David Saks: Broker Price Opinion : What It Is / What It Isn't....

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Broker Price Opinion : What It Is / What It Isn't....



An appraisal, performed by a licensed appraiser, is an opinion of value for a subject property utilizing a concept of market which may rely on locality and other factors, and principles which determine valuation, such as supply and demand, competition, change, surplus inventory, usage and balance which examines the nature of the equalization of factors which either oppose each other or move together.

Since the appraisers judgement and experience are relied upon in the process, an appraisal may be considered an opinion. Another expression used in the definition one must consider most important to the process is value. Since there are so many varieties and types of value, and since each type may possess an assortment of subclassifications, appraisals may represent a particularly delineated value.

The three approaches to appraisal are Sales Comparison, Cost Comparison and Income Approach.

How do the approaches work together or in conflict?

How do they work for the BPO?

When is a BPO an acceptable alternative to a formal appraisal?

What must the broker avoid when performing a BPO?

These are some of the common question we hear daily when considering an appraisal versus a broker price opinion.

The good thoughts from the honorable members of our Active Rain Community are most welcome.

David Saks

Time&Temp Memphis

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Comment balloon 6 commentsDavid Saks • March 23 2008 10:57AM



As a formerly licensed Appraiser and a currently licensed broker, my opinion is that although a BPO may not develop all three approaches, it may still be as accurate as an appraisal. It depends on many factors, sometimes you have an appraiser who travels 30 miles out of their area and may not be aware of the nuances that may affect the values in an area. A Real Estate Broker who works in an area everday, has seen the homes that have sold, and that are currently available for sale. I also feel as a Broker/Owner that I have a better feel for the pulse of the local market conditions based on the everday production of 33 agents. An Appraiser is basing their opinion on a visit to the subject property and MLS photos of the comps, wheras a Broker will have first hand knowledge. I am not suggesting a BPO is better than an appraisal, or even that all agents take the care that is necessary when performing BPO's. I am saying that depending on the purpose of a BPO, especially if it is to be used for pmi removal, or pre-foreclosure in conjunction with an appraisal it may well serve the client well. I have the utmost respect for Appraisers as well as agents that take the time to do the required tasks well.

Posted by Billie Dalessio (Home Run Realty, LLC) over 12 years ago
A Realtor will "buy" the listing.  Realtors are tempted to tell sellers what they want to hear.
Posted by Scott over 12 years ago

Generally the Brokers Price Opinion is done for a bank to determine current value.  It can be done because they are selling the loan, determining the value of their portfolio, or the buyer is behind.  You will usually have to bracket the subject in size, price, and lot size. You will use both active and sold listings.  They have a quality control department which makes sure you have met all the criteria for their reports.The Realtor get a set fee for this report. 

 A Comparable market analysis is done for the sellers to determine price to list.  This price can be a little more flexible depending on the urgency of the seller to move -- this is where the Realtor may Buy the listing.

Posted by Charlotte Rose (Watson Realty Corporation) about 12 years ago


I've done a few bpo's on napkins for friends, but not for cash, listings or valuable prizes. :-)
The BPO is more detailed than the good old standard CMA (comparative price analysis).

The lender's usually want a little more information to play with, and that might place the one performing the BPO in a good postition to secure the listing. Most agents don't want to spend all of the time it takes to put together a comprehensive BPO because it's so labor intensive and nets one so little cash, roughly 50 to 100 bucks, for all the time and energy which includes comparatives, photos of the subject properties including the front, various views of the street, etc., some interior shots if ordered, and the CMA, if requested, included in the package.

There's the additonal hazard for some agents that comes with performing a BPO in a blighted neighborhood full of crime, foreclosures, declining property values, drugs, police and stigma.

There's the element of rejection which some agents have to contend with that adds more frustration to the already inauspicious condition of receiving a paltry sum of money for all of the effort expended.

The banks turn down BPO's because they don't agree with or like the comparatives.

There's also the discouraging fact that the small fee has to be split with the brokerage for most affiliate agents. With a 60/40 split the 100 dollar bpo leaves the agent with 60 dollars in their pocket after all of the hard work and effort. In today's credit smacked, gas starved economy most agents will probably tell you to forget it. They feel they're being exploited.

Doing BPO's is a good way to keep up with the market changes, and doing them pro bono might demonstrate goodwill in a declining housing market if you can afford to place your time on the line in such a manner, although the references from the courtesy might just pay off in a big way somewhere down the line.

It's been said that appraiser's have one of the dirtiest jobs in the real estate business. Whether or not that rings or smatters of truth or is a prevarication is arbitrary, although when it comes to financing there's no alternative if it's required by the lender. The BPO, in the short term, can have some merit in a point of sale sale transaction such as a foreclosure when a quick comparative is necessary for anything other than establishing value for a loan.

Of course, real estate agents are cautioned not to use the word value when preparing a BPO because it's just an opinion of price based on market changes and not on the three approaches to value used in a traditional appraisal.

BPO's might be a piece of cake for some to perform and a headache for others. It might depend on whether or not it's a full blown picture or just a drive-by assessment using a few approximated sales comparisons.

Thank you for your comment.

Posted by David Saks ((retired)) about 12 years ago

I have never gotten into this but would love to do some of them!

Posted by Norma J. Elkins, Realtor - Elkins Home Selling Team ( Elite Realty Group) about 12 years ago

Nice to hear from you, Norma. Hope your having a fine evening.

Posted by David Saks ((retired)) about 12 years ago

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