Real Estate Marketing Ideas, Real Estate Lead Generation

The Advantages of Working Broker Price Opinions

By Meaghan Loraas Last Updated March 18, 2022 3 min read

Have you considered working on broker price opinions on the side? Here are some things to consider.

What is a Broker Price Opinion?

A Broker Price Opinion (BPO) is a real estate valuation tool. BPOs are often used to determine an appropriate list price when a property is going on the market. Experienced agents understand how to calculate BPOs and how to leverage them to grow client confidence. Your expertise that you gain by working BPOs just may be what you need to generate more referrals and leads.

How to Determine a BPO

To determine BPO, a real estate agent compares the property to similar “comps” (comparable sales) in the neighborhood to determine a general value. That estimated value can then be used to come up with a listing price and give the homeowner and agent an idea of how much they can expect the property to sell for if this sounds like a lot of “abouts” and “estimates” that’s because it is–BPOs try to anticipate the future, but they aren’t a crystal ball. 

BPOs are also helpful for investors working foreclosures or short sales. These real estate transactions don’t usually represent actual market value, so a BPO (along with work estimates) helps determine if a project can produce a worthwhile profit. Real estate professionals (not just brokers) are versed in their local market–is it on the upswing? Are we about to hit the holiday doldrums? How desirable is this school district? A well-developed BPO shows homeowners, buyers, and investors what is likely and what is possible so that they can make informed decisions. Additionally, a history in BPOs can establish you as one of your area’s real estate experts. 

Difference between BPOs and Appraisals

The critical difference between a BPO and an appraisal is the value types. A BPO is similar to an appraisal, though not as thorough, and with a slightly different eye to value. An appraisal is a detailed examination of a property, neighborhood, and the real estate market. Appraisers use comparable sales to calculate a market value–the selling price a property should command on a specific date. 

Some lenders will accept drive-by appraisals. These are typically for well-qualified borrowers with a sizeable down payment, but the most common review is an interior/exterior. The appraiser will take a detailed look at the home, measure the exterior to confirm square footage. Additionally, they estimate the roof and siding, and evaluate the interior quality and condition. The appraiser will then need to use a minimum of three comps to show value and ideally include a few pending sales to show the immediate market trends. Appraised property values are inherently retrospective–specific values on a particular date. 

A BPO is a forward-looking value. Unlike an appraisal based on what is provable, a BPO considers what is possible. BPOs use comparable sales, but they also consider matching listings, inventory numbers, and the minutiae of location, view, and quality that can be hard to quantify in an appraisal. And unlike an estimate, a BPO can “game out” potential values based on possible renovations or updating. 

Pros of Working BPOs

BPOs are helpful in a hot market because they consider trends, listings, and inventory. A BPO looks not just at where values are today but where they likely will be in the next few weeks. They can also project possible values based on different work done–a new roof, an updated kitchen, or fresh paint and carpet. In some states, a BPO is an acceptable substitute for an appraisal and can be used as a valuation for sales and refinances. In short, a BPO is a quick, low-cost way to have an educated real estate professional give value to a property. And, as that real estate professional, it establishes you as an authority in your farm area.

Cons of BPOs

While BPOs have their place, they can’t be used as a substitute for a valuation by a certified real estate appraiser. Real estate agents can’t establish retrospective value for estates or tax purposes, and many states limit their use for financing purposes. A BPO is an excellent snapshot of the current market, but it doesn’t have the same qualitative research that backs a certified appraisal. 

Why Would Someone Choose a Broker Price Opinion?

BPOs have their place in the toolbox of every agent, investor, buyer, and seller. A well-developed BPO, paired with a history of accuracy and informed pricing, can help secure agent listings. An agent with a strong track record of accurate BPOs will inspire confidence in their sellers. Buyers and investors can also make decisions with confidence when they have a BPO. Those looking to invest in short sales and foreclosures can use BPOs to secure financing (in some states), calculate their margins, and ensure profitability. There are times when an appraisal is more time and money than a sale requires; in those situations, a BPO is an essential tool to confirm the value.