What is a BPO?

By
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194

Question: My lender said that the offer of $360,000 on my house was too low because the realor hired by the bank to perform a BPO said it was worth $380,000. What is a BPO?

Answer: A BPO stands for Broker's Price Opinion. When a lender wants to know the market value of a home for that moment in time they will often hire a realtor ( or a company who hires realtors) to give them their opinion of what the current market will bear for the property in question. This is not a full appraisal but there are certain parameters that must be followed by the realtor. In general the parameters are:

3 active listings and 3 recently sold comps that are:

1. Within 1 mile of an urban property, 2 miles of a suburban property,and 20 miles of a rural property

2. Within 20% of the gross living area and lot size of the subject property

3. Within 10 years of the age of the property

4. Not a foreclosed or short sale property unless a lot of the neighborhood sales are distressed properties

These comps should bracket the subject property, that is they should be a little above and a little below in all parameters and ultimately in value.

By sticking to these parameters a value can be placed on the home.

Problems can arise when there are not enough active listings or sales in the previous 6 months of similar homes to make comparisons. When this happens the realtor needs to go outside the required parameters and then make adjustments. Most problems BPO's happen during this adjustment time.

If your BPO comes in at a price that seems off the wall, the listing realtor can do his/her own or hire an appraiser to justify what they think is market value. Of course, it is ultimately the bank or their investor's decision, so they can listen to reason or not.

If you have any other questions about short sales please ask!

Marcy Moyer

Keller Williams Realty

650-619-9285

www.marcymoyer.com

marcy@marcymoyer.com

D.R.E,  01191194

Posted by

Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties

 

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Rainmaker
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Rob D. Shepherd
Windermere/lane county - Florence, OR
Principal Broker GRI, SRES

IN Oregon doing a BPO on a home worth more than 250k can be considered an appraisal by an unlicensed appraiser. Dangerous territory.

Jan 23, 2011 04:29 AM #1
Rainmaker
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Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

Not a problem in Ca. where most homes (especially in the Silicon Valley) are over 250K.  Personally I would rather have a realtor who knows the market tell a bank what a home will sell for over an appraiser in most cases.

Jan 23, 2011 06:46 AM #2
Rainmaker
2,790,345
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Marcy, you present an excellent explanation of a BPO. I honestly hope someday soon lenders will be required to get a full appraisal on properties. Reason being: as you state … the lenders can listen to reason or not. My experience is … mostly NOT. All of the BPO’s that come back on my short sale listings are so outrageously high. Agents who do BPO’s are not licensed and trained appraisers … who are the only people who should be placing values on short sales. IMO.

Jan 23, 2011 04:35 PM #3
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Rainmaker
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Marcy Moyer

Probate, Trust, and Investment Specialist
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