The problem with BPO’s

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Real Estate Agent with Weichert, Realtors - Welcome Home

It’s simple really.  You can’t do one if you are just a licensed salesperson (in Pennsylvania).  According to the Pennsylvania Association of Realtors (PAR):

"Broker Price Opinion" (BPO) is not a legally defined term in Pennsylvania, as are "appraisal" and "comparative market analysis." When a fee is charged for a BPO, it will either be considered an appraisal or a CMA. If it is determined to be a CMA (i.e., provided for the purpose of determining the asking/offering price for a property for the seller or buyer), then it falls within the scope of permitted activity for a real estate licensee. If, however, the BPO is determined to be other than a CMA, it will qualify as an appraisal, which requires an appraisal license to perform.   To avoid confusion, the term BPO should not be used for any written expression of value for a fee. "Appraisal" and "comparative market analysis" are the terms that should be employed, depending on the purpose and scope of the valuation.

Yes, I know some of you might do BPO’s already.  Yes, I know they are the primary tool banks use to try and place a market value on short sales and foreclosures.  Yes, I know half of you have a different opinion and will come up with all sorts of ways you could try and justify the “legality” of your performance of BPO’s.  But the fact remains that you can’t do them for the simple fact that they don’t exist in this state and further, the service the banks are asking you to perform when they order a BPO is considered buy the regulatory boards to be an appraisal.

Don’t believe me?  Then refer to these articles written by the attorneys at PAR, who are more knowledgeable on the subject than I am:

http://www.parjustlisted.com/archives/2421

http://www.parjustlisted.com/archives/142

or page 7 of this newsletter from the PA Real Estate Commission

http://www.appraisalinstitute.org/newsadvocacy/downloads/PennsylvaniaBPODocument.pdf

This presents quite a conflicting message to what you may be hearing from even our own industry.  There are courses out there being sponsored by NAR that encourage you to perform BPO’s as a revenue stream.  Go back and read those articles in the links again.  According to the opinions stated there, if you performing BPO’s for the purpose of generating revenue you are risking prosecution by not only the Real Estate Commission but also the State Board of Certified Appraisers.

The other statement I might make is that the very definition of the term itself would preclude the majority of you from being able to perform a BROKER Price Opinion if you aren’t actually licensed as a Broker.  This could lead the Real Estate Commission to charge you with not only performing unlicensed appraisals but “conducting the business or acting in the capacity of a broker or salesperson without first being licensed or registered?”  Heavy stuff and nothing I’d want to risk being prosecuted for.

 

Yes, I know that some of you do BPO’s in order to obtain listings.  According to those articles in the links up there, nothing is wrong with that if you actually get the listings (or at least some of them) and you call it a CMA and include the appropriate disclaimer.  Anything less puts you right back at risk of prosecution.

 

For my last nail in the coffin of the BPO, I read recently that within the next year banks will require a UAD (Uniform Appraisal Dataset, a standard grading system for valuing properties) to be included in all BPO’s. The UAD is already a requirement for any BPO’s when the mortgages are backed by Fannie Mae and Freddie Mac.  Adding them to all BPO’s pushes them even farther toward the realm of an appraiser.

 

This post doesn't even begin to touch the additional undelrying problem of half the BPO's being done are just simply inaccurate.  My market area is about 2 1/2 hours from Philadelphia and yet we recently had a short sale agent done by an agent from center city Philadelphia, who wasn't a member of the local MLS and had no access to the comparable property data.  How again is was he qualified to perform a BPO on the local market?

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