Trinity Real Estate Solutions® - Broker Price Opinion, BPO

Explanation of a Broker Price of Opinion

What is a Broker Price Opinion?

A Broker Price Opinion (BPO) is a method used by real estate brokers to estimate the selling price of a property.  The price is based on local and regional real estate market information, current neighborhood conditions and comparable properties that are currently for sale or have been sold.

Mortgage lenders, banks and investors view Broker Price Opinions as valuable tools when evaluating their portfolios. They may order a BPO instead of or in conjunction with a property appraisal. A BPO is generally lower in cost and has a quicker turn time than an appraisal.

What is the borrower’s role in the completion of a BPO?

A borrower’s participation during the BPO process can vary depending on the type of BPO being conducted. For an interior BPO, the broker will need access to the property. It is important that the borrower arrange a convenient time to meet the broker and answer any questions they may have concerning the property. The broker will need to take a photo of each room in the property to provide an accurate opinion of the property. For an exterior BPO, cooperation is also important; however, the broker will only take exterior photos of the property.

It is important to remember that a BPO is ordered for numerous reasons; however, their primary purpose is to estimate the potential selling price of a property.

What are the responsibilities of the broker?

It is the responsibility of the broker to provide an accurate opinion concerning the estimated listing price of the property. Brokers should present themselves professionally when meeting with the borrower. Additionally, the broker should never discuss the lender’s motivation for ordering a BPO with the borrower, because only the lender truly understands the reason for the report. Instead, brokers should refer the borrower to the lender for questions.

What are the lender’s rights in regard to BPOs?

A mortgage is collateral for a debt. While the mortgage is in the repayment process, the property is not the sole possession of the resident since the house is collateral for a debt. A mortgage is agreed upon with the condition that the deed will be given to the owner when the terms of the mortgage have been satisfied. During the repayment process, lenders periodically monitor the collateral to gather updated sales information on a mortgaged property.

Why would a lender request a BPO?

Banks and lenders make financial decisions based on the information provided in a BPO. Below are a few reasons and situations in which a lender would order a BPO.

  • Loan origination*
  • Home Equity Loan*
  • Home Equity Line of Credit-HELOC*
  • Selling a residential property
    • Estimate the selling price of a property
    • Requested by a buyer
  • Quality control on a valuation report
  • Portfolio evaluation
  • Mark-to-Market (MTM) assessment
  • Removal of Private Mortgage Insurance
  • Establish a portfolio price
  • Distressed loans
    • Estimate the current market price
    • Resolve diligence/disposition issues
    • Determine the listing of a REO property
    • Estimate a listing price for a Short Sale
  • Legal Review
    • Divorce proceedings
    • Estate settlements
    • Lawsuits
    • Prenuptial agreements

*where permitted by FIRREA & on loans under $250,000
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