What Is BPO in Real Estate and When to Use It?

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Written By Justin McGill

DealBloom aims to share the latest tips and strategies to help realtors, brokers, loan officers, and investors navigate the world of real estate.

If you’re a real estate agent, there are certain times when it makes sense to use a BPO. But what is BPO in real estate?

A BPO is short for broker price opinion. It’s basically an estimate of the value of a property, typically used by banks and other financial institutions. As a real estate agent, you might be asked to do a BPO if someone is trying to get pre-approved for a loan or refinancing their mortgage. The bank will ask for your opinion on the value of the property so they can determine how much money to lend them.

It’s important to remember that a BPO is not the same as an appraisal – it’s just an estimate based on things like recent sales prices of similar properties in the area.

So what is BPO in real estate and why would you want to do one? Well, sometimes it can help move along deals that might otherwise fall through because buyers can’t get financing approved. And even though it’s just an estimate, doing accurate BPOs can help build your reputation as being knowledgeable about values in your market area.

What is BPO in Real Estate?

BPO in real estate stands for Broker Price Opinion. It’s a report that real estate agents and brokers can use to estimate the value of a property.

The BPO report includes information about the property’s location, condition, amenities, and recent sales data.

A BPO is an estimate of the value of a home, determined by a real estate agent. A BPO is based on several factors, such as the number of bedrooms and bathrooms, the size of the lot, and the age of the home.

A broker price opinion is not an appraisal, and it will not necessarily be the same as your property’s actual worth.

What Type of BPO Do I Need?

There are two types of BPO: Drive-By or Exterior BPO and Interior BPO.

An interior BPO is a more comprehensive report than an exterior one.

Everything in the exterior BPO will also be included in the interior BPO but the interior BPO will have additional information.

An external BPO should ideally include at least three photos of the home. One of these photos is taken from the curb and shows the full street address and front of the house.

Another photo is shot down the street to show the neighborhood.

A third photo shows the exterior of the house and its general condition.

The agent will research the tax records for details about the home – including the year it was built, number of bedrooms, and square feet. Most BPOs also include information about three similar properties that have sold and three that are currently on the market.

The agent will search the Multiple Listing Service (MLS) for recent sales, and determine the listing price, sale price, and days on market.

How Does a Broker Price Opinion Work?

A broker price opinion is an estimate of a property’s market worth provided by a licensed real estate professional.

To provide a BPO, real estate agents examine similar homes that recently sold in the same area and make adjustments based on the location, square footage, and condition of the properties.

Broker price opinions are typically delivered in written format and will include an analysis of current market conditions.

BPOs can be a helpful tool for homeowners trying to make decisions about their property, however, it’s important to keep in mind that market conditions are constantly changing. Some BPOs only include an exterior inspection of the home while others also include a tour of the interior.

A BPO is used by homeowners who are trying to decide whether or not to refinance or do some home renovations.

Lenders often use a BPO when estimating the value of a property for streamlined refinancing, foreclosures, and short sales.

A BPO can be a more cost-effective way of estimating a home’s value. According to the National Association of Broker Price Opinion professionals, a BPO can cost about one-half to three-fourths of the cost of a full appraisal.

While the exact price of a BPO is a variable, it is generally based on an expert’s current knowledge of the real estate market. This knowledge can help when determining a list price.

A broker price opinion can be faster than a traditional appraisal. In a hot market, it can be difficult to get an appraisal schedule.

A BPO can be a more affordable option than an appraisal, as it can cost just a fraction of the price. This makes them a great choice for those looking to save on costs.

A BPO can be used in place of a traditional appraisal. A lender may use a BPO for a foreclosed or short-sale property, or a homeowner’s request for PMI cancellation.

A BPO isn’t nearly as detailed as an actual home valuation. A licensed, professional real estate appraiser performs a home value assessment.

A BPO may not be the best option for every mortgage transaction. In some cases, an official appraisal may be required instead of a BPO – especially when purchasing a home.

A broker price opinion may be considered to be biased because it is completed by a real estate agent who earns a commission based on the sale price, as opposed to a third-party, objective, appraiser.

A BPO may be restricted by some state and federal laws. The use of a BPO may vary depending on the state in which it is used.

When to Use a BPO

While both appraisals and BPOs serve the same purpose, a mortgage broker may prefer a valuation from a loan officer over one from a licensed or certified professional. This is because a loan officer’s appraisal is more conservative and is geared toward the lending process.

A BPO can be a useful tool for buyers and sellers, as well as private lenders, early in the property purchasing and selling process. A broker can evaluate a property’s value based on comparable properties in the area.

For a relatively small fee, both the buyer and the seller gain a better understanding of what the price will be for the property.

An exterior BPO is typically used when the broker is unable to gain access to the property. This can happen when the property is being repossessed but the owner refuses to cooperate.

One of the only times when lenders will order BPO instead of an appraisal is for short sales. This is because a lender will lose money on a short sale and an appraisal will only increase the losses.

Banks, mortgage loan companies, and asset management companies also order BPOs for:

  • Home purchases
  • Home loan refinancing
  • Sale of a bank-owned foreclosed property
  • Property value estimate

BPO is commonly used by homeowners, investors, and potential buyers in the following situations:

  • Valuation for a short sale or foreclosure purchase
  • FSBO
  • Portfolio and asset valuation
  • Nonperforming private loans
  • Reperforming private loans
  • Selling private loans
  • PMI requests or appeals

While a BPO has many uses in real estate, it is not always a good substitute for a formal, official property appraisal. It’s not even legal in some states.

Most banks require an appraisal of the home before approving a mortgage.

Conclusion

What is BPO in real estate? A BPO is a helpful tool for real estate agents to have in their arsenal, especially when working with buyers who are trying to get pre-approved for a loan. While it’s just an estimate, doing accurate BPOs can help build your reputation as being knowledgeable about values in your market area.

Justin McGill