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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: rzymuR/Shutterstock September 01, 2020 Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. As you browse real estate listings, the prices attached to those properties help give you an idea of how much money you’ll need to buy each home. Who sets those numbers, though? If the home seller is working with a real estate agent or broker to handle their transaction, the list price of the home is likely the broker price opinion, or BPO. What is a broker price opinion
Broker price opinion definition
A broker price opinion, commonly known as a BPO, is a real estate professional’s opinion of a property’s value. BPOs are most often used when setting the list price of a property, similar to a comparative market analysis, and in the case of a or . To determine the BPO, a real estate agent or broker will use his or her expertise to assign a dollar amount to a property based on certain factors. BPOs are normally performed by a broker who is familiar with the local housing market. “Usually, the agent does this as part of their listing agreement when selling a house,” explains Rocke Andrews, president of the National Association of Mortgage Brokers and owner of Lending Arizona. “They look at similar properties that have sold recently and provide an estimate of what the home should be listed for.” There are two main types of BPOs: internal and external. An internal BPO involves a broker spending time inside the property to evaluate the condition of the home, take measurements and capture photographs. With an external BPO, sometimes referred to as a drive-by BPO, a broker may simply be able to assess the outside of the property before giving it a sticker price. A BPO is helpful in the early stages of the real estate transaction when setting the list price of a home. The home seller gets an understanding of what the property will command, and the buyer gets an understanding of what they will need to pay to own it. In the mortgage lending process, however, BPOs are not the go-to method. In most cases, a lender will order a professional for the property to determine its value, instead of a BPO. BPOs are not accepted for mortgages sold to Fannie Mae or Freddie Mac or guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or Department of Agriculture (USDA), according to Jefferson L. Sherman, president of the Appraisal Institute. “There are 14 states where BPOs are supposed to only be used for the purposes of providing a buyer, seller, prospective buyer or prospective seller with a listing or purchase price,” says Sherman. “However, each of those laws is nuanced.” How appraisals and BPOs are different
There are a few important characteristics that set an appraisal apart from a broker price opinion. First, an accurate appraisal requires a heightened level of expertise and training. “Appraisals are conducted by duly certified valuation professionals who have met extensive education, experience and testing standards in valuation, have demonstrated their valuation competency by passing a national exam and adhere to generally-accepted uniform valuation standards,” says Sherman. Second, professional appraisers generally don’t have conflicts of interest that could influence their opinion. While a real estate professional will likely be paid a commission based on the sale price of the home, an appraiser is paid solely for the job of determining the property’s value. BPOs are also less expensive than the . A BPO costs roughly $50 or so, according to Andrews, while an appraisal can run anywhere from $300 to $450 or more. When a BPO makes sense
In certain situations, such as a foreclosure or short sale, BPOs can play an important role. “Back in the real estate downturn, there were so many foreclosures and properties on the market, lenders would use these due to a faster turnaround time and lesser fee,” Andrews says. That thinking still applies today, albeit in a much healthier housing market. Sherman points out that Pennsylvania recently approved a law that “says that BPOs cannot be used for any type of mortgage purpose, except for short sales and pre-foreclosure work.” So, if you’re buying a distressed property, a BPO might be the opinion that turns out to be closer to fact than that of a professional appraiser If you’re applying for a mortgage, however, your lender will most likely order an appraisal to get a read on the home’s value, not a BPO. Learn more
SHARE: Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles