The term “broker’s price opinion” (BPO) is used in the real estate industry to describe a home appraisal that a real estate broker performs. A BPO is not an official appraisal but an opinion of the property’s value.
A BPO is not binding on either the buyer or the seller and should not be used as the sole basis for making a decision. A broker’s price opinion is similar to a comparative market analysis.
The only real difference is semantics. Banks and lenders often refer to evaluations by a real estate agent as a broker price opinion. Real estate agents refer to their evaluation work as a CMA or comparative market analysis.
Let’s look closely at the most important things to know about a broker’s price opinion.
How does a broker price opinion work?
A broker’s price opinion includes a detailed property analysis, including its location, condition, and amenities. The opinion also includes an estimate of the market value of the property.
Broker’s price opinions are essential for buyers and sellers to understand a property’s worth better.
A real estate agent will visit the subject property to get an idea of the value. There are two kinds of broker’s price opinions—internal and external.
Internal vs. external BPO
An interior BPO will be far more accurate because a real estate agent can get a true picture of the home.
Conditions, amenities, and floor plan layout will not be available without an interior visit. Standing from the curb doing an exterior broker price opinion will be challenging. There is too much that goes into a home value to be able to accurately predict value without stepping inside.
However, sometimes a bank will only want a quick opinion and don’t ask for an interior visit. The lender expects that the value could be off without an agent venturing inside the property.
Broker price opinion vs. house appraisal
A broker’s price opinion (BPO) is a document prepared by a real estate agent, whereas a licensed appraiser conducts an appraisal. This document is different from a house appraisal, which evaluates the value of a property made 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 will also contain this information but will be on a standardized form that the appraiser submits to a mortgage lender.
Lenders, banks, and other financial institutions never accept a broker price opinion when lending money. Mortgage requirements do not permit it. Appraisers are independent third parties in a real estate transaction. On the other hand, real estate agents have a vested interest in a home sale.
What are the benefits of having a broker’s price opinion?
The benefits of having a BPO include:
- You can negotiate a better price for the property if you’re a home buyer.
- Having the chance to get an opinion of the property’s value when selling.
- The ability to use the opinion as the basis for a purchase or sale agreement.
Cost of a broker’s price opinion vs. real estate appraisal
A broker’s price opinion gives property context and helps guide the negotiations between buyers and sellers. The cost of a broker’s price opinion is typically 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 can provide more detailed information about a property, including its value and potential improvements. The typical cost of a BPO ranges from $50-$150. The price of a home appraisal runs from $300-$500.
In a real estate transaction, the cost of a house appraisal is born by the buyer and becomes part of their closing costs.
Final thoughts on a BPO
A broker’s price opinion has its place in property evaluations. However, it should not be relied upon entirely. A broker’s price opinion accuracy depends on the person performing the task. Is it an agent with years of experience serving the BPO or someone who just got their real estate license?
It is possible you could get multiple BPOs and get different results. Property values can be very subjective. That is why they are called opinions.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years. Bill is the owner and founder of Maximum Real Estate Exposure. For the past decade, he has been one of the top RE/MAX REALTORS® in New England.