Appraisal vs. broker price opinion (BPO): Which matters more?

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As you browse real estate listings, the prices attached to those properties help give you an idea of how much money you’ll need to buy each home. Who sets those numbers, though? If the home seller is working with a real estate agent or broker to handle their transaction, the list price of the home is likely the broker price opinion, or BPO.

What is a broker price opinion?


Broker price opinion definition

A broker price opinion, commonly known as a BPO, is a real estate professional’s opinion of a property’s value. BPOs are most often used when setting the list price of a property, similar to a comparative market analysis, and in the case of a foreclosure or short sale.


To determine the BPO, a real estate agent or broker will use his or her expertise to assign a dollar amount to a property based on certain factors. BPOs are normally performed by a broker who is familiar with the local housing market.

“Usually, the agent does this as part of their listing agreement when selling a house,” explains Rocke Andrews, president of the National Association of Mortgage Brokers and owner of Lending Arizona. “They look at similar properties that have sold recently and provide an estimate of what the home should be listed for.”

There are two main types of BPOs: internal and external. An internal BPO involves a broker spending time inside the property to evaluate the condition of the home, take measurements and capture photographs. With an external BPO, sometimes referred to as a drive-by BPO, a broker may simply be able to assess the outside of the property before giving it a sticker price.

A BPO is helpful in the early stages of the real estate transaction when setting the list price of a home. The home seller gets an understanding of what the property will command, and the buyer gets an understanding of what they will need to pay to own it.

In the mortgage lending process, however, BPOs are not the go-to method. In most cases, a lender will order a professional appraisal for the property to determine its value, instead of a BPO.

BPOs are not accepted for mortgages sold to Fannie Mae or Freddie Mac or guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or Department of Agriculture (USDA), according to Jefferson L. Sherman, president of the Appraisal Institute.

“There are 14 states where BPOs are supposed to only be used for the purposes of providing a buyer, seller, prospective buyer or prospective seller with a listing or purchase price,” says Sherman. “However, each of those laws is nuanced.”

How appraisals and BPOs are different

There are a few important characteristics that set an appraisal apart from a broker price opinion.

First, an accurate appraisal requires a heightened level of expertise and training.

“Appraisals are conducted by duly certified valuation professionals who have met extensive education, experience and testing standards in valuation, have demonstrated their valuation competency by passing a national exam and adhere to generally-accepted uniform valuation standards,” says Sherman.

Second, professional appraisers generally don’t have conflicts of interest that could influence their opinion. While a real estate professional will likely be paid a commission based on the sale price of the home, an appraiser is paid solely for the job of determining the property’s value.

BPOs are also less expensive than the cost of an appraisal. A BPO costs roughly $50 or so, according to Andrews, while an appraisal can run anywhere from $300 to $450 or more.

When a BPO makes sense

In certain situations, such as a foreclosure or short sale, BPOs can play an important role.

“Back in the real estate downturn, there were so many foreclosures and properties on the market, lenders would use these due to a faster turnaround time and lesser fee,” Andrews says.

That thinking still applies today, albeit in a much healthier housing market. Sherman points out that Pennsylvania recently approved a law that “says that BPOs cannot be used for any type of mortgage purpose, except for short sales and pre-foreclosure work.”

So, if you’re buying a distressed property, a BPO might be the opinion that turns out to be closer to fact than that of a professional appraiser  If you’re applying for a mortgage, however, your lender will most likely order an appraisal to get a read on the home’s value, not a BPO.

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