CMA vs BPO vs Appraisal whats my home worth?

By
Real Estate Agent with RE/MAX Preferred Inc. Realtors

So your sitting around the house and wondering about the current value of your home. After talking it over with your spouse and getting the input of a few friends you find yourself perplexed wondering about CMA's, BPO's and Appraisals. Just what are these three and what do they mean to you?

Lets take them on one at a time. CMA or the Competitive Market Analysis is a marketing tool that Realtors (R) have used for years. In fact it has become so common place that some real estate agencies such as the State of Oregon requires its use. In general the CMA is used by Real Estate agents to get a handle on and present to the Owner or perspective purchaser of real property your opinion of value.

Often times though the opinion of value is not all that close to reality in fact there are some agents who do the CMA with an eye towards getting a listing. Hence some CMA's may be over ambitious in terms of value. The direct evidence of this over exuberance can be seen in price reductions. How many times have you either called on a home or have seen the sticker put on the sign indicating a price reduction? Sure sometimes that price was strictly a Sellers choice, however it is my belief that it is our job to be straight forward with the Seller and not take listings that you will have to go back to the Seller later on for a significant price reduction.

BPO's or the Broker Price Opinion is a another form of evaluation. Often times the lending institution that has your property secured will ask for a current BPO. There reasons can be many. They could be asking because like most lenders they intend to sell the loan and the new lender wants a current assessment of value. They may also be asking because you have asked to refinance the home or to take out an equity loan. Of course they would also request a BPO if there was a request to Short Sale the property of if they thought a Foreclosure was in the wind. So then how does the BPO stack up against the CMA?

So unlike the CMA there is not an agent attempting to vie for a listing. Value for the BPO is much more realistic in terms of real value.  As an active Real Estate Broker preparing hundreds of BPO's every year the things that I look at and are required by the requesting BPO company is a Realistic Value based on 3 current Active listings and 3 recent Sold listings within the immediate Subjects neighborhood. This often means within a mile of the property. The prices of the comps chosen also must be within about 15 or 20 per cent of each other. Other parameters are usually an age variance of less than 10 years and Square footage of the Main floor and upper floors total to be less than a 20 per cent difference. Lot size as well has a tolerance some companies will allow up to 40 per cent difference while others require the lot difference to be within 20 per cent. So the scope of the BPO evaluation is far more realistic and does not seek to see what is the highest value that you might be able to get like the CMA.

Appraisals on the other hand are the most Conservative of all. The appraisal is done by only a licensed appraiser and seeks to value the property for a lender to protect its value based asset. During the last several years during the collapse of the real estate market it was discovered the often times appraisals were done to help a lender and or Buyer achieve a sale.  That action caused many homes to be valued higher than what there true value was. Because of the appraisers use recent values of opinions to value there sales it became a spiraling upward movement that was destined to fail. Because of it a whole series of new regulations were implemented with the intention of not allowing that to happen again. Hence today's Appraiser takes a very conservative approach to value. Some that may have come from the fact that there were serious repercussions to those previous Appraisers who had over escalated values.

So what does this mean for you? When speaking to a licensed Real Estate Broker like myself you will still be receiving a CMA but for me it will be one tempered towards the BPO because we all know that the final arbiter will be the Appraiser and his appraisal for the lender who has final say on the approval or denial of your sale no matter how much you or your Buyer may think your home is worth.

 

Comments (31)

Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Herb, we believe the valuse of a CMA, BO, and anappraisal should all be nearly equal if the person doing them has the training and experience.  Unfortunately often they do not.

Apr 14, 2013 08:01 PM
Marcia Hawken
WILLIAM RAVEIS - Naples, FL
Naples Luxury Specialist

Herb,

Great breakdown of the various ways to value a home.  When I do a CMA I am pretty concervative because it is my reputation at stake . In the average community most people know what a home should be valued at...give or take renovations. The internet has leveled that playing field. Do I miss out on listings?  Yes, but I either get them when they realize they were wishing a price and relist with me or get their neighbors listing because they know I know what I am doing.

Apr 14, 2013 08:02 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

This is a great post describing the differences between CMA ,bPO and appraisals.

Apr 14, 2013 09:13 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Herb, good explanation of the three types of value opinions. In the end it is the appraisal that really counts. If we as real estate agents use appraisal techniques in doing our CMA's and BPO's, we can come pretty close to an appraised value. Good Post!

Apr 14, 2013 11:17 PM
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

Nice explanation of our industry jargon. I imagine our language can seem a bit "Greek" to outsiders.

