If you’re trying to get a mortgage, you may hear the lender refer to a broker price opinion. Is that the same thing as an appraisal, or a comparative market analysis? Not really. Let’s explore the differences in these three ways of valuing a house.
Three ways toward valuation
- A broker price opinion (BPO) is an unofficial estimate of a home’s market value. A licensed real estate agent relies on her professional judgment to develop this subjective opinion. The agent preparing a BPO will consider such factors as sales trends in the neighborhood, curb appeal, location in relation to local attractions, and her general knowledge of what similar homes in the area sell for. The BPO is her best estimate of a home’s value.
- BPOs can be external or internal. An external BPO, also known as a drive-by, happens when the agent does not have access to the home and judges it from the outside only. With an internal BPO, the agent tours the home and can assess it based on its floor plan and features.
- A comparative market analysis (CMA), like the BPO, compares a house to similar homes in the area. But the CMA also considers prices of specific homes that are sold, pending or withdrawn from the market, as well as the number of days nearby houses spend on the market. For a consumer, the difference between a CMA and a BPO may be hard to discern.
An appraisal is a full evaluation of a home’s value. A certified or licensed real estate appraiser prepares an appraisal after a detailed tour of a house and consideration of its exact square footage, improvements and neighborhood comparable values.
Who uses a BPO evaluation?
Lenders are the most frequent users of BPOs. The BPO helps the lender evaluate a home whose owner wants to refinance, or one that the lender has foreclosed upon and is preparing to sell. By contrast, lenders order appraisals when a consumer seeks a mortgage for a property under contract. This is because they need as accurate an evaluation as possible when deciding how much money they will loan.
Licensed real estate agents use CMAs to assist sellers in marketing their homes.
Is there a charge?
Regulations in some states limit how much, if anything, an agent can charge for a BPO and under what circumstances a BPO can be used. Some states don’t allow BPOs at all. If the agent charges a fee, it is typically $100 or a little more.
Related – Let’s Make a Deal: Seller Strategies