The term “Broker’s Price Opinion” (BPO) is used in the real estate industry to describe a home appraisal performed by a real estate broker. A BPO is not an official appraisal but an opinion of the property’s value.
A BPO is not binding on the buyer or seller and should not be used as the sole basis for decision making. A broker’s price opinion is similar to comparative market analysis.
The real difference is semantics. Banks and lenders often refer to appraisals by real estate agents as a broker’s price opinion. Real estate agents refer to their appraisal work as CMA or Comparative Market Analysis.
Let’s take a closer look at the key things to know about a broker’s price opinion.
How does a broker price opinion work?
A broker’s pricing opinion includes a detailed property analysis, including its location, condition and amenities. The opinion also includes an estimate of the property’s market value.
A broker’s pricing opinions are essential for buyers and sellers to better understand the value of a property.
A real estate agent visits the subject property to get an idea of value. There are two types of brokers’ price opinions—internal and external.
Internal vs External BPO
In-house BPO is more accurate because the real estate agent can get a true picture of the house.
Conditions, amenities and floor plan design are not available without an internal visit. Resisting the constraint of making an outside broker price opinion can be challenging. There is so much that goes into the value of a home to be able to accurately predict the value without ever stepping foot inside.
However, sometimes the bank wants a quick opinion and does not ask for an in-house visit. The lender expects the value to be off without the agent venturing into the property.
A broker’s price opinion vs. a home appraisal
A broker’s price opinion (BPO) is a document prepared by a real estate agent while a licensed appraiser conducts the appraisal. This document differs from a home appraisal, which evaluates the property’s value by an independent appraiser.
A BPO typically includes information such as the property’s square footage, location, and recent sales history in the area. An appraisal includes this information but in a standard form that the appraiser submits to the mortgage lender.
Lenders, banks and other financial institutions never accept a broker’s price opinion when lending money. The mortgage requirements don’t allow that. Appraisers are independent third parties in real estate transactions. On the other hand, real estate agents have a vested interest in selling a home.
What are the benefits of having a broker’s price opinion?
Benefits of having a BPO include:
- If you are a home buyer you can negotiate a better price for the property.
- Having the opportunity to get an opinion on the value of the property when selling.
- Ability to use opinion as basis for purchase or sale agreement.
Broker’s Price Opinion Cost and Real Estate Appraisal
A broker’s price opinion gives context to the property and guides negotiations between buyers and sellers. The cost of a broker’s price opinion is usually less than the cost of a real estate appraisal, which can vary depending on the size and complexity of the property.
A real estate appraisal provides more detailed information about a property, including its value and potential improvements. The typical cost of a BPO ranges from $50-$150. The cost of a home appraisal runs from $300-$500.
In a real estate transaction, the cost of a home appraisal is borne by the buyer and becomes part of their closing costs.
Final thoughts on BPO
A broker’s price opinion has its place in property valuation. However, it should not be relied upon completely. The accuracy of a broker’s price opinion depends on the person performing the task. Is it an agent with years of experience serving BPO or someone who got their real estate license?
You can get multiple BPOs and get different results. Property values can be very subjective. That is why they are called opinions.
Bill Gassett MetroWest has been a nationally recognized real estate leader helping people buy and sell Massachusetts real estate for the past 35 years. Bill is the owner and founder Maximum real estate exposure. For the past decade, he has been one of the top RE/MAX Realtors in New England.