How the Broker's Price Opinion Drives Foreclosure Sales

Published On 2020-06-23
How the Broker's Price Opinion Drives Foreclosure Sales

What is a BPO in real estate

What is a Broker’s Price Opinion (BPO)?

First thing’s first, what is a broker’s price opinion (BPO) and how is it used anyways? It is a report that a licensed real estate agent performs that helps determine the potential selling price or estimated value of a real estate property. This opinion is different than a comparative market analysis (CMA) that a realtor performs for their clients because the real estate professional performing the BPO gets paid a fee to do this report instead of including it in the services they offer to a client.

Why a BPO?

So who chooses to have a BPO performed and why? Several different people or entities may choose this option. For example, a lender might opt for to have this assessment done while refinancing a mortgage or a during foreclosure. The property owner might also choose to have this done if they are thinking of selling their home or refinancing a mortgage and want to have a general idea of their property value. The reason why BPOs are so widely used is that the service costs much less and can usually be performed more quickly than a formal appraisal of the property.

When a broker is performing a BPO, they may drive by the property and make a determination based only on the exterior condition of the home. If a broker gains access to the property to review the condition and features of the home, this is called an internal broker price opinion. In addition to viewing the condition, brokers will also consider comparable listings and recent sales in the neighborhood when making their final determination.

Potential pitfalls

Though broker price opinions are widely sought after due to their affordability and speed, they are not free from pitfalls. It is also important to note that not all states even allow brokers to perform this service or block them from charging any fees. Or instead of outright banning them, state laws may choose to limit the use of BPOs to certain circumstances. The fact that many of these opinions are reported from realtors working potentially outside of the property’s area (and therefore with less knowledge of home sale prices) and limited information about the property’s condition and features, the opportunities for pricing errors are abundant. And, as any real estate professional will avow, an error in pricing is never good. For example, if a BPO is too high, this can create an obstacle to the sale of the home, as properties that are overpriced stay on the market for a long period of time and sellers often need to make significant price reductions. If a BPO is too low, however, the sale price of the property might be unnaturally low. Therefore, it is always important to remember that while BPOs can be a valuable resource, they are not appraisals and a formal appraisal may bring back different numbers altogether.


Related Articles: