How to Determine Value on a Property By Adjusting Values on Comps

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I have been a REO broker for almost five years now, but before I got into REO I was completing broker price opinions (BPOs) for banks.  Broker price opinions help banks and other companies determine values on properties.  When completing a BPO, there are certain guidelines that are expected to be met.  Almost every BPO I do requires three sold and three active comparables and those comparables to be within certain guidelines of the subject property.

A BPO can be a great tool for a beginning or seasoned investor to determine values on properties.  I can go into any town in the country and complete a BPO and come up with a somewhat accurate value.  The trick in coming up with an accurate value on a BPO is making proper adjustments.  Every house is different in some way and making accurate adjustments is how we calculate what those differences are worth monetarily.   If you can complete an accurate BPO it can greatly increase your value accuracy.

BPO Guidelines

Here are the typical guidelines that most banks and BPO companies require Real Estate agents to go by when completing a BPO

  • Distance:  All comps must be within 1 mile of the subject if it is in an urban or suburban neighborhood.
  • Age:  All comps must be within 10 years of subject, unless the home is over 50 years old.  At that point the age brackets can be widened.
  • Size/square Footage:  Only above ground square footage is calculated in the square footage on a BPO.  The square footage on the comps must be within 20% of the subject.  Basement square footage and finish are calculated separately from above ground square.
  • Property type:  Comparable properties must be the same type as subject.  Single family detached homes must be compared to single family detached, duplexes to duplexes, town houses to town houses, etc..
  • Bedroom/bathroom count: Only above grade bedrooms and bathrooms are counted in the BPO information.  Comparable Bedrooms and baths must be within one of the subject.
  • Style:  It is not required, but you should try to use the same style of home.  2 story to 2 story, split level to split level, ranch to ranch.
  • Sale date:  Sold comps should have sold in the last six months, although many banks prefer three months.

Exceptions to Guidelines

Not every property has three perfect sold and active comparables in the same neighborhood.  At some point you will run into a property that has very few comps and you cannot meet the BPO guidelines.  If you have to break the guidelines, extensive explanations must be written out to justify why the guidelines were exceeded.  If a comp that was used is 20 years older than subject, then you must explain why this comp was used.  If there are comps available that are within 10 years of subject, then the bank is going to want to know why those comps weren’t used.

The premise behind these guidelines is to use the most similar properties as comparables to the subject property.  If there are other minor differences in the properties characteristics or condition, those can be taken care of with adjustments.  I have to use many different BPO forms and some allow adjustments and some do not.  I greatly prefer the forms that allow for adjustments, because I can put a monetary value on differences in condition, square footage or bedroom count.

Related: BP Podcast 007: Making Appraisals Work For You with Ryan Lundquist


Adjustments are made to the comparable properties to show if they are superior or inferior to subject.  The adjustments are calculated on the comparable properties, not the subject.   If a comp sold for $180,000, then you will add or subtract adjustments to account for positive or negative features.  After the adjustments are made, we have a new price that shows what the subject is worth based on the comparable sale or listing.

It can be confusing at first determining if an adjustment should be positive or negative, but it gets easier with practice.  Adjustments can be made for bedrooms, square footage, age or any other variable.  The basic idea is to use a negative adjustment on the comparable property, if the comp has superior features and positive adjustments on the comparable property if the comp has inferior features to subject.  A BPO looks much like an appraisal, and the adjustments work the same way.

Example adjustments

Screen Shot 2013-09-07 at 10.05.34 PM Screen Shot 2013-09-07 at 10.05.45 PM


Based on this comparable property the subject property is worth $194,500.

How to Calculate Adjustments

Calculating adjustments is a judgment call based on an individual market.  There is no across the board figure for square footage, garages or lot size.  It is up to the preparer to figure what the actual adjustment figures are.  I will provide one tip.  If it costs $100 a square foot to build a home, that doesn’t mean the adjustment for square footage should be $100.  The $100 a square foot for a new build is factoring in the entire house into that figure, while BPO adjustments factor in many individual variables like bedrooms and baths as well as square footage.  Usually you will see adjustments on BPOs of $20 to $40 a square foot for above grade square footage and less for basements.  The higher range is usually for more a expensive house that has a higher build quality.


I (mostly my assistant) complete about 1,000 BPOs a year for banks and third party companies that specialize in BPOs.  Whenever I am interested in a property for an investment, I will have my assistant complete a quick BPO on the property to see if her value lines up with mine.  If you can learn to accurately apply adjustments to comparable properties like an appraiser or BPO preparer does, it can greatly improve the accuracies of your values.

