BPO, CMA, Appraisal… What’s the Difference? (And Why “As-Is” vs ARV Matters)

[Chris Seveney]

As a note investor, understanding the value of the underlying collateral is one of the most important parts of the due diligence process. But not all value opinions are created equal. If you're relying on a BPO, CMA, or appraisal, you need to know not only how it was created but also what it’s actually telling you.

Let’s break it down:

CMA (Comparative Market Analysis)
Usually done by a real estate agent. It pulls recent comps and is meant to help get a eyeball value. This is informal and rarely used in note investing unless you are working with an agent you trust and need a fast ballpark number. It’s typically an as-is value, not adjusted for any repairs.

BPO (Broker Price Opinion)
This is common in the note world. It's more formal than a CMA but still prepared by an agent, not an appraiser. BPOs can be exterior or interior (rarely interior) and can vary in quality depending on the agent's experience. The critical part for note investors: always confirm if it's as-is or ARV. I have seen BPOs come back with numbers that assume the home is in good condition when the photos show otherwise. If you are buying a non-performing loan, that disconnect matters.

Appraisal
This is completed by a licensed appraiser and follows uniform standards. It is the most formal valuation, often required in traditional lending. For our purposes as note investors, appraisals are less common due to cost and access issues. Like BPOs, they can be ordered as-is or subject-to-repair. If it's being used to value an REO or note you plan to foreclose on, make sure the appraisal reflects reality, not just a best-case scenario.

Also people need to note as I am seeing this more often:

As-Is Value vs ARV

This is where investors get tripped up. If you are reviewing a value that reflects ARV but you are acquiring a loan secured by a property that is currently vacant, needs repairs, or is in legal limbo, then you are not buying that ARV—you are buying the as-is reality. I recently received some notes for sale that had valuations based on ARV even though the repairs were not done... Thus these properties were underwater.

What I recommend:

When reviewing any valuation, always ask:

What is the current condition of the property?

Is this valuation as-is or after repair? 

Were repairs assumed? If so, what kind? (BPO's have line items for this)

How were comps selected? (you do not want comps of all renovated properties)

[Don Konipol]

Quote from @Chris Seveney:

As a note investor, understanding the value of the underlying collateral is one of the most important parts of the due diligence process. But not all value opinions are created equal. If you're relying on a BPO, CMA, or appraisal, you need to know not only how it was created but also what it’s actually telling you.

Let’s break it down:

CMA (Comparative Market Analysis)
Usually done by a real estate agent. It pulls recent comps and is meant to help get a eyeball value. This is informal and rarely used in note investing unless you are working with an agent you trust and need a fast ballpark number. It’s typically an as-is value, not adjusted for any repairs.

BPO (Broker Price Opinion)
This is common in the note world. It's more formal than a CMA but still prepared by an agent, not an appraiser. BPOs can be exterior or interior (rarely interior) and can vary in quality depending on the agent's experience. The critical part for note investors: always confirm if it's as-is or ARV. I have seen BPOs come back with numbers that assume the home is in good condition when the photos show otherwise. If you are buying a non-performing loan, that disconnect matters.

Appraisal
This is completed by a licensed appraiser and follows uniform standards. It is the most formal valuation, often required in traditional lending. For our purposes as note investors, appraisals are less common due to cost and access issues. Like BPOs, they can be ordered as-is or subject-to-repair. If it's being used to value an REO or note you plan to foreclose on, make sure the appraisal reflects reality, not just a best-case scenario.

Also people need to note as I am seeing this more often:

As-Is Value vs ARV

This is where investors get tripped up. If you are reviewing a value that reflects ARV but you are acquiring a loan secured by a property that is currently vacant, needs repairs, or is in legal limbo, then you are not buying that ARV—you are buying the as-is reality. I recently received some notes for sale that had valuations based on ARV even though the repairs were not done... Thus these properties were underwater.

What I recommend:

When reviewing any valuation, always ask:

What is the current condition of the property?

Is this valuation as-is or after repair? 

Were repairs assumed? If so, what kind? (BPO's have line items for this)

How were comps selected? (you do not want comps of all renovated properties)

Very good information.
Appraisals, BPOs, etc are often (dependent on property value, location  and type) much less reliable for commercial property than for residential.  

Apartment properties, triple net leased properties, land leases, motels, and fully occupied retail centers are the properties where appraisals tend to be most accurate.  Almost everything else is a “crap shoot”.  

Here’s a “tale” of two properties.  The first is an auto repair facility we financed 2 + years ago.  The appraisal stated value at $1.3 million.  The borrower filed BK 14 months ago.  The appraisal in BK court came in a $1.2 million.  When we were finally able to obtain ownership of the property we got a new appraisal that found market value at $1.35 million.  The broker we hired to market the property looked at the appraisals, and told us that they were worthless.  Why?  Because there was a lot of new development interest in the immediate area and because no property had sold that reflected that interest appraisals didn’t pick it up.  In short order he producing two offers in the $2.25 - 2.35 million range. 

Second property is a mixed use building we made a rehab loan on in 2023.  Appraisal at the time was $8.5 million “completed”.  We are now dealing with a loan modification due to the fact that the two recent appraisals have been at $2.75 and $3 million.  How does the appraised value decline 60% + in 2 years?  Well, first office building properties nationally have declined 40 -45% in value since COVID.  Second, this particular market was hit much harder.  So, the projected rental rates are less than half of what they were 3 years ago.  Further, cap rates are higher.

The main thing newer investors in our asset (real estate) need to understand is (1) real estate doesn’t ALWAYS go up and (2) appraisals are OPINIONS, not absolutes.  Hindsight is ALWAYS 20/20.