The list price of a property, often the most attention-grabbing aspect of a real estate listing, is typically determined by the real estate agent or broker handling the transaction. This figure is known as the Broker Price Opinion, or BPO, when the seller collaborates with a professional to manage the sale.

A broker price opinion (BPO) is an estimate of a property’s value provided by a real estate professional. While it represents an opinion, it is typically supported by recent selling prices of comparable homes in similar neighborhoods.

BPOs are commonly used when determining the listing price of a property for sale, often as part of the agreement between a seller and their real estate agent. They can also be requested in other situations such as foreclosure sales, short sales, or when homeowners are considering refinancing their mortgages or removing private mortgage insurance premiums. Additionally, BPOs can be utilized in estate valuations or to assess the value of financial assets.

There are two primary types of BPOs:

  • Internal BPO: Involves a real estate agent physically visiting the property to assess its condition, take measurements, and capture photographs from inside.
  • External BPO: A less detailed assessment where the real estate agent evaluates the property based solely on its exterior appearance and condition, as well as its location, without entering the property.

BPOs are primarily used when listing a property for sale, providing sellers with an estimate of its market value and helping buyers gauge what they might need to pay to purchase it.

However, in certain scenarios like foreclosures or short sales, BPOs also play a crucial role. “During the real estate downturn from 2006-09, with many foreclosures and properties on the market, lenders turned to BPOs due to their quicker turnaround times and lower costs,” explains Rocke Andrews, former president of the National Association of Mortgage Brokers and owner of Lending Arizona in Tucson.

This practice continues today. According to Jefferson L. Sherman, 2020 president of the Appraisal Institute and founder of Sherman Valuation & Review in Cleveland, Ohio, “In some states, BPOs are restricted from being used for mortgage purposes except for short sales and pre-foreclosure work.”

Homesellers use BPOs to set competitive listing prices, but these evaluations can also benefit homebuyers and homeowners in various ways.

For buyers, obtaining a broker price opinion is beneficial when:

  • Purchasing a financially distressed property: Brokers can provide accurate valuations, especially in foreclosure scenarios with comparable neighborhood data.
  • Making all-cash offers or needing a quick closing: BPOs offer a faster valuation option compared to traditional appraisals.
  • Working with a lender that accepts BPO reports, in states where they are permitted.

For homeowners, a BPO can be useful when:

  • Seeking to eliminate private mortgage insurance (PMI): Years after purchasing a property, a BPO can assess home value and equity, potentially allowing for PMI removal. Fannie Mae and Freddie Mac accept BPOs for borrower-requested PMI cancellations.
  • Considering refinancing, a home equity line of credit (HELOC), or another home-based loan: Lenders often accept BPOs to assess equity levels for these financial products.

To ascertain a broker price opinion (BPO), a real estate agent or broker leverages their local market expertise to assign a property a specific dollar value based on various factors.

“Typically, agents conduct a comparative market analysis as part of their listing agreement when selling a home,” explains Andrews. “They review recent sales of similar properties and provide an estimate of the appropriate listing price.”

Some private lenders also utilize BPOs, notes Andrews. However, in traditional mortgage lending, where financial institutions determine loan amounts and terms, BPOs are not the primary method for property valuation. Instead, lenders usually opt for a professional appraisal.

This preference arises because broker price opinions are generally not accepted for mortgages backed by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or the Department of Agriculture (USDA), as Sherman confirms.

A BPO and an appraisal may appear similar, but several key differences distinguish them:

  • Expertise and training: According to Sherman, appraisers undergo rigorous standards including education, experience, and testing in valuation. They must pass a national exam and adhere to accepted valuation standards.
  • Vested interest: Real estate professionals often earn commissions based on a home’s sale price, incentivizing them to set higher prices in BPOs. This can lead to potentially inflated estimates. In contrast, appraisers are compensated solely for determining a property’s value, reducing conflicts of interest.
  • Cost: BPOs are generally more affordable than appraisals. Appraisals typically cost between $300 to $800 or more, while a BPO is about half that cost, sometimes as low as around $50, as noted by Andrews.

The most straightforward method to obtain a BPO is to request it from your Realtor or real estate agent who can assess the home’s value. Alternatively, you can contact most real estate agents in your local area.

Another option is to utilize the directory of the National Association of BPO Professionals. By entering your zip code, you can access a list of specialists available in your region. This approach allows you to select a professional who may provide more impartiality than your own agent.

Once scheduled, your broker will visit the property to conduct the assessment and deliver a report. It’s crucial to distinguish between an internal and external BPO. If you have made substantial improvements to the home, such as a kitchen remodel or bathroom renovation, ensure these enhancements are considered when determining the property’s value.