What Is a Broker Price Opinion (BPO)?
A broker price opinion (BPO) is exactly what it sounds like: an estimate or an opinion from a real estate broker or agent about how much your home could sell for in the current market. Think of it as a way for a real estate professional to determine a fair listing price for your home.
A BPO is typically considered less accurate compared to a more thorough home appraisal, however. In many cases, states restrict how you can use a BPO when buying or selling a home.
Still, a BPO may still have its place and can be useful in certain scenarios.
- A broker price opinion (BPO) is used to help determine a home’s potential sales price and is conducted by real estate agents or brokers.
- A BPO cannot take the place of an appraisal for mortgage lending purposes.
- The BPO process tends to take less time to complete and costs less than an appraisal.
How does a broker price opinion work?
A broker price opinion is an estimate of a home’s potential price, and given as a range rather than an exact amount. Homeowners most commonly use BPOs to establish a listing price before selling their home, or to decide whether they want to refinance or make home improvements.
A licensed real estate agent or broker typically performs a BPO. There may be additional restrictions in some states, which might include the professional having their license for a certain amount of time, completing education requirements or not being the homeowner’s listing agent.
The process of determining a BPO involves evaluating homes that have sold recently in the neighborhood. Called comparables, real estate professionals usually look at nearby home sales from the last three to six months. Then, factors such as the home’s size, condition and location will be considered when arriving at a price estimate.
The person or entity that orders a BPO should receive a written report outlining the following:
- A statement outlining the BPO
- The property’s description
- How the professional arrived at their estimate
- The real estate professional’s contact information
- Required disclosures and disclaimers
How much does a BPO cost?
There isn’t a specific price range as to how much BPOs cost, but you should ask for a price estimate before you agree to one. Prices could vary based on factors like your location, the real estate professional’s experience and how in-depth the report will be. Anyone involved in a real estate transaction can request a BPO — including a lender, homebuyer or home seller.
When should you use a broker price opinion?
You can use a BPO in a variety of situations when you or your lender want an estimate of your home’s resale value, but don’t need a full home appraisal.
A BPO is useful if:
- You want a quick estimate of the home’s value. A BPO could help you decide a listing price for your home or determine whether you have enough home equity to qualify for a home equity loan or HELOC.
- You want to purchase a foreclosed home. BPOs tend to be faster than appraisals so there are less chances for a delay during a short sale or foreclosure.
- You’re facing a major life change. A BPO can help if you’re dividing assets after a death or if you want to reassess your estate planning.
A BPO isn’t useful if:
- You want to purchase a home with a mortgage. Federal law prohibits using BPOs in place of an appraisal during the mortgage underwriting process.
- You want to use a BPO for a refinance. With the exception of some loans like an FHA streamline refinance where you don’t need an appraisal at all, you can’t use a BPO to determine a home’s value for refinancing purposes.
- You want to borrow against your home equity. Laws also prohibit the use of BPOs for home equity loans or HELOCs.
Types of BPOs
The two main types of broker price opinions: interior and exterior BPOs.
- Interior BPO. This type of BPO is where the real estate professional checks both the inside and outside of the property to gain a better understanding of the home’s overall condition and features.
- Exterior BPO. Also called a “drive-by BPO,” this type of BPO involves the real estate professional assessing the property from the outside only.
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BPO vs. CMA vs. home appraisal
BPOs, home appraisals and comparative market analyses (CMAs) are all methods to analyze and estimate a price for your property. The main difference lies in its usage, who can conduct one and which entity regulates them.
Broker price opinion (BPO) | Comparative market analysis (CMA) | Home appraisal |
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Pros and cons of a broker price opinion
Pros
- Quicker process than a home appraisal. Appraisals may be harder to schedule, especially in a very active real estate market.
- Costs less than an appraisal. BPOs can cost a fraction of what an appraisal would cost you.
- May be more accessible for certain home transactions. Lenders or homebuyers may be better off using a BPO for a short sale or a foreclosure since appraisers may not be able to enter the home to conduct their assessment.
Cons
- May not be as accurate. Since a BPO is an estimate of a home’s listing price and not its market value, it may not be as accurate compared to an official appraisal from certified and licensed appraiser.
- May not be used as an alternative to an appraisal. Federal laws such as the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) require those who take out a mortgage for a primary residence to go through the home appraisal process. Some states, like Pennsylvania, only allow BPOs in very specific circumstances.
- May be too subjective. Since the real estate agents completing BPOs may not be bound by the same laws as appraisers, the price estimate may not be as objective.
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