Understanding a Broker's Price Opinion (BPO)

A BPO is a Broker’s Price Opinion and is one of the two most common ways to estimate the value of certain property, the other being a comparative market analysis (CMA).  A BPO is a report prepared by a chosen real estate broker, realtor, real estate agent, or sometimes but rarely, a licensed appraiser, that offers their professional opinion on the current market value of a certain subject piece of real estate. It is a tool utilized by lenders and mortgage companies to value properties when the cost and delay of an appraisal can be otherwise avoided. These businesses require a neutral party to estimate values for a variety of reasons and circumstances and need a “boots on the ground” most economical evaluation of a property’s value to move that property out of their portfolio   Real estate, by its very nature, is highly localized and a solid local analysis of value provides the most accurate estimate of what a piece of property is worth and what value to set to move it quickly.

Brokers, to do a BPO, are typically retained by a lender, mortgage company, or loss mitigation firm, and contracted to provide either a drive by BPO or an internal BPO. The process is as simple as the acronym suggests. The report that is generated is the culmination of a due diligent investigation reviewing the characteristics of the property type, square footage, structure, lot size, and neighborhood “fit”, along the immediate neighborhood features and qualities, local zoning compliance, repair and remodeling needs to competitively market the property, and, of course, the values of comparables in the immediate locale. BPO basics usually include three comparable properties currently on the market and three comparables sold within the past 180 days, preferably within a one mile radius of the subject property, the age and property condition, with a drilled down comparison of similar bedroom/bathroom configurations.

What is typically issued is a brief 2-3 page report providing the analysis above noted, adding photographs, comparables, and local and regional marketing information. Additional documentation will include a repair list if repairs are recommended, like a new roof, with the estimated repair costs incorporated into any value estimate. No property is ever exactly the same as any other, so adjustments to ascertain a good market value will include consideration of features from a bonus room, to an additional bathroom, upgrades to kitchens and bathrooms, even a certain better view to name a few. Neighborhood data provides a synopsis of current market conditions. The BPO will estimate what the property will likely sell for in a typical 90-120 day time frame based upon recent comparable sales. Generally, the report will provide a “quick sale” estimate if the hiring institution wants to quickly move the property.

There is the drive by BPO and the internal BPO. Most BPO’s are drive by because there is no internal access but they are clearly more challenging to determine market value without a diligent observation of the property interior. With the drive by BPO relying on an exterior review only, the neighborhood data and comparisons take on even more importance. The interior BPO is a more accurate and thorough presentation with a measured evaluation of both the exterior and interior gained by access and a diligent walk through to confirm home conditions and features.

BPO’s are a lot like appraisals, serve the same purpose although appraisals are performed by licensed appraisers offering a more thorough property analysis, and are a more generic, less costly substitute.

The BPO is likely to remain a popular tool to estimate market value and while each individual BPO will vary depending upon client needs and property attributes, knowledge of what a BPO is, how it is utilized, and by whom is yet another weapon in the investor arsenal.

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