THE PITFALLS OF A BROKERS' PRICE OPINION (BPO)

By
Real Estate Agent with Coldwell Banker Resort Realty, Sandpoint, Idaho SP37235

As we see the increase in Short sales, there are a lot of requests for BPO's. According to Idaho Real Estate License Law, it is legal for brokers, associate brokers and salespeople to give their educated opinion on the value of real property for the purpose of a prospective lisiting or sale (CMA's). IN ORDER TO TENDER A BROKER'S PRICE OPINION IN IDAHO, YOU MUST BE LICENSED AS A BROKER OR AN ASSOCIATE BROKER.

As an Associate Broker, if you receive a fee for a broker's price opinion, you must run that fee through your designated broker. If you are a salesperson and are required to provide a Broker's opinion with a short sale packet or the like, ask for your broker's assistance in preparing one.

As this real estate market continues along its tumultuous course, we are finding more agents being lured into offering price opinions for troubled properties. This is a dangerous course and the ramifications can be painful...to say nothing of the fact that properly executed BPOs can take more time than they are worth.

Bottom line: Do not subject yourself to possible disciplinary action for practicing appraisal without a license by providing a broker's price opinion when you are not licensed to do so.

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Rainer
25,795
Sandy Gleason
North Pointe Realty - Buhl, ID
Realtor for Southern Idaho-Magic Valley

You are so right about Idaho law. My broker has done some and they take way longer than they are worth. We as agents are asked alot and have to say no.

 

Jan 07, 2009 02:59 PM #1
Ambassador
727,491
Sheldon Neal
Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ
That British Agent Bergen County NJ

Hi Kent - interesting angle on BPOs. Here in NJ, I think they are ALL done by Realtors, dozens by me ! I have cut back just because the time aspect is so consuming, but aren't we OK if provide our 'opinion' in the BPO - just like a glorified CMA - as long as we are not claiming it's an official appraisal ?

Jan 07, 2009 03:01 PM #2
Rainmaker
207,305
Pat Tasker
Shorewest Realtors - Germantown, WI
Your Milwaukee Metro Area Agent (WI)

wow...they have laws about this stuff? Inever heard of that when it comes to bpo's...

Jan 07, 2009 03:09 PM #3
Rainmaker
206,567
Kent Anderson
Coldwell Banker Resort Realty, Sandpoint, Idaho - Sandpoint, ID
from Schweitzer to the Lake
Sheldon, it makes sense to me but not in Idaho. BPOs are considered a different animal even if we offer a disclaimer. ...and with short sales requiring a BPO, my guess is that NJ may be sticklers in that department as well.
Jan 07, 2009 03:10 PM #4
Rainmaker
777,768
Michael A. Caruso
Surterre Properties - Laguna Niguel, CA

I agree with the protocol as it was expressed by Kent.  Seems like people need a buck and are breaking the rules.

Jan 07, 2009 03:13 PM #5
Rainmaker
227,029
Joan Snodgrass
Midamerica Referral Network - Kimberling City, MO

bpo's are ok here in MO, if you have your broker's opinion, but as you said - hardly worth the effort for an average pay of $25.  I had a request for one about 25 miles drive last summer.  Told them I'd do it for $50.  Didn't hear from them again.

Jan 07, 2009 03:15 PM #6
Ambassador
727,491
Sheldon Neal
Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ
That British Agent Bergen County NJ

Now I'm gonna have to look into this further !

Right now as it is explained to us here - there are SO many 'opinions of price' needed by banks for F/C and S/S transactions, that they clearly save thousands and thousands of dollars by only paying a fraction of what they pay an appraiser to do. Here they pay on avg $40-$45 for a 1 pic exterior BPO w/3 sold and 3/active comps, and I dont budge for anything less than $75 (sometimes more) for an Interior BPO.  It has been explained to us that we are simply providing - in a local Realtor's experience - the opinion of price based on comps. And banks are supposedly basing their view of the BPO as just coming from an 'educated local Realtor' and not expecting it to be of the caliber or depth of a Certified Appraiser. I haven't yet heard that there's any concern with Realtors doing them - it's certainly not illegal or against the rules here to my knowledge, but I can see where there may become a time when there needs to be some regulation, as some Realtors cant even price their own listings right, let alone a banks BPO !!!

Anyway, thanks for provokinig thought Kent !

Jan 07, 2009 03:26 PM #7
Rainmaker
468,400
Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

I think it is ok for realtors to do it in California, but have never done one myself. Seems like a lot of work for very itle money.

Marcy

Jan 07, 2009 03:48 PM #8
Rainmaker
1,074,384
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

An agent should not be involved in a short sale if they do not know what they are doing. Agents need to remember there is no room for error as the client is most likely at foreclosures door step.

Jan 07, 2009 11:20 PM #9
Rainmaker
206,567
Kent Anderson
Coldwell Banker Resort Realty, Sandpoint, Idaho - Sandpoint, ID
from Schweitzer to the Lake

I agree, Bill, a short sale is a special animal and there IS a lot at stake.  It takes well earned relationships with all parties involved to get these things to go through correctly and in a timely fashion.  Hard work and, often-times, at a reduced commission.

Jan 09, 2009 11:11 AM #10
Rainer
6,241
Kerry Constantine
Power Brokers Real Estate - Fort Myers, FL

In Florida it is legal for both associates and brokers to do BPO's as long as they do not try to pass them off as full appraisals by a licensed appraiser. The banks need to save as much money as they can and if a broker/associate can give them comps and help with establishing a sale price at a lower rate I can not blame them for trying to save a buck.

