What are broker price opinions, and do you need one? Obtaining an accurate broker price opinion (BPO) is critical in the short sale process. When you execute this step successfully, you are far more likely to complete the transaction quickly and satisfactorily. Continue reading to explore a breakdown of this stage of the short sale process.

What Are Broker Price Opinions?

A BPO involves your bank appointing an agent to provide the lender with a valid property appraisal. Essentially, the agent will come out to inspect your home and give the bank their opinion on what the property will most likely sell for on the open market. Assuming they execute everything correctly, your bank will understand your property’s value and approve market value bids.

However, if the appraisal is too high, the bank will incorrectly feel the house is worth more than buyers will spend, thus denying fair bids. Excessive valuations can result in wasted time spent in valuation disputes or, in the worst-case scenario, complete transaction failure when there’s no more time available.

Is Getting a BPO Necessary?

The short answer is yes, a BPO is necessary, and it takes place during the “Initial Bank Review” stage of a short sale. First, the bank verifies you have all your paperwork in order and that you’ve completed a property valuation. When you finish the BPO, you’ll have a negotiator assigned to your file and advance to the next step.

The “Preliminary Response” step is where the negotiator goes over the complete file and searches for any omitted paperwork or issues with the transaction. They’ll also check over the BPO and figure out what number the bank or investor may approve as a minimum sale price. A buyer’s offer must meet that minimum price; otherwise, they’re likely to counter or reject it outright.

The negotiator will send the documentation to the investor or a supervisor for final approval once the buyer, seller, and bank agree. This final approval is why getting an accurate appraisal that can motivate potential buyers to make an offer is essential.

What Does a BPO Report Include?

A standard BPO report will include a wide range of information, such as the home’s

• Age
• Number of rooms
• The gross living area
• Condition

Other factors looked at will include the size of the lot and what the surrounding neighborhood is like. They also detail the number of homes for sale in the area in addition to the number of foreclosures in the area. Together, this information paints a general picture of what the home would be worth on the open market. It allows you to set an appropriate list price and estimate what the actual sale price of the home will be.

Types of BPO

There are two main forms of BPO: full BPOs, also known as internal BPOs, and drive-by BPOs, also known as external BPOs. What’s the difference? The main dividing factor between the two is their thoroughness.

Full BPOs involve entering the home, taking measurements and photos, and carefully evaluating the overall condition of the property. During a drive-by BPO, the agent examines the exterior of the home and other homes in the area before assigning a sticker price. In this situation, the agent never enters the home, which means the homeowner doesn’t need to be available to provide access.

Both forms of BPO take a similar amount of time and provide accurate valuations. They also take the same factors into consideration, like the location, size, and condition of the home—they just use different methods to gather this intel.

What’s the Difference Between a BPO and an Appraisal?

Appraisals and BPOs evaluate many of the same things and strive toward a similar end goal, which makes them easy to confuse. But there are a few key characteristics that set these two processes apart.

An appraisal is a longer, more comprehensive way to evaluate a home. A licensed appraiser will perform the appraisal, and they must complete the process in accordance with the Uniform Standards of Professional Appraisal Practice and law. Appraisals include detailed information on both the exterior and interior of the home and the surrounding neighborhood; because of this, they provide a more accurate and narrow valuation.

A real estate agent or broker performs BPOs, and they tend to be much quicker and cheaper but more limited in scope and less accurate. A huge perk of BPOs is that agents can perform them even when the homeowner isn’t present, which isn’t the case for appraisals. This makes them a crucial tool for foreclosures or situations where the homeowner is currently living away.

In some circumstances, appraisals are necessary, and you can’t use BPOs as alternatives. But you can use BPOs as a quick, less expensive alternative to appraisals for foreclosures and short sales. For a short sale, a BPO can provide an accurate price range for a home and set the stage for a fast, successful sale.

We hope this article has explained what broker price opinions are and why you may need one. When it comes to determining a home’s minimum value for a short sell, BPOs are an incredibly valuable tool. They’re quicker and less time- and money-intensive than standard appraisals, and they can help you sell a home for a fair price.

That said, BPOs don’t always go as planned. Problems like substandard reports or agents attempting to manipulate the price for their own gain can result in unsuccessful valuations.

When a BPO goes unfavorably and you need help, reach out to Short Sales Cooperative for assistance. We understand that the short sale process can be long, arduous, and emotional for all involved—and we want to change that. When you work with us, we handle the essentials so that you don’t have to. Our goal is to ensure agents and homeowners are as hands-off as possible. Don’t stress over a BPO gone wrong. Contact us, and we can help make things right. For information on short sale basics and the services we offer, look around our site or send us a message today.