A Guide To Broker Price Opinion (BPO)

Many factors can help determine a property's listing price, and in some cases a key component is a broker price opinion (BPO). Lenders and home sellers alike may consult a real estate professional for a BPO to get a quick and accurate estimate of the home’s value. 

What Is A Broker Price Opinion?

A broker price opinion is an estimate of a property’s value done by a real estate broker or other qualified professional. Though only an estimate, a traditional BPO is based on the sales of comparable properties in a given neighborhood. Usually, a BPO is used as part of the listing agreement when selling a house.

When Is A Broker Price Opinion Used?

BPOs are most commonly used in the following situations:

• Short sales and foreclosures
• Portfolio and asset valuation
• Nonperforming and reperforming loan sales
• Whole loan sales
• PMI appeal requests

Note that BPOs are not legal in all states. Most lenders require a home appraisal to determine the home’s property value, and government-sponsored institutions like Fannie Mae and Freddie Mac don’t accept BPOs for mortgages sold to them.

How Do Broker Price Opinions Work?

To determine the broker price opinion, a broker or real estate professional uses real estate comps, or comparable homes. This process is similar to completing a comparative market analysis (CMA). Real estate agents also use CMAs to estimate property values – they take a look at similar homes sold in the same area over a certain period of time.

In addition to comps, a few factors determine the broker price opinion. The following items usually go into the report:

• Age of the home
• Size of the property
• Neighborhood surrounding the property
• Zoning requirements
• Condition of the property

After analyzing these factors, the broker provides homeowners or buyers with a broker price opinion form with the results.

Types Of Broker Price Opinions

There are two main types of broker price opinions: internal and external. Here’s how those opinions differ.

Internal BPO

In an internal BPO, an agent goes into a home and spends time measuring and evaluating its features in order to accurately evaluate it. The broker evaluates the home’s internal conditions, measures rooms to get accurate sizing and verifies the number of bedrooms, bathrooms, etc. in person.

External BPO

In an external BPO, also called a drive-by BPO, a broker assesses the property from the outside – solely the exterior – unlike with an internal BPO. A broker may look at some official information about the home, such as square footage and number of bedrooms. External BPOs are more common but less accurate than internal BPOs.

Broker Price Opinion Vs. Appraisal: What’s The Difference?

The two main differences between appraisals and BPOs involve time and cost.

Trained experts conduct home appraisals, while BPOs are done by agents or brokers. The appraisal accuracy will be much higher because appraisers must meet certain educational guidelines and benchmarks. They also take continuing education courses in valuation. BPOs likely won’t line up with a property’s full market value.

BPOs are less expensive to order than appraisals. Appraisals generally cost anywhere from $300 – $450 (for single-family homes) and up to $600 (for multifamily homes). The average price of a BPO can range from $50 – $300, though prices vary by location.

Because of the typical appraisal timeline, and amount of substantive work, the home appraisal process often takes a week or 2 to fully complete. Meanwhile both an external and internal BPO might take a much shorter amount of time – in some cases, less than 1 day to complete.

How To Get A Broker Price Opinion

There are a couple of ways that homeowners or potential home buyers can get a BPO.

Asking A Real Estate Agent Or Broker

If you’re working with a real estate agent or through a broker, you can ask them to do it. They may even create a BPO free of charge if you’re already working with them on a purchase or sale.

Going Through A Broker Price Opinion Company

You can also order a BPO through broker price opinion companies. A few national companies that offer this service include Clear Capital, LRES and Equator.

You can also contact the National Association of BPO Professionals (NABPOP) for a list of certified BPO vendors who hold BPO certification.

Should You Order A Broker Price Opinion?

Ordering a broker price opinion makes the most sense when determining the value of a home in foreclosure or in a short sale. During either of these situations, the seller may want to sell the home quickly, and a BPO would help to achieve that goal.

There are certain situations when a BPO wouldn’t make sense for a home buyer or seller. For a thorough, detailed overview of a home's value, you'd want to get an appraisal rather than a BPO. If you're applying for a mortgage, you don’t need a BPO because lenders require an appraisal before approving you for the loan.

The Bottom Line

A broker price opinion can be requested by a lender, loss mitigation company, mortgage company or homeowner who wants a property value estimate. BPOs will offer less comprehensive valuation results than home appraisals, especially external BPOs, only look at the exterior of a home. BPOs will often make the most sense in a foreclosure or short sale situation.

If you need a BPO for your current situation or project, find a local mortgage broker in your area.