Broker Price Opinion
What is Broker Price Opinion?
A broker price opinion, commonly known as a BPO, is a real estate professional’s opinion of a property’s value. BPOs are most often used when setting the list price of a property, similar to a comparative market analysis, and in the case of a foreclosure or short sale.
To determine the BPO, a real estate agent or broker will use his or her expertise to assign a dollar amount to a property based on certain factors. BPOs are normally performed by a broker who is familiar with the local housing market.
“Usually, the agent does this as part of their listing agreement when selling a house,” explains Rocke Andrews, president of the National Association of Mortgage Brokers and owner of Lending Arizona. “They look at similar properties that have sold recently and provide an estimate of what the home should be listed for.”
There are two main types of BPOs: internal and external. An internal BPO involves a broker spending time inside the property to evaluate the condition of the home, take measurements and capture photographs. With an external BPO, sometimes referred to as a drive-by BPO, a broker may simply be able to assess the outside of the property before giving it a sticker price.
A BPO is helpful in the early stages of the real estate transaction when setting the list price of a home. The home seller gets an understanding of what the property will command, and the buyer gets an understanding of what they will need to pay to own it.
In the mortgage lending process, however, BPOs are not the go-to method. In most
cases, a lender will order a professional appraisal for the property to determine its value, instead of a BPO.
BPOs are not accepted for mortgages sold to Fannie Mae or Freddie Mac or guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or Department of Agriculture (USDA), according to Jefferson L. Sherman, president of the Appraisal Institute.
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.
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.
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.
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