What is a broker price opinion (BPO)?

Arguably the most eye-catching part of a real estate listing is the price attached to the property. Who sets that number, though? If the home seller is working with a real estate agent or broker to handle their transaction, the list price of the home is likely the broker price opinion, or BPO.

What is a broker price opinion?

A broker price opinion (BPO) is a real estate professional’s dollar estimate of a property’s worth. It is an opinion, but one often backed up by the selling prices of comparable homes in comparable neighborhoods.

BPOs most commonly come into play when setting the price of a property being put on the market: They are typically part of the listing agreement a seller signs with an agent. But they can be called for in other situations, like a foreclosure sale or a short sale.

Homeowners thinking of refinancing their mortgages or wanting to get their private mortgage insurance premiums lifted might request them too. Finally, BPOs can be employed in valuing an estate or financial assets.

Types of broker price opinions

The two main types of BPOs include:

• Internal BPO: An internal BPO involves a real estate agent spending time inside the property to evaluate the home’s condition, take measurements and capture photographs.
• External BPO: An external BPO is much less involved. The real estate agent doesn’t even enter the property, but instead assigns it a value based on its exterior appearance/condition and its location.

Common uses of broker price opinions

BPOs most commonly come into play when you’re putting a property on the market. The home seller gets an understanding of what the property will command, and the buyer gets an understanding of what they will need to pay to own it.

However, in certain situations, such as a foreclosure or a short sale, BPOs can also play an important role. “Back in the real estate downturn [of 2006-09], there were so many foreclosures and properties on the market, lenders would use these due to a faster turnaround time and lesser fee,” says Rocke Andrews, past president of the National Association of Mortgage Brokers and owner of Lending Arizona, a Tucson brokerage.

And they still do. In some states, in fact, “BPOs cannot be used for any type of mortgage purpose, except for short sales and pre-foreclosure work,” says Jefferson L. Sherman, 2020 president of the Appraisal Institute and founder of Sherman Valuation & Review in Cleveland, Ohio.

When to get a broker price opinion

Homesellers use BPOs to set an appropriate listing price. But homebuyers and homeowners can find them useful too.

If you’re a buyer, obtaining your own broker price opinion often makes sense when you’re:

• Buying a financially distressed property. Brokers can often offer a more accurate valuation when a home is in foreclosure but exists in a neighborhood with good comparables.
• Making an all-cash offer and/or trying to close quickly. Getting a BPO on which to base your bid is often faster than hiring an appraiser.
• Working with a lender who accepts BPO reports (and in a state that allows them).

On the other hand, if you’re a homeowner, a BPO might make sense when you’re:

• Trying to eliminate your private mortgage insurance (PMI). Years after you’ve bought a property, BPOs can work if you’re seeking a valuation of your home and your home equity stake to eliminate PMI (see FAQ). Fannie Mae and Freddie Mac accept BPOs for borrower-requested PMI cancellations on their loans.
• Considering swapping your mortgage or getting another home-based loan, and you want to know if you have enough equity. or home equity line of credit (HELOC) and Many lenders will accept a BPO if you’re seeking a HELOC or home equity loan or want to refinance your mortgage.

How broker price opinions work

To determine the broker price opinion, a real estate agent or broker will use their expertise with the local housing market to assign a dollar amount to a property based on certain factors.

“Usually, the agent does this [comparative market analysis] as part of their listing agreement when selling a house,” says Andrews. “They look at similar properties that have sold recently and provide an estimate of what the home should be listed for.”

Some private money lenders will use BPOs, too, says Andrews. In traditional mortgage lending, however, when financial institutions determine how much to loan you and what to charge, BPOs are not the go-to method for determining a property’s value. In most cases, a lender will order a professional appraisal for the property, instead of a BPO.

That’s because broker price opinions are not accepted for mortgages sold to Fannie Mae or Freddie Mac — as most home loans are — or insured/guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or Department of Agriculture (USDA), according to Sherman.

Broker price opinion vs. appraisal

While a BPO and an appraisal might sound similar, several important characteristics set them apart:

• Expertise and training: Sherman points out that becoming an appraiser comes with a fairly rigorous set of standards. “Appraisals are conducted by duly certified valuation professionals who have met extensive education, experience and testing standards in valuation, have demonstrated their valuation competency by passing a national exam and adhere to generally accepted uniform valuation standards,” he says.
• Vested interest: A real estate professional will likely receive a commission based on the home’s sale price, so it’s to their advantage to set a price on the high side. That means that a BPO might be a bit inflated. In contrast, an appraiser is paid solely for the job of determining the property’s value, which limits any potential conflict of interest.
• Cost: Broker price opinions are also less expensive than the cost of an appraisal. An appraisal can run anywhere from $300 to 800 or more, and a BPO costs half that — and sometimes even less, roughly $50 or so, according to Andrews.

How to get a broker price opinion

The easiest way to get a BPO is by asking your own Realtor or real estate agent to assess the home’s value. However, you can also use most real estate agents in your area.

You may also want to consider searching the National Association of BPO Professionals directory instead. Just enter your zip code to see a list of available specialists in your area. This option allows you to choose a professional who may offer more objectivity than your own agent.

Your broker will schedule a time to look at the home and deliver a report. Be sure to remember the difference between an internal and external BPO; if you have made significant upgrades to the home such as a kitchen remodel or a bathroom renovation, you’ll want to make sure those changes are accounted for when determining the property value.

FAQ

• For what reason is a broker price opinion most often requested?

  Lenders commonly request a broker price opinion for refinancing or foreclosure assessments. Property owners also request it when contemplating a sale or refinance, or wanting to terminate their private mortgage insurance. BPOs are favored for their lower cost and faster turnaround compared to formal appraisals.

• Can a BPO remove PMI?

  A broker price opinion (BPO) can be used to remove PMI (private mortgage insurance) when you think your home’s value has increased sufficiently (read how one of Bankrate’s staffers did it here). Your lender will require an appraisal, but might accept a BPO instead to verify the property’s current worth before it’ll agree to cancel the PMI. It’s a less expensive alternative to a formal appraisal and can satisfy the property value assessment required by your lender, provided it aligns with your loan terms.

• How accurate is a broker price opinion?

  The accuracy of a broker price opinion (BPO) can vary widely. It relies on the broker’s knowledge, the quality of comparable sales data and market conditions. While useful for estimates, BPOs are generally less accurate than formal appraisals, which are conducted by certified appraisers and adhere to strict guidelines. BPOs also incorporate subjective factors — namely, the real estate agent or broker’s “reading” of the local real estate market, adding variability to the valuation.

Additional reporting by Jean Folger