Broker price opinion
A broker price opinion is an estimate of a property's probable sales or listing price given by a real estate broker or sales agent, which federal banking guidance says is not by itself an appraisal or an evaluation.
An estimate of probable price that is not by itself an appraisal
The federal Interagency Appraisal and Evaluation Guidelines of 2010 describe a broker price opinion, or BPO, as an estimate of the probable sales or listing price of the subject property, provided by a real estate broker, sales agent or sales person. The same entry goes on to say what a BPO is not.
A BPO generally provides a varying level of detail about a property's condition, market, and neighborhood, as well as comparable sales or listings. A BPO is not by itself an appraisal or evaluation
Interagency Appraisal and Evaluation Guidelines (2010)
Two things follow from those lines. A BPO aims at a price, what the property would probably sell or list for, rather than at the property's market value. And its detail varies: the Guidelines expect some BPOs to say more about condition and comparable sales than others. The rest of this entry sets the BPO beside an appraisal, a lender's evaluation and a home mortgage.
A BPO next to an appraisal, under Virginia law
Virginia has no statute by the name broker price opinion. What its Code regulates is the appraisal, which Va. Code 54.1-2011 makes unlawful to perform for compensation without an appraiser's license, except as 54.1-2010 and two subsections of 54.1-2011 provide. That section is the license requirement for appraisers; it is not a rule about price opinions.
The exemption written for real estate licensees is 54.1-2010 A 1, for a valuation or analysis provided in the ordinary course of business for a fee, and the limits it attaches, including what that valuation may be called, are argued in why a licensee's valuation is not an appraisal.
The word broker in the name is loose, too. The Guidelines' definition covers a broker, a sales agent or a sales person. Virginia's brokerage statutes give a broker duties of its own: it is a principal or supervising broker, for example, who assigns licensees to separate clients under designated agency.
A BPO next to a lender's evaluation
An evaluation is the document a lender may use where its regulator does not require an appraisal, and Virginia defines it as an opinion of the market value of real property used in that kind of transaction. The Guidelines rule the BPO out of that role and give the reason:
a valuation method that provides a sales or list price, such as a broker price opinion, cannot be used as an evaluation because, among other things, it does not provide a property's market value.
Interagency Appraisal and Evaluation Guidelines (2010)
The gap is between a price and a market value. A BPO answers what the property would probably sell or list for; an evaluation has to reach market value. A comparative market analysis meets a similar objection in the same Guidelines, under their name for it, competitive market analysis.
The Dodd-Frank sentence on a consumer's principal dwelling
The 2010 Guidelines also quote the Dodd-Frank Act on a setting home buyers meet directly: a mortgage loan tied to the purchase of a consumer's principal dwelling. As the Guidelines quote it:
[i]n conjunction with the purchase of a consumer's principal dwelling, broker price opinions may not be used as the primary basis to determine the value of a piece of property for the purpose of loan origination of a residential mortgage loan secured by such piece of property.
Dodd-Frank Act, as quoted in the Interagency Appraisal and Evaluation Guidelines (2010)
Outside a lender's file, the question a BPO answers is still a practical one for a seller: what the property is likely to bring. The Guidelines note a BPO may draw on comparable sales or listings. A comparable listing comes with its own record, including how long the MLS shows it on the market, and ground bought for its income raises the separate question of what a cap rate is.
After a price estimate on a tract from a licensee, not an appraiser?
A licensee's estimate here is an opinion of value, never an appraisal and not written to stand in for one. Send the parcel and say what the number is for. No cost, no obligation.
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Questions about this term
Why is it called a broker price opinion when a salesperson can give one?
The name is looser than the definition. The 2010 Interagency Appraisal and Evaluation Guidelines describe an estimate of probable sales or listing price "provided by a real estate broker, sales agent, or sales person." The document is defined by what it estimates and who gives it, not by the giver's license rank.
Does Virginia have its own statute for broker price opinions?
No statute by that name exists in Virginia. The Code's appraiser chapter speaks instead of a valuation or analysis of real estate that a licensed broker or salesperson provides in the ordinary course of business, and it says that valuation shall not be referred to as an appraisal or used in lieu of an appraisal by a licensed appraiser.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Interagency Appraisal and Evaluation Guidelines (December 10, 2010) Federal Register
- Va. Code 54.1-2009: definitions for Real Estate Appraisers, including evaluation Code of Virginia
- Va. Code 54.1-2010: exemptions from the appraiser chapter Code of Virginia
- Va. Code 54.1-2011: necessity for an appraiser's license Code of Virginia
- Va. Code 54.1-2130: definitions, including designated agent Code of Virginia