What is a Broker’s Price Opinion? Simply stated it is the opinion of a licensed real estate agent of the most likely sales price (value) of real property. The National Association of Realtors states a Broker’s Price Opinion (BPO) should contain 7 things in writing. They are as follows:
1. The identity of a subject property
2. The date of the opinion
3. A defined price or value
4. Limiting conditions (Statement of Purpose and Intended Users)
5. Any interest of the agent including Agency Relationship to Owner
6. Basis for Opinion and sources of Information
7. If not an Appraisal by licensed Appraiser then state the fact
On a practical level, number 3 is the most important. So, what determines a good value?
Ever watch Antiques Road Show? People are so surprised or sad when the “expert” tells them the value of their heirloom. One common theme I hear from the evaluator is “in recent auctions, similar items sold for $3,500”. They are referencing what someone else was willing to pay for a like item.
The same concept applies to homes. Recently sold properties (last 3 months) of nearby comparable properties provide best indicator of value. Value is so deceptive relative to square footage, floor plans, construction, and land. A good agent will make many adjustments for differences.
Another factor I consider are the comparable homes that did not sell. Failures can bring out features the market is rejecting.
I was with a seller today who knew what the adjacent homes sold for. She was curious why I did not give the same value to her home. Her home did not have re-finished hardwood throughout, or tile in bathroom, etc. Her home was roughly the same overall size but on 2 floors instead of one. All of these factors must be considered in the equation.
Is a Broker’s Price Opinion (BPO) the same as an appraisal? No, it is not. An appraisal is made by a licensed professional Appraiser. Although they also look at recently sold properties, they are also looking at replacement construction value and perhaps income as well if investment property. Appraisals have specific formats generally for the benefit of lenders. Appraisals are great tools. BPO’s are great tools as well, because they will pick up on many subtle details that pertain to the current “buying public”. As an example… appraisers generally do not affect value based on aesthetics like colors, etc. Realtors are sensitive to those things because we listen to buyers constantly giving feedback. Realtors know that a seller’s specially decorated walls may only reach a small amount of buyers’s tastes.
The best way to determine the most accurate value of a property is to hold a well advertised absolute auction. That will bring out the competition to level the marketing playing field. Most people are not comfortable with that approach, because the buyers may not think so highly of your place as you do. So the next best thing is to ask a Realtor for a BPO or broker’s price opinion. What is a Broker’s Price Opinion? The best professional determination of what your house is worth.