SS123: What is a BPO in Real Estate

SS123 What is a BPO in Real Estate

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing What is a BPO in Real Estate.

When selling a piece of real estate through a broker; the first step is usually for the broker to generate a BPO. In this episode, Charles discusses what a BPO is and why is it important to pricing and selling your property.

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Talking Points:

  • When reviewing different on-market properties; buyers might wonder how the seller came to their listing price. Typically, a real estate broker will provide their clients with a broker price opinion or simply BPO. Sellers will rely on the information from the BPO when setting a price for their property.
  • What is a BPO?
    • The BPO is an unofficial assessment of a property’s value.
    • The BPO is typically requested by an owner that might be interested in selling their property.
    • A broker price opinion is a real estate broker’s estimate of your property’s value. Brokers base their opinion on a number of property details including; its size, number of bedrooms, bathrooms, and garages; along with its age and the property’s condition. The broker will also take into consideration the surrounding neighborhood, market, and comparable sale prices of the area.
  • What Are the Different Types of Broker Price Opinions?
    • There are 2 main types of BPOs;
    • An External BPO or a drive-by BPO is an opinion that only considers the exterior condition of a property along with basic public information that is available through public records. This is less thorough and is usually just the starting point. If a property owner sees a price that interests them; they might request a full BPO.
    • An Internal or full BPO is the most comprehensive price opinion. This BPO takes into consideration everything from the external BPO in addition to the interior condition of the property. When a real estate professional is reviewing a property; they are confirming that the property consists of what is listed in public records, along with the current condition of the property. Maybe a bathroom was recently renovated or there is a lot of deferred maintenance; this will all be taken into consideration with a full BPO.
  • Pros and Cons of Broker Price Opinions
    • Pros
    • A BPO is much faster than an appraisal
    • A BPO costs less than an appraisal
    • In certain situations; a BPO may be able to be substituted for an appraisal (possibly during a foreclosure, short sale, or when a borrower is requesting to cancel their private mortgage insurance).
    • A BPO is able to offer a price range for a specific property dependent on market conditions.
    • Cons
    • A BPO is usually considered to be a subjective valuation (since they are usually created by an agent looking to represent the seller).
    • A BPO usually is not able to be used as an appraisal alternative.
    • A BPO is usually not as accurate as an appraisal.
  • What are the Differences Between a BPO and an Appraisal?
    • Even though appraisals and BPOs look at comparable property sales, utilize opinions from real estate professionals, and are heavily dependent on market data; there are still several differences:
    • Appraisals are completed by trained, licensed appraisers
    • Appraisals are required by most mortgage lenders – BPOs are typically not accepted as an alternative
    • Appraisals utilize historic market data versus market trends
    • Appraisals are less subjective; there is no relationship between the seller and the appraiser whereas with a BPO; the broker is most likely trying to provide a high price, in order to get the property listing
  • How are Broker Price Opinions Utilized?
    • In certain situations, getting a BPO makes sense. Potential property sellers will find a BPO very helpful with pricing their property. It is important to take into consideration that most BPOs from brokers looking to list your property will try to come in on the higher end of the price range in order to secure the listing.
    • When speaking to different brokers; see what their BPOs come back at and then dig into why and how they came up with those numbers. If a broker says that the price is higher because of a current trend or they feel that recent property price increases will continue; that BPO might not be as solid as a broker telling you that they arrived at their price because someone in their office just sold a similar property last month, less than a mile from your property.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing what is a BPO in real estate.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Charles:
When reviewing different on-market properties, buyers might wonder how the seller came to their listing price. And typically, a real estate broker will provide their client with a broker price opinion or a bpo. Sellers will rely on this information from the BPO when sending a price for the property. So what is a bpo? Well, the BPO is an unofficial assessment of the property’s value. The BPO is typically requested by an owner that might be interested in selling their property. A broker price opinion is a real estate broker’s estimate of your property’s value. Brokers base their opinion on a number of property details, including its size, number of bedrooms, bathrooms, garages, along with its age and the property’s condition. The broker will also take into consideration the surrounding neighborhood market and comparable sale prices at the area. So what are the different types of broker price opinions? Well, there are two main types of BPOs. An external B p o or drive by BPO is an opinion that only considers the exterior condition of the property along with the basic public information that is available through public records.

Charles:
This is less thorough and usually just a starting point. If a property owner sees a price that interests them, they might request a full BPO to see if they want to sell. An internal or full BPO is the most comprehensive price opinion. Now, the BPO takes into consideration everything from the external BPO in addition to the interior condition of the property. When a real estate professional is reviewing a property, they are confirming that the property consists of what is listed in the public records along with the current condition of the property. Maybe a bathroom was recently renovated or there’s a lot of deferred maintenance. This will be taken into consideration with the full bpo. So pros and cons of broker price opinions so pro are a BPO is much faster than an appraisal. A BPO costs much less than an appraisal. In certain situations. A BPO may be able to be substituted for an appraisal possibly during a foreclosure short sale, or one a borrower is requested and cancel their private mortgage insurance.

Charles:
Their pmi. A BPO is able to offer a price range for a specific property dependent on the marketing conditions. Some of the cons of BPOs are a BPO is usually considered to be very subjective valuation, since they are usually created by a agent looking to represent the seller in a sale. A BPO usually is not able to be used as an appraisal alternative, and a BPO is usually not as accurate as an appraisal. So what are the difference between a BPO and an appraisal? Well, even though appraisals and BPOs look at comparable property sales utilize opinions from real estate professionals and are heavily dependent on the market data. There are still some differences. Number one, appraisals are completed by a trained licensed appraiser. Appraisals are required by most mortgage lenders. Bpos are typically not accepted as an alternative. Appraisals utilize historic market data versus market trends and appraisals are less subjective.

Charles:
There is no relationship between the seller and the appraiser, whereas the bpo, the broker is most likely trying to provide a high price in order to get the property listed. How are broker price opinions utilized? Well in certain situations, getting a BPO makes sense. Potential property sellers will find a bpo very helpful with pricing their property is an important take into consideration that most BPOs from brokers looking to list their property wool will try to come in on the higher end of the price range in order to secure the listing when speaking to a different brokers, see what their BPOs come back at and then dig into why and how they came up with those numbers. If a broker says that the price is higher because of a current trend, or they feel that the recent property price increases will continue, that BPO might not be as solid as a broker telling you that they arrived at their price because someone in their office just sold a similar property last month, less than a mile from your property. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and potential show topics@globalinvestorspodcast.com. Look forward to two episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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