What is a broker price opinion (BPO)?

A broker price opinion (BPO) is a real estate professional's official estimate of a property’s value. BPOs may be helpful when buying or selling a home. Buyers can use the BPO to help find out whether they're getting a good deal. Additionally, the service may help sellers market their homes with an accurate price. Let’s look at how BPO works, the different types of BPOs and whether getting one is right for your current position in the housing market.

Do note that a BPO isn’t a substitute for an official appraised value or the true market value of a home and may not be used in some states. Additionally, per regulations, BPOs are generally not allowed for loan originations or refinancing. In some cases, however, it may be used for loan modifications.

Who writes a BPO?

A broker’s price opinion is written by a real estate agent or a broker. Brokers often use several strategies to come up with their price, including:

• Performing a visual assessment of the physical house.
• Conducting a competitive market analysis (CMA) by analyzing the local housing market through a multiple listing service (MLS) and comparing the home in question to similar homes for sale.
• Calculating how much it might be to prepare the property for sale, including the costs of any repairs.

How to get a BPO

When you hire a real estate agent, you form a contract called a listing agreement. If you’re selling your home, BPOs are typically a part of most listing agreements. If you aren’t selling your home, but are looking for a BPO anyway, you may be able to contact a trusted real estate agent or broker and hire them for this specific service. For example, you may be a buyer looking at potential homes for sale and are wondering if the listing price is a fair BPO, and not one the seller used for a high profit margin.

Types of BPOs

There are different ways brokers typically conduct a BPO. As mentioned earlier, they perform a visual assessment, conduct a CMA and calculate potential costs of selling. These assessments may be done internally or externally:

• Internal BPO: When a broker gets authorized access to the property. They can enter the house and other areas on the property (like the backyard) to view and collect more granular data on the home that helps them determine the price after other research.
• External BPO: Sometimes known as a “drive-by” BPO, and is when the broker looks at the home from the outside only to make a price evaluation. A broker might do an external BPO as price research for a different listing, or for a lender or buyer who doesn’t currently have access to the home.

For both an internal and external BPO, the broker may take photos of the property as part of their process. This might depend on their level of authorization. Do note that due to the thoroughness and exposure of an internal BPO, it may provide a better assessment than an external BPO.

BPOs vs. Appraisals

As you now know, a BPO is a real estate professional’s estimate of a property’s value. While this might sound similar to a home appraisal, the two are quite different.

A home appraisal is conducted by a third-party appraiser who assesses a home’s market value. Unlike a BPO, an appraisal is not the sale or asking price of the home but how much it’s worth in the current housing market. Due to this, the appraised value and BPO on the same property may vary. Sellers sometimes use a BPO for their listing to drive up the value of their home as a sale strategy. When the home is professionally appraised, the value may come back lower.

Whether you’re buying, selling or refinancing a home, your mortgage lender will require a formal home appraisal. The results of the appraisal will help determine how much money they’re willing to lend you. Overall, a home appraisal has a bigger impact on financing and tells you more about the market value of a home than a BPO.

Should you get a BPO?

If you own a property and are looking to refinance or sell your home, you may request a BPO. Some people opt for a BPO over other assessments like appraisals because the service may be included in their listing agreement (depending on the broker) or is less costly overall. BPOs may also be requested by a lender amid refinancing a mortgage or foreclosing on a property. It’s a potentially easier, quicker and lower profile way to understand the price of a property.

Do check the legality surrounding a BPO in your area before making a request for the service.

In summary

A BPO is a real estate professional’s estimate of a home’s value. A BPO is often included in a listing agreement, or it may be requested by a lender during a refinancing or foreclosure. Depending on the scenario, a BPO may be done internally or externally and may be less costly than a home appraisal. Do note that BPOs aren’t accepted in all states, and lenders typically require a home appraisal either way.

FAQs

How much does a BPO cost?

One of the biggest differences between an appraisal and a BPO is the cost. A BPO is less thorough and is known to be less expensive, however the specific price will vary depending on the location and type of BPO you get. A BPO may be about half of the price of an appraisal, or in some agreements, may be free.

What are the pros and cons of a BPO?

Getting a BPO may be helpful if you’re trying to refinance, sell your home or understand the price of another property. As mentioned, it’s typically less costly than an appraisal. However, BPOs may not be accepted everywhere. Consider checking with your local municipality. If BPOs are accepted, you may still run into situations where an appraisal is required over a BPO.

When to use and when not to use BPO?

BPOs are often used by real estate agents when they are listing a home for sale. During a short sale or foreclosure where you’re looking to make a quick sale, a BPO may be better equipped to achieve that goal. If you’re looking to get a more detailed understanding of a home’s value, you might opt for a home appraisal.