A Guide To Broker Price Opinion (BPO)

In real estate, we’re often lucky to be able to tap into several alternatives for accomplishing a goal. The broker price opinion (BPO) is one of those alternatives. What is a broker price opinion and why might it matter in the listing price of a property?

Let's find out.

What Is A Broker Price Opinion?

When a real estate broker or other qualified professional determines a property’s estimated value, it’s considered a broker price opinion. A BPO is used as part of the listing agreement when selling a house. A lender, loss mitigation company or mortgage company that wants an assessment of a property can request a BPO.

A homeowner who wants to refinance or sell their home can also request a BPO. They often go this route because it's a less expensive and quicker option than an appraisal. However, they might also use it as a supportive document instead of as an appraisal replacement.

BPOs are most commonly used in the following situations:

• Short sales and foreclosures
• Portfolio and asset valuation
• Nonperforming and reperforming loan sales
• Whole loan sales
• PMI appeal requests

Note that BPOs are not legal in all states. Most lenders require a home appraisal to determine the home’s property value.

How Do Broker Price Opinions Work?

To determine the broker price opinion, a broker or real estate professional uses real estate comps, or comparable homes. This process looks very similar to completing a comparative market analysis. (Real estate agents use comparative market analyses to estimate property values – they take a look at similar homes sold in the same area over a certain period of time.)

In addition to comps, a few factors determine the broker price opinion. The following items usually go into the report:

• Age of the home
• Size of the property
• Neighborhood surrounding the property
• Zoning requirements
• Condition of the property

After analyzing these factors, the broker provides homeowners or buyers with a broker price opinion form with the property results.

There are two main types of broker price opinions, which we'll detail in the next section.

What Are The Types Of Broker Price Opinions?

You can find two types of broker price opinions: internal and external. Let's go over definitions for both – you might prefer one over the other.

• Internal BPO: In an internal BPO, an agent goes into a home and spends time measuring and looking at its features in order to accurately evaluate it. The broker evaluates internal conditions of the home, measures rooms to get accurate sizing and verifies the number of bedrooms, bathrooms, etc. in person.
• External BPO: In an external BPO, also called a drive-by BPO, a broker assesses the property from the outside – solely the exterior – unlike with an internal BPO. A broker may look at some official information about the home, such as square footage and number of bedrooms. External BPOs are more common but less accurate than internal BPOs.

Appraisal Vs. BPO: What’s The Difference?

The two main differences between appraisals and BPOs involve time and cost.

Home appraisals are conducted by trained experts, while BPOs are done by agents or brokers. The appraisal accuracy will be much higher because appraisers must meet certain educational guidelines and benchmarks. They also take continuing education courses in valuation.

BPOs are less expensive to order than appraisals. Appraisals generally cost anywhere from $300 – $400 (for single family homes) and up to $600 (for multifamily homes). BPOs may cost half of each of those amounts.

The amount of time and amount of substantive work, including detailed findings through appraisals, often takes a week or two to fully complete.

On the other hand, both an external and internal BPO might take a much shorter amount of time – in some cases, less than one day to complete.

How Do I Get A Broker Price Opinion?

Homeowners or potential home buyers can order a BPO through broker price opinion companies. A few national companies that offer this service include the following:

• Clear Capital
• LRES
• Equator
• Residential Real Estate Review
• Pro Teck Valuation Intelligence

You can also contact the National Association of BPO Professionals for a list of certified BPO vendors who hold the NABPOP BPO certification.

The average price of this service can range from $50 – $300, though prices vary by location. Note that you should review the legality of BPOs in your state before you choose this option.

Should I Order A Broker Price Opinion?

When does a BPO make sense if you're buying or selling your home? When determining the value of homes in foreclosure or short sale, a BPO may be the preferred option. During a short sale or foreclosure situation, the seller may want to sell the home quickly, and a BPO would more likely achieve that goal.

BPOs do not make sense for home buyers and sellers in certain situations. If you need a thorough, detailed overview of a home's value, you'd want to get an appraisal, not a BPO. If you're applying for a mortgage, you do not need a BPO because lenders require an appraisal, not a BPO.

The Bottom Line: Determine Whether A BPO Is Right For You

A lender, loss mitigation company, mortgage company or homeowner who wants an assessment of a property can request a BPO.

To complete a BPO, a broker or real estate professional uses real estate comps similar to a comparative market analysis, plus a few other factors, such as the age of the home and the size of the property.

BPOs look different from home appraisals because they offer less comprehensive home valuation results. Some BPOs, such as external BPOs, only look at the exterior of a home.

Home buyers and sellers may choose to order a BPO in a foreclosure or short sale situation. However, if you want a more detailed valuation of your home, get an appraisal, not a BPO. If a BPO is the right option for you, find a local mortgage broker in your area.