what is a BPO

Question

Hi, I'm trying to flip a property it's my first flip in a good area, and the lender wants paperwork of a "Broker Price Opinion"? What is it exactly? And what is different from an appraiser than a BPO?

Bob E. · Answer

If it is really a BPO that you need I like Valuation Vision, they charge about $100 and the report has a nice format.  No affiliation other then being a satisfied customer.

Bill Gulley · Answer

Have no idea why your lender wants you to get a BPO, they can't lend off of it, not an insured bank. A broker (agent) might do a BPO at the office, from the car or they may go inside. A BPO is only an opinion from a broker, usually as to what a listing price might be. During the crash, banks were complaining about expenses of appraisals for foreclosures and in some areas appraisers couldn't keep up, the regulators allowed banks to use BPOs as a cost cutting measure. A BPO is not a recognized expert opinion of value.

Appraisers are trained beyond the education required for a broker in valuations and are registered and qualified by licensing. There are different certifications as well, from residential to commercial. Any federally insured institution is required to have an appraisal by a qualified appraiser to make a new loan on RE, there are exceptions as to amounts, types of loans, but generally a mortgage requires an appraiser.  Good luck :)

Brandon M. · Answer

BPO- costs you closer to $75-100 vs $350-400 for an appraisal. Could be thought of as a drive by appraisal, they don't actually go in the house and look at the inside. They might take a couple exterior photos they can get from the street but that is it. BPOs are done by real estate agents who have been qualified to provide their opinion of value.

BPOs are fairly common with lenders, whether they are getting a value to determine next steps for foreclosure, sale of non-performing note, etc. Just a cheap way of getting a more accurate value than they would get from their home office 3000 miles away that trusting the "Zestimate" that is always so far off!

Felicia Dooley · Answer

Thank You Evan & Joe you guys are a great help!

Account Closed · Answer

We only get BPOs on our distressed houses. No appraisals. It works great for us, these are all pretty much the same, 50-60k houses, 12-15% cap rate on buy hold.

Evan Manship · Answer

A BPO and an appraisal differ in many ways. An appraisal is a much more detailed report which illustrates rental rates, comparable sales, and cost data within the area. A BPO could be as short as a one page letter describing how the broker's opinion is that this property is worth $xxx,xxx.

Appraisals are much more acclaimed in real estate, but sometimes BPOs fly for more relaxed lending standards. Be careful when flipping on a loan - holding costs can be extremely expensive if your property gets no sales.

Ask your seller broker to write up a BPO of opinion now versus what it will be worth post-renovations (ARV). This may persuade the bank that the risk has legitimate upside.

Good luck