Photo: Images Money

About Author

Mark Ferguson

Mark Ferguson is a has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more than 20 rental properties that include single family homes, as well as commercial properties, including a 68,000 square foot strip mall. Mark has sold more than 1,000 homes as a real estate agent and is the owner/managing broker of Blue Steel Real Estate in Greeley, Colorado. Mark started the InvestFourMore blog and website in 2013, which has hundreds of article on real estate. Mark is constantly sharing his insights, case studies, and interesting things that happen to real estate investors on both his blog and well-known sites like Forbes.


    • Thanks for the comment Samantha.

      You have to use the most similar you can find and make adjustments. It’s gets tricky and tough to assign values for adjustments if they are really different, but all you can do is give it your best.

      An important part I left out is the range if the adjusted values. If they are within 10% that’s good. 20% okay. Any higher and rethink the values you have your adjustments or see if you missed something.

      • Good nuts-and-bolts article, Mark, your perspective as a practicing agent is invaluable.

        Are you saying that if the total “net adjustment” to the comp is more the 20% of the comp’s sales price, then that is a red flag and calls into question whether this is truly a good comp? In your example, adjustments are 19.5k, and the comp sold for 175k, so the adjustment is just over 11% of sales price, so this would be an acceptable comp, is that a correct assessment? Are the adjustments actually netted like that, or are the “absolute values” added up in making this determination. Obviously some can be positive and some negative, so it almost seems odd to just let all of that offset and conclude that the comp is fine, even though there are lots of offsetting differences in features.

        • Hi David, actually what I meant is the total adjusted values for every comp should be with in 20%. 120k, 135k, 125k would be a great range. 110k, 140k, 150k would cause issues because there is su h a wide range of values.

  1. Thanks Mark. You cleared up some questions on how BPO’s should be handled. Now I know who to call for an opinion when I disagree with a BPO. We had to challenge a few on the selling side and it creates a lot of unnecessary stress on all parties when you get a bad BPO by someone that just doesn’t know the dynamics to accurately pricing the homes value.

    • Hi Michael, there are a lot of bad appraisals. Some bpo companies cause those themselves with the rules they out in place, just like appraisals. Some companies won’t let you use REOs or distressed sales when you are valuing a short sale. I have no idea how that makes sense.

  2. Michael Woodward on

    Really interesting read Mark. I spend a lot of my time analyzing property values (ARV) for my flip projects. Do you have a spreadsheet (that you wouldn’t mind sharing) with the calculations you use to create the BPO’s or are you using some kind of proprietary software? I’m always looking for ways to speed up this time-consuming task.

    I’m also trying to figure out a way to analyze property data in bulk that I can use to quickly determine property values. Do have a process (spreadsheet, database, etc) for doing that kind of thing?

    Thanks for the article!


  3. Great article. Can you provide some more information, references,or examples on how you would come up with the numbers for the 3rd column “Adjustment”? At this point, the numbers sound like they’re coming out of thin air.

    • Hi Ray, thank you.
      The adjustments are different for each house and each market. That is where the expertise and work of the person doig the report come in. You’ve got to do research and figure out what the different characteristics mean monetarily in your market. It is very subjective.

      • Hi Mark,

        Thank you for an informative article. Not to hammer on this too much – ok, I’m hammering – but I have the same question as Ray re:finding a way to put a number to those adjustments.

        When you talk about doing research, can you provide some guidelines on that? Would I research solds and figure out on average how much more a 4br sells for than a 3br, for example? Same for a garage, an extra half-bath, etc. And I’m guessing it even gets more specific, determining which parts of town benefit from which features, that kind of thing.

        I’d like to be able to make proper adjustments for those times when we need to make a case to an appraiser, or challenge a BPO, or whatever. And, while I feel we do a really good job with our comps, it would be great if my argument was all the more professional.

        Thanks again!


        • Do you have access to any appraisals or appraisers in your area? They are a great source to find out what typical adjustments are in your area. They do it every day.

  4. Oh man. I’ve had such a problem with comps on this purchase! It’s a triplex with legal non-conforming zoning in an area only zoned for singles and doubles and the bank is–wait for it–surprised there aren’t any triplexes nearby to comp. Duh? So then they’re upset because the duplexes have to be modified up and the one 4-plex just outside the zone has to be modified down. So frustrating! God forbid somebody who knows the area and the market just go out there and go, “Holy crap–this property is worth way more than she’s paying for it!”

  5. Great article Mark.

    I have 3 questions that I deal with every day when determining the ARV for my flips.