Jan 09, 2009 11:22 AM #11
Rainmaker
206,567
Kent Anderson
Coldwell Banker Resort Realty, Sandpoint, Idaho - Sandpoint, ID
from Schweitzer to the Lake

I couldn't agree more, however...what do you think licensed appraisers think of the BPO thing?  It kind of cuts into their credibility when they charge many times more for a product that is fairly similar to a BPO. 

Jan 09, 2009 11:37 AM #12
Anonymous
Bob

Sorry, but only brokers are aloud to be paid for a CMA, or BPO. If you are a sales agent doing BPO's, this is against Idaho Law.

The provisions of this chapter shall not prohibit a real estate broker
or associate broker licensed under Chapter 20, Title 54, Idaho Code, whose
license is active and in good standing, from rendering a broker’s price
opinion, for which the broker may charge a fee

 

 

54-4103. Unlawful Practice of Appraisal.
[. . .] It shall be unlawful for any person to appraise, practice appraisal,
assume to act as, or hold themselves out to the public as an appraiser, or carry
on the calling of an appraiser within the state, or to perform an appraisal of
real estate located in this state unless the person has first been licensed or
certified by the board under the provisions of this chapter.
54-4105. Exceptions.
[. . .] (2) The provisions of this chapter shall not apply to a licensed real
estate broker, associate broker or salesperson who, in the ordinary course
of his business gives an opinion of the price of real estate for the purpose
of a prospective listing or sale, provided that such person does not represent
himself as being a state licensed or certified real estate appraiser.
(3) The provisions of this chapter shall not prohibit a real estate broker
or associate broker licensed under Chapter 20, Title 54, Idaho Code, whose
license is active and in good standing, from rendering a broker’s price
opinion, for which the broker may charge a fee
, provided the broker’s price
opinion complies with the following requirements:
(a) The broker’s price opinion shall be in writing and contain the following:
(i) A statement of the intended purpose of the price opinion;
(ii) A brief description of the subject property and property interested
to be priced;
(iii) The basis of reasoning used to reach the conclusion of the price,
including the applicable market data and/or capitalization computation;
(iv) Any assumptions or limiting conditions;
(v) A disclosure of any existing or contemplated interest of the
broker(s) issuing the opinion;
(vi) The name and signature of the broker(s) issuing the price
opinion and the date of its issuance;
(vii) A disclaimer that, unless the broker is licensed under the Idaho
Real Estate Appraisers Act, Chapter 41, Title 54, Idaho Code, the report is not
intended to meet the uniform standards of professional appraisal practice;
(viii) A disclaimer that the broker’s price opinion is not intended
to be an appraisal of the market value of the property, and that if an appraisal
is desired, the services of a licensed or certified appraiser should be
obtained.

Sep 30, 2009 03:46 PM #13
Anonymous
Troy DePauw

BPOs = Great Deal...FOR THE BANK!

I would NEVER complete a BPO for a bank. 

First of all, they don't respect my time or pay me what I'm close to being worth.  I can't tell you how many times a BPO has to be done over (and over) again, because the BPO completer (I'd like to say agent, but seriously these values are screwed up at least 75% of the time), is OVERINFLATING the value so they can "represent" the bank. 

People completing BPOs have to understand that there is a marketable difference between an REO and a short sale.  I would never represent to my clients who may have to wait 90 days + that they should pay full market value for waiting...

Lastly, it is very apparent that the banks (at least here in Las Vegas) are manipulating the market with 10-20,000 homes in their possession and not marketing them, allowing them to be vacant, and also dragging their feet in regards to short sales too.

 

Sincerely,

Troy DePauw

Realtor and Team Leader 
DePauw and Associates  (DNA)
SellPro Realty
3300 S. Jones Blvd 10-R
Las Vegas, NV 89146

Direct: 702-238-6686

DNA ~~~ The Team That Treats You Like Family!

Dec 25, 2009 02:47 PM #14
Anonymous
P & J

Hi Kent,

Great blog...Okay, maybe you can give some local (Sandpoint) honest advise. I have a little 1200 sq ft cabin (needs work but not a teardown) with well, septic, power and phone. The property fronts Upper Gold Creek (I'm sure you are familiar). It is approx 3 miles past Western Pleasure. Given the market conditions, what is your best guess (NOT BPO) on current value? Shouldn't the banks BPO use strictly comps that are off the beaten path (Rapid Ltng Rd, Trapper Creek, Upper Pack, etc.) rather than Selle Valley or close in? I am currently in litigation on the property and suing Chase, MERS, US Bank NA and Northwest Trustee service. I have spent over $10k in fees so far and challenging the blatant fraudulent assignments and appointments by the herein mentioned entities. On November 1st at 2:30 in the afternoon at Bonner County Courthouse, Judge Verby will make a final decision to either dismiss the case allowing the foreclosure to commence or he will make a moral judgement call to require the fraudulent chain of title to be discovered. You are welcome to attend. Now mind you, my wife and I are both realtors in Washington and we own a custom home construction business. We work our a**es off and did not buy this property with $0 down. We, like many, had our dreams trampled by the banks greed and it is still happening. Do you know how many times the banks are getting paid on these defaulted assets? Floored me! We refuse to assist the banks if we can at all help it.

P & J

Sorry to ramble on....so getting back to your opinion of the property. Do you think it would sell in the current market and season for more than $120k? Just your own opinion, not a BPO. Penny for your thoughts (that's about all I can afford right now! Lol).

Oct 21, 2010 04:41 PM #15
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Kent Anderson

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