents.

Banks have no requirement to accept the BPO value as true market value. A bank can use the BPO value as a guideline, but it might also use other evidence to support a higher sales price to try to offset a loss.

Banks May Change the Value

When a bank demands a higher price for a home, it doesn't necessarily mean the BPO value is that price. Some agents make this mistake, blaming the BPO agent for assigning an elevated value when it was the bank that decided to ask for a higher price. Banks often use the BPO as additional information. Many automatic valuation software systems are available, and a BPO might only be used as a supplemental report to test or support the software's conclusion.

Relevance of BPOs:

The mortgage industry – banks, lenders, mortgage servicers – have utilized BPOs for years nationwide. BPOs are used for a variety of reasons and according to industry estimates, over 12 million BPOs are performed annually across the country. BPOs provide critical information for decisions and have been widely adopted as a valuation tool in the mortgage industry due to the fast turnaround time, cost effectiveness, and accuracy of BPOs.

The FDIC and the Federal Reserve Board recognize the use of BPOs to determine the disposition of distressed properties. The Department of Treasury also recently recognized BPOs as a viable valuation method in the Home Affordable Modification Program which could affect 9 million homeowners nationwide.

BPO Professionalism, Quality, and Education:

A unique feature and the distinct advantage of a BPO is the fact that real estate agents and brokers deal directly with real estate buyers and sellers. Buyers (or lack of) have the greatest influence on any market and there isn’t a group which is closer to real estate buyers than agents and/or brokers. To understand the buyer’s mind-set is to understand the needs of the market and therefore the price which the buyers are willing to pay. A BPO combines the science of valuation techniques and procedures with the art of knowing and experiencing buyers and the market. The entire real estate industry, to include appraisers, rely heavily on the ability of agents and brokers to establish the list price of houses.

Arguing that brokers and agents do not have the knowledge or skill to perform price opinions can only be characterized as esoteric arguments of semantics due to the fact that agents and brokers are essentially the market makers of real estate. Couple this with the fact that BPOs have an established track record of reliability and accuracy with BPO companies, banks, lenders, and mortgage institutions, it is apparent that BPOs are an effective and reliable pricing/valuation product.

Opposition to BPOs:

Appraisal Organizations: Most appraisal organizations are adamantly opposed to the performance of BPOs. The apparent underlying motivation is that BPOs represent competition to appraisers’ perceived market share. These organizations cite that agents and brokers do not have the qualifications and/or the education to perform valuations and the BPO industry does not have standards.

Lack of awareness: BPOs are not very well known other than in the mortgage and real estate valuation industry. In some cases, even agent and brokers and/or organizations such as the Association of REALTORs are either not aware of or only have a cursory knowledge of BPOs. Even in instances where there is knowledge of BPOs, typically only industry insiders are aware of the relevance and impacts of BPOs. So when appraisal organizations lobby to restrict BPOs, there is relatively little resistance because in most people’s minds, appraisals are the only valuation alternative and most people (including lawmakers) are simply not aware of the impact of allowing appraisals as the only valuation method.

Bryan Realty of East Tennessee Broker, Michele Bryan has been performing both (Fannie Mae and Freddie Mac) interior and drive-by BPO reports since 2010

Order a BPO report:

Drive By Broker Price Opinion $80

Interior Broker Price Opinion $175

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