    1. If there are not 3 sold and 3 active comps within a mile and 6 months….Should you look back further in time or should you look out wider than a mile? I tend to look back further to within the last year that way at least your staying in the same neighborhood.

    2. How reliable is sold price per square foot? I try to use these figures a lot but when I end up in a neighborhood that doesn’t have many solds that were in nice or rehabbed condition. I do try to only look at sold comps +/- 100-200 sq ft and +/- 10 years is this acceptable and reliable?

    3. Is the 10 year range acceptable when you have a subject property built in let’s say 93-97′ ? It seems like you can’t use a 07′ comp for a 97′ subject. Is this the case or is there a typical ruling when it comes to houses in this age range?

    Thanks again Mark, appreciate the article!

    • Hi Matt, Great questions,

      1. This really depends on how similar the neighborhoods are. If I know two neighborhoods have similar prices, but may be over a mile apart, I may tend to use the comp farther away, especially since we are in an appreciating market here. If there are not similar neighborhoods, then I will go back in time.

      2. I don’t look at price per square foot at all. I don’t think that takes into account enough variables like garage, basement, condition, and other features. I will adjust for square footage, but I won’t look at price per square foot alone.

      3. When you get up to houses built within the last 20 years, it is best to narrow your search down to a 5 year window if possible. Most of the banks and BPO companies do not require it, but it makes for a more accurate value.

  6. With regard to adjustments they should be using paired sales analysis to determine , how much to adjust for one feature or another. this is all based on market actions and reactions. it should tell you what your typical buyer is willing to pay for one feature versus another.

  7. Mark,
    Obviously you are not an Appraiser. BPO’s are not a good basis for lending. BPO’s are exactly what it means[ BROKERS price opinion. Banks should not rely on BPO’S due to the risk involved. Do BPO”S comply to USPAP? No, because they are not appraisals. No Appraiser should be a participant in this atrocity, it’s an insult to the Appraisal profession.
    Your article is humorous. When comps are scarce give it your best. Nark, you mean wing-it?
    You have to have evidence to back up your adjustments. Appraiser’s should not participate in doing BPO’s or reviews of BPO’s. In my opinion realtors are trying to involve Appraisers to bolster BPO’S credibility. Bottom line- BPO’s ARE being completed by unqualified agents/brokers and are unreliable. Banks and other companies should not use BPO’S for any determination of value, only Appraiser’s are qualified and licensed to estimate market value.

    • I agree with Gregg and jlwait….First of all it is only a definition of paired sales analysis for the properties to be “exactly alike except for the one feature”. It is obvious that that would be a rare occasion, so it is common sense that it would require an “appraiser” to analyze potential comparables taking the other differences into account. THAT is one of the differences between a BPO and Appraisal! That is only an example of the superior amount of analysis involved in an Appraisal as opposed to a BPO. (considering both are prepared properly by Brokers and Appraisers acting in a professional manor). Mark, your method may work for your purposes but as you said, “A BPO can be a great tool for a beginning or seasoned investor to determine values on properties”. The operative word is “tool”. There are many tools in preparing an appraisal so why would a certified appraiser spend the time to prepare a BPO?.
      In summary, BPO’s should be for the private sector for limited purposes. If lenders are willing to accept more risk to save some money, then that is on them….Bad and bogus appraisals paid enough of a part in the lending crisis as it is! I just wonder how much of it was due to BPOs:/

      • Guys, When did I ever say an appraiser should be completing BPOS? I also never said a BPO should be used for lending purposes and they almost never are. I am trying to teach basic guidelines for investors who want to value their properties. An investor can’t pay $400 for an appraisal every time they are interested in a property. Investors will need values on hundreds, if not thousands of properties a year.

        When I do BPOs for banks, they are used to estimate value for short sales, REO listings, loan mods, removing MI, or determining a portfolio value. Many times my values are accompanied by an appraisal the bank also orders and almost every time the bank or client orders multiple BPOs from different sources to compare values.

    • JWait,
      You are telling me an agent who has been licensed for 10 years, sold hundreds of homes has no idea how to value a home? An investor who has fix and flipped 70 homes in ten years has no idea how to value homes? Than anyone who wants to know the value of a home has to spend $400 to get a full appraisal done?

      Yes there are bad BPOs, just like there are bad appraisals. I have seen many more bad appraisals come in lately than bad BPOS. The appraisers are hand cuffed by the new system and are encouraged to come in below value on homes. I have homes receiving multiple offers over and over that aren’t appraising at value. The appraisers have to use sold comps and if the market is appreciating, that makes it very hard for an appraiser to justify a higher value when his entire value is based off of sold comps that sold 6 months ago when prices were 10% lower. I have appraisers use year old comps in appreciating markets and claim the market is stable to justify it. They ignore the 20% market increase over the last year.

