Broker's price opinion

Broker price opinions are initiated by financial institutions.[1] Examples are banks, mortgage companies, and loss mitigation companies.[3][4][5]

The BPO is performed by a real estate professional who is acting on behalf of the financial institution.[1] Such a professional could be a real estate agent, a real estate broker, an appraiser, or other qualified person.[2][1] Through BPO’s, real estate professionals can improve their skills in property inspection, market knowledge, evaluation, and property pricing.[6] At a price of US $30–$100 per BPO,[5] the work can provide side income or steady income for real estate agents.[1] Agents may also create working relationships and a rapport with financial institutions.[1][7] Some BPO agents work through a BPO company that provides a single point of contact to the client and oversight of agents and their reports.[1]

A financial institution may order a BPO for:

• situations that do not support the cost or time of a full real estate appraisal[4][1][8]
• real estate owned (REO) properties[1]
• pending foreclosures[4] or foreclosure[1]
• short sales[1]
• an addition or a cross check to an appraisal
• home equity loans[1] and a home equity line of credit[1] of less than $250,000
• refinancing[4]
• appeal to cancel lenders mortgage insurance (LMI or PMI)[1]
• due diligence by financial institutions[1]
• asset evaluation and bookkeeping by financial institutions[1]
• a selling or purchase price for an individual property[9] or a portfolio of home loans (sometimes for thousands of loans)[1]

A real estate agent or a broker is hired to complete a BPO report on a property. A BPO may be occasionally requested without a fee in hopes that the financial institution, bank, or lender will receive a sales listing for the property.[1]

The BPO professional then conducts the investigation. Many factors affect the price of a property:

• characteristics of the individual property, such as structure type, size, room use, age, lot size, and parking[10][11]
• how the property fits into the immediate neighborhood[10]
• compliance with local zoning requirements[10]
• characteristics of the neighborhood[10]
• values of similar properties in the surrounding area[2]
• the amount of cleaning, repair, and preparation needed to make the property marketable[2][11]

The result is a brief report, usually two or three pages in length. This report includes analysis of the property and neighborhood, photographs, comparable properties ("comps"), and local and regional market information.[1][10]

A broker may do a drive-by BPO or an interior BPO.[3] In drive-by BPOs, the professionals do not have access to the interior of the property;[5] they rely on exterior appearance, neighborhood information, comparables, and other documentation.[10] The interior BPO is more in-depth; it requires the agent to make contact with the borrower or point of contact (POC) to schedule inspection, and when arriving the agent looks the property over and notes all repairs needed to bring the property to average condition fair market value (updates and upgrades are not allowed, unless the agent can show that the local market calls for updates or upgrades ie granite countertops stainless appliances and hardwood floors). A photo of the front, rear and both sides of exterior are taken, as well as a photo of each room of the interior, as well as all mechanicals and appliances. When completing the report, value is chosen for 30 day quicksale, and 60–90 day values, and a suggested list price for each is calculated based on market conditions and list to sale ratio for that market. The repaired fair market value is then reduced by itemized repair costs to find the as-is value. [5][11]

Automated valuation model

In an automated valuation model (AVM), a computerized mathematical model evaluates basic features of the property, compares to area sales, and determines a rough value. The calculation takes into account information about property size, bedrooms, and bathrooms. An AVM is a basic evaluation – "just to make sure that the property value is in the right ball park" – and may be replaced by a full real estate appraisal.[9] Because an AVM does not involve a site visit, it does not include factors such as condition or upgrades.[8]

Comparative Market Analysis

An individual who is looking to sell or purchase a home might request that an agent perform a comparative market analysis (CMA)[8] to determine a reasonable listing price or offering price.[12] The process of deciding a CMA price is similar to a BPO.[1] However, a BPO – whether the exterior drive-by BPO or the full interior BPO – is more thorough than most CMAs.[13]

Real estate appraisal

Unlike a BPO professional, a real estate appraiser must be licensed or certified in most countries. A BPO is less thorough than an appraisal.

Only a licensed or certified Appraiser can execute a valuation or an appraisal.[14]

• BPO Standards and Guidelines
• Your BPO Coach – Nicole Ocean
• Free BPO, REO and Asset Management Directory
• Free BPO Software