Broker price opinion
A broker price opinion is a licensed real estate broker's estimate of what a property would sell for. It sits between an automated model and a full appraisal in both cost and reliability.
What it involves#
Comparable sales analysis, and usually some inspection — frequently exterior only, which is why it costs a fraction of an appraisal.
Sometimes an interior BPO is ordered where the situation warrants it or where access is available.
The output is a value opinion, generally with an as-is and a repaired figure, and an assessment of marketability.
Where they get used#
Almost entirely by lenders and servicers, on distressed property.
Setting the price at which a short sale will be approved. Pricing an REO listing. Deciding what to bid at a foreclosure sale. Valuing loans in a portfolio.
They are volume tools supporting internal decisions, which is exactly what they are suited to and exactly why they are not appraisals.
The limits#
Exterior-only means the same blindness as an automated model, with a human looking at the front of the house. A failed furnace, a gutted interior, water damage — none visible from the street.
Vacant and secured properties are frequently BPO'd without any interior access at all, which describes most foreclosure inventory.
Variability. Two brokers on the same property produce different numbers, and the spread can be wide on property with few comparable sales.
Why it matters to a homeowner#
Because a BPO frequently decides a short sale.
A servicer evaluating a short sale offer measures it against a valuation, and that valuation is usually a BPO. An offer below it gets rejected — not because the offer was unreasonable, but because the BPO was high.
Where that happens, the BPO is challengeable. Supply the comparable sales the broker did not use, and photographs and contractor estimates for condition problems an exterior view could not capture.
Servicers do reconsider on evidence. They do not reconsider on disagreement.
For a buyer at the other end#
An REO list price set by a BPO carries the same blindness.
A bank-owned property priced from an exterior view may be priced well above or well below what its condition supports. That gap is where both the opportunity and the risk sit, and closing it requires the inspection the BPO did not include.
Reading one you have been given#
Three things to check before accepting the conclusion.
Whether it was interior or exterior. An exterior BPO on a vacant property has seen the outside of a building nobody has been inside for months.
Which comparables were used. Distance, date, and genuine similarity. A comparable two miles away and eleven months old is doing a lot of work.
Whether condition was accounted for. The as-is and repaired figures should differ by something resembling the actual cost of the work.
Where any of the three is weak, that is the basis of a challenge — and on a short sale decision, a challenge supported by better comparables is worth making.