What is a BPO?
Lenders use Broker’s Price Opinion or BPO to quickly and inexpensively determine the value of a property. Unlike a full appraisal, which requires a licensed appraiser to inspect the property and often costs $300-500, the BPO is typically performed by a licensed real estate agent or broker and the cost can be much less: $100-150 is the norm.
A BPO is, in many ways, like a mini-appraisal of a property. The real estate agent or broker will use some of the same techniques to appraise the property that an appraiser uses. Typically there are 3 comparable sales (showing comparable properties that have sold in the last 6 months) and 3 competitive listings (showing the current market trends, these are comparable properties that are listed for sale but have not yet sold).
Another part of the BPO involves the agent or broker actually inspecting the property and taking pictures of it. If the request is for an outside BPO, the agent or broker will typically be required to take a front of house photo, street view, and an address verification photo (showing the address numbers on the mailbox, the sidewalk, house or any other place). If the order is for an interior BPO, the photos above will be taken by the agent or broker PLUS photos of the interior of the property – kitchen, bathroom, living room, bedrooms and basement are the typical photos required here . Also, if the property is vacant, photographs of major mechanical systems (hot water tank, furnace, electrical panel) are sometimes required. Also, if repairs are needed, the agent or broker should also take pictures of these areas.
What is the purpose of the BPO?
For banks or asset management companies, the BPO is a valuable tool to tell them the value of their property. From there, they can price the property accordingly, with the goal of achieving a quick sale. The longer a lender has a property on his books, the more money it will cost him, so selling the property quickly is extremely beneficial to him.
Why do agents and brokers do BPO?
For real estate agents or brokers, the BPO represents an opportunity to supplement or replace their normal commission income. There are some states that do not allow real estate agents or brokers to be compensated for performing BPOs. For all other states, the BPO agent can earn an average of $40-75 for each BPO they complete. Once they master their technique, a BPO agent can complete BPO in an hour or less, bringing their hourly earnings to $40-75 per hour!
Another great reason to do BPO is the opportunity to receive REO listings. REO listings are properties that the lender has repossessed due to foreclosure – they are Real Estate Ownership (REO) properties. As mentioned above, it is in the lender’s best interest to sell these REO properties as quickly as possible and they turn to real estate professionals to get rid of these properties. By performing BPOs, the real estate professional can gain the REO listing and thus increase their income from the commission on the property once it is sold.