Apr 14, 2013 11:21 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

What comes through quite nicely is that you know what you are talking about...That means clients and principals will be well taken care of

Apr 14, 2013 11:47 PM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Frank in some market places it is known as  competitive and in some locations it is known a comparative in fact that would be an interesting topic for a post what do your acronyms stand for.

Apr 15, 2013 12:14 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Joan allthough that may be true the one thing that the other agent has that you dont is a reputation for taking over priced listings that other agents will shy away from untill the price eventually drops. Keep you integrity in place.

Apr 15, 2013 12:17 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Fred ,Christine, Gita , Michael, Doug Richie ,

Thank you all for stopping by and your comments wishing you all a successful year.

Apr 15, 2013 12:23 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Bob,

The truth is that those values are not all the same nor should they be for the focus of each clients needs are different. I completed a BPO over the weekend where the values for the property could have easily been $375,000. The subject property was listed as a Short Sale with a set price of $310,000. The BPO instructions was to do the BPO as a liquidation price and not to include values above the listed price.

I have also done BPO's that were completely trashed and would need significant work to compete in the market place while the BPO instructions asked for a Non distressed value wanting only to see fair market comps.

Of course we all know how often we see listings out there that are way off of the mark and wonder how any CMA could reflect those prices.

Or we have bumped into the ultra conservative appraiser who almost seems to go out of his way to provide the lowest end comps available.

So no Bob they are not all the same nor will they ever be.

Apr 15, 2013 12:31 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Marcia,

Your reputation is the one thing that follows you and or precedes you no matter where you go.

Apr 15, 2013 12:32 AM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Herb: The sellers I've talked to all want to compare their sales price by what everyone around them is listing their house for. BPO and appraisal? That's something we have to explain to them. We need to explain what the actual offers will be.  Unless, of course, it's a really hot sellers market and then who knows what will come in. Great post and well explained.

Apr 15, 2013 01:17 AM
Jim Gilbert
Keller Williams Fairfax Gateway - Manassas, VA
The Gold Homes Team

Appraisals are required to produce "Fair Market Value" representing value in a HYPOTHETICAL market in which supply and demand are in perfect balance. 

CMA's are used to determine "Sales Price" which represents value in an REAL market with supply and demand in imperfect balance.

BPO's should tend to run in between.

Apr 15, 2013 01:18 AM
Harry F. D'Elia III
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

A CMA from a professional real estate agent in your area will suffice if one is just wanting to know estimated value of home at no cost. However, one can obtain a professional appraisal at a cost.

Apr 15, 2013 01:18 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Hella, James and Harry thanks for coming and your comments and points of view.

Apr 15, 2013 01:23 AM
Ridhi Raheja
Movement Mortgage (Illinois) - Naperville, IL
FHA, 203k, VA, Jumbo, PreApproval, Jumbo Home Loan

Spot on! Herb, informative post for giving value to your property. Great job on explaining about the method.

Apr 15, 2013 03:01 AM
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

It does not matter. Whether it is a BPO, CMA or appraisal the value conclusion for any given property can vary depending upon the purpose for which the valuation is being done. When the one doing the valuation has their own agenda the results can be unpredictable, surprising, disappointing and/or frustrating.

 

In a rapidly changing price environment, those doing the valuation, even with the best intentions, have challenges in bringing in values that make sense.

Apr 15, 2013 03:55 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

Rdhi, Thanks for stopping by and your comment

Apr 15, 2013 05:36 AM
Herb Hamilton
RE/MAX Preferred Inc. Realtors - Portland, OR
Real Estate Broker ,CDPE, Downtown Portland

John J,

 

You are so right and I think has been recognized by the lenders as It has become more and more common place to request several BPO's and often more than one appraisal.

Funny thing is that the consumer recognized that years ago by asking more than one agent to come to the table. Although I am not sure they were doing it for the same reasons. I suspect that often times there motives were to keep asking until an agent told them the price they were hoping for.

Apr 15, 2013 05:40 AM
Jill Watts
Realty Pro, Inc. - Vancouver, WA
A Luxury Experience at Every Price Point!

For sales price, I have noticed that home owners will contact 2-3 agents to get an "average" price. Some of those projected prices are so wildly flucuating...it's ridiculous. It's easy to see which agents are "buying" the listing by saying they can sell with that HIGH price. They cannot. They will have to eventually ask the seller to adjust their price to the real value, thus making the seller mad. Because in the seller's mind...he/she has already "spent" that extra money in their minds  ... which they will never get but thought they would for their overpriced home. After months of no offers go by, they either lower the price or fire the agent.

Jun 25, 2014 05:56 AM