What Is A BPO In Real Estate?
A BPO in real estate is short for Broker’s Price Opinion. A Broker’s Price Opinion is an opinion of value of specific piece of real estate performed by a real estate broker or real estate agent.
How Is A BPO Created?
A BPO is created by analyzing the subject property along with 3 ideal active comparables and 3 ideal sold comparables to arrive at a fair market valuation.
Who Uses Broker Price Opinions?
Broker Price Opinions in most cases are used by lending institutions like banks. Many times when a borrower goes into default, the lender will try to get an idea of value and to figure out what course of action to take with the borrower.
In some cases the borrower is upside down and may be an ideal candidate for a short sale. In this case, the bank will order the BPO usually after an offer has been presented for the short sale.
Be sure to check out this article on How To List & Sell Short Sales.
BPO’s are traditionally a less expensive option for banks compared to a real estate appraisal. In some cases less than 10% of the cost than that of an appraisal.
What Is A BPO Used For In A Real Estate Short Sale?
Many times lenders will use BPO’s to get an idea of value once a short sale offer is submitted and presented.
However, some lenders are proactive and will preliminarily get an idea of value for the short sale or even a foreclosure.
If the bank ordered a preliminary BPO for the short sale, many times they will want the short sale agent to go to market at that value or within 5-10% if there is limited action on open market.
How Much Does A BPO Cost?
BPO’s usually cost around $40-$125. Again they are a less expensive option compared to an appraisal. These monies are paid directly to the broker and then disbursed to the real estate agent who performs the valuation.
** Want to get BPO assignments from the banks? Check out this ARTICLE.
What Is The Process Of The BPO (Broker’s Price Opinion)?
Once a real estate agent accepts a BPO assignment, they will have to do the following:
- Site visit. Some are only exterior but many are interior. You will have to make an appointment with the owner or listing agent in cases of a short sale.
- Take pictures of the property inside and out including the street address and other important features per the BPO agents request.
- Submit on the BPO agent’s website a description of the property, all pictures of the property, 3 active and 3 sold comparables. Sometimes more.
- The BPO agent will review and report back to you of anything missing / needed or if they are in a disagreement with some of your chosen BPO comparables.
- Once the BPO is accepted they usually pay out the broker every 30 days in my experience.
BPO vs. Appraisal
BPO as mentioned is performed by a real estate agent or real estate broker. An appraisal is performed by an actual certified appraiser.
An appraiser’s sole responsibility is to formulate an idea of value using a few methods. One or all. Depends on the lender and type of real estate.
Appraisals are usually required when a borrower is getting a new loan or a refinance. The 3 methods are as follows:
- Sales Comparison – Analyzing comparable active and sold properties to the subject property. Most common.
- Cost Approach – Analyzing the value of the land plus the cost to replace the structure if any.
- Income Comparison – Used for properties that generate income such as an apartment complex. An appraiser will analyze income and expenses to come up with a valuation.
BPO vs CMA
A CMA is a comparative market analysis. This is very comparable to a BPO (Broker’s Price Opinion).
However, the CMA is usually performed by a real estate agent / broker to give a prospective seller an idea of value of their real estate in a traditional sale.
This will still usually consist of analyzing the subject property as well as providing at least 3 active and 3 sold comparables to come up with a good asking price to go to market for sale.
How Much Do BPO Agents Make?
On average in my experience they make around $60 per BPO performed. If an agent were to sign up with multiple BPO asset management companies, they could expect to do several a week or even several a day.
When I was primarily listing short sales, an agent in the area was consistently hired to do BPO’s for my short sale listings.
In speaking with him, he was making around $5,000 a month performing BPO’s.
**Want to learn how to list and sell short sale? Click HERE.
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