BPO stands for broker price opinion and focuses on providing an estimate of a property’s value, which is typically ascertained by a professional real estate broker. This opinion is based on many different characteristics of the property in question. However, a BPO isn’t considered to be as comprehensive as a standard real estate appraisal. While the estimate will likely be close to the market value of the home, there are also times when the estimate is much different than the actual value.
Even though this estimate isn’t considered to be official, it can prove to be highly beneficial for sellers and buyers alike. When you’re getting ready to list your home on the market, the real estate agent can take a quick look at your home to help you determine what the property should be listed at. After the agent takes a look at your home, they will compare it with several other properties that have recently sold in your area, which allows them to calculate what the price of your home should be.
It’s also possible for financial institutions to order a BPO when a home is about to be foreclosed on, which is used by the bank to confirm that the home value is currently lower than the amount that’s owed on the home. Whether you’re getting ready to place your home on the market or to purchase a home, knowing what a BPO is could prove useful during the sale or purchase process. The following is a detailed guide that explains the various types of BPO and how they are used.
Two Standard Types of BPO
- An Interior BPO: This type of BPO involves taking photographs and assessing the interior of the home.
- A Drive-by BPO: This type of BPO creates an assessment of the home solely by the exterior view of the property.
An Interior BPO
If you obtain an interior BPO, this type of broker price opinion will focus almost entirely on the interiors of a home to provide a more accurate assessment of the property value. The real estate agent who performs the interior BPO will identify the square footage and number of rooms that are found in the home. During this process, pictures will be taken of the home interiors, which are designed primarily to make sure that there are no noticeable repairs that need to be made to the property.
If the interior BPO is set by a bank or similar financial institution, they will have certain photo and form requirements that the real estate agent must adhere to for them to receive payment for the service. Banks will typically avoid ordering an interior BPO if it’s believed that someone still resides in the home. However, this BPO can be ordered by a homeowner when they are about to sell their home or refinance the property. While an interior BPO focuses mainly on the interiors of the home, it will still include all of the tasks that occur with a drive-by BPO.
Along with the total square footage measurement and individual room measurement, an interior BPO will also include an inspection of the interior features, repair estimates, value adjustments via market comparisons, and cleaning estimates. Because of the amount of work that needs to be done with an interior BPO, the costs can be anywhere from $100-$175.
A drive-by BPO
A drive-by BPO is a less intensive type of assessment that involves the real estate agent taking photos of the exterior of the home, which will typically include an image of the address along with a street view image. By taking these pictures, the real estate agent may be able to determine the value of the property based mainly on the age of the property, the style of the home, and the type of home.
The photos that are taken will also provide the real estate agent with the ability to assess if any damage has been done to the exterior of the home, which will reduce the property value. Some of the information that can be placed into a drive-by BPO report include the number of rooms in the home, if the home is currently occupied, how the property compares to nearby homes, and what the shape of the land is. If a lender requests a drive-by BPO, they will sometimes request that additional pieces of information be included in the BPO report.
To understand how these two BPO types differ from one another, you should view an interior BPO as an extension of a drive-by BPO. While the drive-by BPO centers entirely around the exterior of the home, an interior BPO will include all tasks that are completed in a drive-by BPO as well as additional tasks for the interior of the home. The type of BPO that you request depends entirely on the reason that the request is being made.
How is a BPO Calculated?
The wide range of factors that are used to calculate a BPO include:
- Condition of the home
- Demand in the nearby vicinity of the home
- Size of the property
- Size of the structure
- Information from three homes that have recently been sold in the nearby area
When a real estate agent or broker conducts an interior BPO, they will take photos of the home interior while also gathering additional details about the condition of the home interior. When inspecting the home, the real estate agent in charge of the BPO will try to determine if the home has been taken care of properly and if there are any signs of mold or damaged walls that could indicate neglect by the homeowner. As for a drive-by BPO, the value of the home is calculated based primarily on the condition of the exterior as well as some standard information that can be found in property records and multiple listing services.
If you’re currently a homeowner, a drive-by BPO could be ordered by the bank without you knowing, which is why you might notice someone taking pictures of your property without informing you. The main similarity between a BPO and an appraisal involves the recent sales factor that’s used when calculating the value of the home. Both of these processes will look at recent sales of homes that have similar features as the home that’s currently being assessed, which should help them make an accurate estimate of the property value.
An appraisal goes further than a BPO by including additional factors like how much it will cost to maintain or repair the property, what the value of the property would be at its best condition, and how much money would be made if the home was rented out to tenants. While an appraisal will always occur during the home selling or buying process, it usually takes place towards the end of the transaction, which is why a BPO is commonly recommended to buyers and sellers alike.
Who Needs a BPO?
In the vast majority of situations, a BPO is ordered specifically by a financial institution in the event that a short sale is about to occur or the home is about to be foreclosed on. The main situations where a BPO could be ordered include:
- Foreclosures or short sales where the value of the home is believed to be less than the amount of money that’s owed on it
- The settlement of an estate where the homeowner has died
- Obtaining a recent property valuation when the mortgage is being sold on the secondary real estate market
- The identification of the equity amount that’s currently held by the homeowner, which is done for the purpose of removing a requirement for private mortgage insurance
If you’re a homeowner who wants to sell the property or are someone who’s thinking about buying a home, a BPO can provide you with a general estimate of the property value without the need for completing an extensive appraisal. If you’re thinking about obtaining a BPO for your home or a home that you’re interested in, you will need to make this request from larger valuation firms that offer this service. These firms include everything from Pro Teck to Clear Capital. When you make this request, they will hire a local real estate agent or broker to handle the actual BPO. After the BPO has been completed, the valuation company will check the forms to make sure that the BPO meets their quality standards.
Why Would You Seek a BPO?
While A BPO is almost always sought by a bank or similar financial institution, there are a variety of reasons why you might want to obtain a BPO when selling or buying a home. As a seller, a BPO will allow you to obtain an estimate on the value of the property, which may be enough to determine a sensible listing price for the home. If you start at the right price, your home might not stay on the market for too long.
As a buyer, the estimate from a BPO will help you make the right offer on the home in question. If you back up your offer with this information, the homeowner may be more likely to accept the offer. The main benefit of a BPO is that it costs much less than an appraisal. While an official appraisal can cost upwards of $300-$400, a BPO will only cost $50-$175 depending on the type of BPO you obtain.
Obtaining a BPO in Real Estate
Whether you’re looking to sell your property and want to obtain an accurate estimate of the home value or are about to purchase a home and want to know if it’s priced properly, a BPO may be the perfect solution for you. This valuation of the property can be performed at a much lower cost than a standard home appraisal, which will allow you to obtain an estimate of the property value before the home is being closed on. Since a BPO takes numerous factors of a home into account, the real estate agent who performs the estimation will usually provide you with an accurate assessment.
If you want to request one of these estimates, you will need to make this request with a valuation firm. The broker price opinion that you obtain can help you list your home at the right price or can assist you in understanding the true value of a property that you’d like to buy. If you want to know more about what a BPO is or would like to begin your search for a new home, contact our real estate professionals at Nicki & Karen Southern California Luxury Real Estate today!