Elevating the Precision of BPOs: A Technical Guide

Producing a Broker Price Opinion (BPO) that stands up to scrutiny involves a deep dive into the specifics of market analysis, property evaluation, and data interpretation. For realtors looking to refine their BPO skills, focusing on the nuances of choosing comparables, making adjustments, and leveraging advanced tools can significantly enhance accuracy. Here’s a technical guide to mastering these aspects. Hopefully, this advice allows you to make additional money while we all await the return of a more active real estate market.

Of course, if you don’t want to do BPOs, you can always try to increase your sales by using our Kukun Agent Portal for client engagement. Please visit us at www.kukun.ai to learn more.

1. Choosing Comparable Properties

The foundation of a credible BPO lies in the selection of appropriate comparables. Here’s how to ensure precision:

• Geographic Proximity: Comps should be within a one-mile radius of the subject property in urban areas, and within a five-mile radius in rural settings. This minimizes the impact of differing local market conditions.
• Recency: Prioritize properties sold within the last three to six months to reflect current market conditions. If the market is particularly volatile, narrow this window.
• Similar Features: Choose comps that closely match the subject property in terms of age, design, layout, and---most importantly---size and location.
• Condition: Account for differences in maintenance levels, renovations, and updates. A newly renovated home should not be directly compared with one in need of significant repairs without adjustments if at all possible.
• Visit Mykukun.com: Consider visiting our website where we list quality comparables on each property page. www.mykukun.com

2. Making Accurate Adjustments

Adjusting the value between the subject property and selected comps is critical and must be approached with a systematic method:

• Quantitative Adjustments: Adjust for quantifiable differences such as square footage, number of bedrooms and bathrooms, lot size, and functional utility. For instance, add or subtract a set dollar amount per square foot of size difference.
• Qualitative Adjustments: Modify for subjective factors like property condition, architectural style, neighborhood desirability, and market trends. These adjustments often require a percentage change based on the realtor’s judgment and market knowledge. As mentioned below, consider using a statistical package to run a regression.
• Special Features: Consider unique attributes such as waterfront locations, views, pools, and premium appliances. These features can significantly influence property valuation and require bespoke adjustments.

3. Leveraging Advanced Tools

Utilizing the right tools can streamline the BPO process, enhance precision, and save time:

• Real Estate Software: Platforms like CoreLogic’s Realist, GeoData Plus, or PropertyShark can integrate public and proprietary data, providing detailed property reports and analytics.
• MLS Systems: Use advanced MLS systems that offer detailed filters for selecting comps and automated tools for adjusting property values based on specific criteria.
• GIS and Mapping Tools: Geographic Information Systems (GIS) can analyze spatial locations and organize layers of information into visualizations, aiding in the accurate selection of comps based on geographic data.
• Mobile Appraisal Apps: Tools like a la mode’s TOTAL for Mobile allow realtors to gather property data during field visits, directly populating BPO forms with organized data and photos.

4. Consistent Application and Review:

• Standardization: Develop a standardized method for adjustments to maintain consistency across all BPOs. Consider running a regression on your MLS data to get scientifically rigorous adjustments and make sure to weight your comps based on those adjustments as well as closeness in time and space. Explicitly writing down a “similarity score” and taking a weighted average can force you to think rigorously about your comparables and your opinion of value.
  Regression advice:  

1) Consider using the log of price instead of the raw price.  Consider doing the      same to square footage and lot size.         

2) Filter out very low prices---Many realtors will accidentally register rentals as sales in their local MLS; this is happening even more often now than in the past as realtors who never did rentals in the past have begun doing more of them in response to low sales volumes.   

3) Assuming regression is not your thing and you have access to local appraisals, consider looking to some quality recent ones to get some guidelines for reasonable market adjustments.                              

• Peer Review: Before finalizing a BPO, have it reviewed by a colleague. This can help catch mistakes and ensure that the valuation holds up under scrutiny.
• Historical Analysis: Regularly compare your past BPOs to actual sale prices to identify any consistent over- or under-valuations, adjusting your methodology as needed. Give special attention to those that sold relatively soon after your BPO was performed and consider adjusting the sale price using a home price index you trust. Zillow’s zip code level index is good choice and can be found on their website for free.

A technically sound BPO not only reflects the current value of a property but also highlights a realtor's expertise and reliability. By meticulously choosing comps, applying precise adjustments, and utilizing advanced tools, realtors can enhance the accuracy of their BPOs, thereby better serving their clients and strengthening their professional reputation in the competitive real estate market.