      A BPO on the other hand allows for a lot more flexibility with regards to comps. I can base my value on listings, if I am able to justify it with commentary. If 80 homes sold in an area in the last 6 months and there are 2 for sale then that is a major factor affecting value. I never see those comments in an appraisal.

      I see so many appraisals from out of area appraisers who have no market knowledge and ignore major value indicators, like a 4 lane main thoroughfare or try to compare my completely remodeled home to a dilapidated REO without making any adjustments or adjusting $2500 for paint, carpet, appliances, holes in drywall, doors, windows etc. I see it all the time where condition adjustments are way off on appraisals.

      How do you come up with your condition adjustments? Do you itemize repairs needed on the subject like many BPOs do?

      Sorry for the rant and the tone, but you weren’t exactly pleasant.

  8. I am a retired broker and I have recently purchased a home that is on a creek. I am wondering how you appraisers factor in creeks. The home is waterfront and only three other homes in the neighborhood share this. The home is in Georgia. Can I use another creekside home as comparable or use this as a reason to go outside the neighborhood or is there an adjustment and if so how much? I can hear the creek from the front porch. See it in the winter. This has to effect marketability as it was a determining factor in me purchasing the home. What do you think?

  9. Mark,

    My question pertains to the spread between comps. I’ve been doing inner city comps and I find that sold comps may range over a period of 3 months, samples style home, as much as $40,000. Example a foreclosure of similar style homes sales for $40,000 less. When looking at the current comps, you only find comps with $40,000 or 50,000 spread. Should the comp extend past 1 year or 5 miles to find similar foreclosures to keep the spread between the subject and comparable around 20%.

    I hope this makes sense to you.

    Thanks for your feedback.


  10. This property in FLorida : 6786 Brookline Dr Miami FL. 33015 was listed for $179,900
    ?Built in 1967
    An Appraisal was done : $150,000… The Listing Agent did NOT disclose this fact to my BUYER’S Agent
    A Second Appraisal was done by my Financing Bank : $ 140,000 result , COMPARABLE METHOD was done

    My question : Why was there such a difference between both Appraisals and what is the depreciation adjustment that should be done for the YEAR BUILD when using the COMPARABLES method ?

    If you need a copy of the Appraisal, I can provide with a detail explanation of the need to see it.

  11. It seems to me, quality, upkeep, and so forth no longer play much of a role, as long as you stay just above the “fixer upper” state, your home value is going to be the same as if you dumped 500K in improvements.

    I realizes HOAs have killed the market, turned homes into clones, and killed the “personality” of homes, but has it also killed off the ability to invest in improving your home? Are we to the point we believe only Square feet should matter, or how many rooms, regardless if those windows are storm or single pane? After all it’s just another house.

    Sure, I can see spending money makes it easier to sell, and as I love projects I will have no issue selling, but to be cursed with the same change in value as the lazy neighbors because they are unwilling to make their homes as nice, just seems ignorant.

    Come on people, your killing the economy by ignoring aesthetics. It is more than numbers, it is quality, design, style, personality. This is a home not an apartment, not a prison cell, a home.

  12. Might I get your thoughts on what constitute a similarly sized home? My realtor is saying that my property is “comparable” to my neighbors. While it is similar in most ways, my house has 50% more SF above grade (1850 vs 1320). That is a lot of extra house to value at $20/SF. It implies that 1/3 of my $600K+/- home is only worth $10,000. As a buyer, that is very inconsistent with what I would value.

    Can you comment on what constitutes a similarly sized home, and how you adjust when the comparable are substantially different as in this case (50%)?


  13. Need some help here, I am a buyer and My first appraisal came in at 440000 on a single family detached home in cambria heights NY. My bank ordered a 2nd appraisal due to the fact that this is a flip home but it is a fully renovated home with everything new and now the 2nd appraisal came in at 395000 a 48000 difference. When I reviewed both appraisals the 2nd one the appraiser used attached homes as comps as well as not listing cost approach or taking into account that this home has been greatly updated as it is a fully renovated home. There are comps within that last 6 months and do not understand what they were not used. I am concerned only because the seller will not sell at 395000 and I know the first appraisal is more accurate then the 2nd. The appraiser did not want to change anything is was rather rude to my agent….. we decided to send our findings to my bank….. is there anything we can do here as this appraiser did not use Detached homes when comparing to the home I am buying….. ? any help will be welcomed and thank you.

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