What is a Broker Price Opinion?
A BPO is the approximate value of a property that is decided by a real estate broker or other qualified individual. He or she comes to this conclusion after looking at many different metrics and all features of the property.
When would you get a BPO?
This is useful for both parties to the transaction. For sellers, it gives them more substance for their respective list price or offer amount. For buyers, it assists in comprehending true collateral value when obtaining refinancing or a new loan, calculating liquidation price, or buying out a partner’s interest.
How is a Broker Price Opinion different from an Appraisal?
The biggest difference between a BPO and an appraisal is cost, as the BPO is typically less expensive. However, the trade off is a decline in quality, as an appraisal is significantly more in depth. Appraisals are also less biased, as they are conducted by a third-party, whereas a BPO is less factual, as it’s formed from the opinion of the broker. Because of this, their reasoning behind their report may differ from an appraisal.
BPO regulations by state
Broker price opinion regulations differ by state, so you should contact an attorney if you have questions prior to requesting one. Some states are stricter than others, so subjects like comparative properties or tax appeals are determined by the local rules and regulations. Listing these exceptions state by state wouldn’t effectively cover the full scale of differing regulations, so we recommend speaking to your local real estate attorney or broker for their interpretation of the regulations.
Elements Of The Report
Although each property is different, the reports tend to follow the same pattern. The templates tend to include the following:
- Market Overview and Tendencies: Incorporates data related to current market conditions within the subject trade area. This may include population and employment growth/decline, vacancy and leasing rates, local news, construction plans, and a demographic summary of the area.
- Site Description: An overview of the site with details such as point of ingress, proprietorship, residency, or lack of and visibility.
- Property Condition: Elaborates on the property description, but in significantly more detail as to its current condition.
- Location: Basic information regarding the position of the premises, and may incorporate a site map, building type, address, and size.
- Comparable listings (past and present): Analysis of 3 or more similar properties, both currently on the market, and recently sold. The data acquired will help determine the price.
- Proforma: A multi-year budget illustrating future expenses, Net Operating Income (NOI) and Gross Potential Income (GPI)
Due to the cost savings and efficiency, BPOs are increasing in popularity. While they are a good alternative to appraisals, keep in mind that these are the opinion of someone who wants you to buy or sell property, so they may tilt in favor of the sale. Just be cautious and remember that the final estimate may not reflect the reality of current market conditions.