What is a BPO?
A BPO or a Broker Price Opinion is similar to an appraisal but is not an official report by a licensed appraiser. A BPO is sometimes be used by a mortgage company to bypass the cost of a full-blown appraisal report. A BPO is done by a real estate broker (usually that has negotiated contracts in a certain area) and an opinion of value is determined to suggest the marketable value of a property. In many cases a mortgage company will order a BPO (for a short sale) to determine if the mortgage amount is less than the marketable value. Many people believe that BPO’s will soon replace appraisals.
Traditionally, an appraiser gets the offer to purchase contract when an appraisal is ordered. This can sometimes bias an opinion because there is a value that the buyer is seeking. With a BPO there is a blank slate and an opinion must be formed based on the comparable properties. BPO’s, like appraisals, may require 3 active properties and 3 properties that have been sold in the last 6 months. Since no two properties are exactly alike there must be adjustments made to make the houses equal. Appraisers seem to have a knack for adjustments even though they may not be actively involved in real estate transactions. Their information is based specifically on data, whereas a real estate broker may have hand on experience for a certain area and know what the property should bring. Both appraisers and brokers do their best to determine value and may or may not come to the same value. As we play our part as a Columbia SC real estate agency, we often employ both ideas and base our suggested listing price on the results. As far as a lender is concerned, an appraisal takes precedent.