A guide to broker price opinion (BPO)

A broker price opinion (BPO) is a quick, professional estimate of a home's value prepared by a licensed real estate agent or broker. Sellers use BPOs to set a competitive list price; buyers use them to sanity‑check offers. Below, we explain what a BPO is, how it compares to an appraisal, when it makes sense to order one, and how much a BPO typically costs.

What is a BPO?

A broker price opinion (BPO) is an estimate of a property's value done by a real estate broker or other qualified real estate professional. Though it is strictly an estimate, a traditional broker opinion is based on the sales of comparable properties in a given neighborhood to give you a realistic picture of the local housing market. Usually, a BPO is used as part of the listing agreement when selling a house to help determine a competitive asking price.

When is a BPO used?

BPOs are most commonly used in the following situations:

• Short sales and foreclosures
• Home renovations
• Portfolio and asset valuation
• Loan modifications
• Nonperforming and reperforming loan sales
• Whole loan sales
• Private mortgage insurance appeal requests

While BPOs can be a helpful estimation tool for buyers and sellers, lenders typically will not rely on BPOs alone in place of a formal appraisal to value a property. For loan origination or a refinance, lenders typically require an appraisal rather than relying solely on a BPO. Separately, some states restrict whether agents or brokers can charge a fee for a BPO.

How do BPOs work?

To determine the BPO, a broker or real estate professional uses comparable homes in the area - known as real estate comps - to gauge current market trends. This process is very similar to completing a comparative market analysis (CMA). Real estate agents also use CMAs to estimate property values by looking at similar homes that have sold in the same area over a specific period.

The following factors impact the BPO and are typically included in the report:

• Age of the home
• Property size
• Neighborhood surrounding the property
• Zoning requirements
• Property condition

Types of BPOs

There are two main types of BPOs: internal and external. These terms refer to whether the real estate professional is evaluating the home from the inside or the outside. Here is a closer look at how those opinions differ in practice.

Internal BPO

In an internal BPO, an agent enters a home and spends time measuring and evaluating its features to accurately evaluate it. The broker evaluates the home's interior condition, measures the rooms to ensure accurate sizing, and verifies the number of bedrooms, bathrooms, and other key details in person.

External BPO

In an external BPO, also called a drive-by BPO, a broker assesses the property solely from the outside. Unlike an internal BPO, the broker does not step foot inside the home. Instead, they may look at official county records and publicly available information about the home, such as its square footage and number of bedrooms, to help guide their estimate. While external BPOs are more common due to their speed and nonintrusive nature, they are generally less accurate than internal BPOs.

BPO vs. appraisal: What’s the difference?

BPOs are quick estimates made by real estate professionals, while appraisals are formal assessments performed by certified appraisers. BPOs are used to determine a listing price, while appraisals can be a more accurate estimate of the property’s current fair market value.

Trained experts conduct home appraisals, while BPOs are done by agents or brokers. Appraisal accuracy will be much higher because appraisers must meet specific educational requirements and benchmarks. They also take continuing education courses in valuation.

BPOs are less expensive than appraisals. BPOs typically cost $30 – $300 while appraisals usually cost $240 – $600.

The typical appraisal timeline often takes a week or so to complete, while a BPO can be done in a day.

How to get a BPO

If a quick valuation sounds like the right tool for your situation, here’s how you can get a BPO.

Ask a real estate agent or broker

If you are already working with a real estate agent or a broker, you can ask them to arrange a BPO. They may even do it for free if you are already a client.

Work with a BPO company

You can also order a valuation through specialized BPO companies. A few national companies that offer this service include Clear Capital, LRES, and Equator. You can also contact the National Association of BPO Professionals (NABPOP) for a list of certified vendors.

Should you order a BPO?

Ordering a BPO makes the most sense when determining the value of a home in a foreclosure or short sale. In either situation, the seller may want to sell the home quickly, and a BPO would help achieve that goal by keeping the process moving.

However, there are certain situations when a BPO wouldn't make sense. If you're trying to get a mortgage, your lender will require an appraisal regardless.

The bottom line: BPOs provide quick information

A BPO can be a useful estimate when dealing with a short sale or foreclosure. A BPO can also come in handy if you're planning home renovations and want to know roughly how much they will increase your property value. For sellers, a BPO can help you decide on a listing price. However, if you're buying a home and getting a mortgage, a BPO might be unnecessary, since you'll need a formal appraisal.

If you are ready to get started on a home sale or purchase, you can find a local mortgage broker today to help you explore your financing options.