BPO - Broker Price Opinion, What is it?
In situations where the value of a property needs to be evaluated, but not officially conducted by an official appraiser, a broker price opinion (BPO), could be requested.
BPO - What It Is
A broker price opinion is an estimated property value assessment that is almost always conducted by a real estate broker or a qualified agent. This property valuation can serve as an alternative to an official property appraisal performed by a licensed appraiser. BPOs are often ordered by financial institutions, most often lending mortgage holders. When a BPO is ordered by a lender, it is possible for it to be ordered without notifying the homeowner.
The difference between a BPO and an appraisal lies in the fact of who is conducting the property valuation and the cost of having the valuation done. A BPO is most often much less expensive than a full appraisal. In some cases, a full home appraisal is not necessary and the lender will opt for the more budget-friendly option. BPOs are often performed in short sale cases and foreclosures to help ensure that the value of the property is in fact lower than the amount still owed on the current mortgage. BPOs are also used in the case of trading a mortgage on the secondary market and sometimes just to get information about the home value on a mortgage in good standing.
A BPO will give the person/company who ordered it an anticipated sale price on the property and an appraisal will only offer the current market value. An appraisal gives all the details of a property’s value and is considered the top-of-the-line value assessment. Appraisals are conducted by licensed officials that must follow a strict set of guidelines and regulations to arrive at the property’s current value.
Since a BPO is determined by a real estate broker or agent, instead of an official appraiser, the valuation comes from a knowledgeable professional that is not solely trained in property valuation to arrive at an estimated value and a potential listing/asking price. The benefit of conducting a BPO instead of an appraisal is the lower cost and faster process. A BPO takes about 1 to 5 days where an appraisal can take 7 to 10. The average appraisal costs about $300-$400 and an average BPO costs around $100-$200
How BPO is Calculated
A BPO uses factors such as:
- Property location
- Property Size
- Size of Structures on Property
- Demand of the Area
- Comps from three recent sales of similar properties in the area
BPOs can be conducted just from looking at the property from the outside, usually, a drive-by BPO where photos are taken from a car on the street. Some BPOs are conducted with an inside view of the home where photos are taken of the inside and more details are required to be reported about the interior condition. In many cases, exterior BPOs do not contact the homeowner to let them know one will be conducted.
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