Home Buying in Baltimore>Question Details

Iwannaknow, Home Buyer in 21040

What is the difference between a BPO & a home appraisal; isn't the BPO slightly more biased because it is requested from the lender for a?

Asked by Iwannaknow, 21040 Tue Sep 6, 2011

short sale?

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More biased because they are requested by the lender?
As you have read, most BPOs and appraisals are ordered by banks/lending institutions. That is not where the bias resides.

The bias appears in the purpose for which these tools are used.
The appraisal is for granting a mortgage to a home buyer.
The BPO is to assess a value to establish a selling price. (A preliminary BPO and an interior BPO. The second is the most important)

As you can imagine a lender is better served by a low appraisial when granting a mortgage.
As you can imagine a bank is better served with a high BPO when establishing and negotiating a selling price.

Banks can dictate in the BPO or appraisal order what comparables can be used, where the comparables may be located, time frame of sale and when the order must be completed.

Now, what is not obvious is each of these, BPO and appraisal, are scored by the ordering bank. A low scored report can result in the BPO agent or appraiser not receiving an order in that area for a certain period of time or be black balled forever. So, is there a bias? I don't know.

But to get the outcome you want you need to stay on top of ALL of these events as well as all the other wagons involved in a successful real estate transaction.
1 vote Thank Flag Link Tue Sep 6, 2011
So I got a bpo during my divorce on my houses. Note I'm trying to sell one.... The bpo came in at like $26000. I'm selling the house and have buyer read but they looked at the bpo as an appraisal.. Not bpo... So now they don't think it can happen... If I get an actual full appraisal should I be expecting more value?
0 votes Thank Flag Link Fri Jan 22, 2016
BPO is Opinion
Appraisal is value for lending purposes.
And I would love to meet the banker that lends money based on BPO.
0 votes Thank Flag Link Tue Dec 22, 2015
A Broker Price Opinion is conducted by a real estate professional with some expertise in your area. The BPO includes information about 3 recent home sales of properties that are similar to yours and 3 current listings of homes that are similar to yours. The agent will then give their opinion as to the current market value based on a 30 day quick sale and a regular market based on the average days on the market.
An appraisal is conducted by an appraiser. A licensed appraiser will visit your home and give at least 3 recent sales of homes in your area and an evaluation based on condition and the most recent sales in the area. An appraiser notes market conditions in their report and the report is slightly more scientific in nature. Both reports are based on the agent or appraisers opinion and their view of the current market conditions.
In the case of a BPO the agent may or may not look at the interior of your home, whereas an appraiser will definitely seek entry in order to do a full evaluation.
0 votes Thank Flag Link Wed Nov 23, 2011
They are both biased.

In the end, it's what a buyer and seller are willing to make a deal at.

Look at all the homes that are "underwater". Everyone of those sales and purchases had an appraisal.

Appraisals are based on "recent" sales. So if you are buying in an "up" market, the last 3 sales in your immediate area of course will show "high" prices. Little if any is given to history of pricing over a 2, 4, 6 year period.

Are millions of people moving in? Are these "higher" prices being driven by owner occupied purchases or investor grabs.

Ever have an appraiser ask you "so what do you need it to be at.."

The most recent sales are REALLY a misleading indicator.

What caused the real problem:

1. Free money. So people had money to buy regardless of "real" value.

2. The National Association of Realtors who jumped on the "prices always go up" bandwagon.

Also, many lenders now have to pay attention to the appraisals. Local banks that survived the fall took a real look at any loans they held onto, then many joined in and simply sold off the loans and no longer had local obligation.

Real bankers knew better.

Good luck.
Web Reference: http://www.rentlaw.com
0 votes Thank Flag Link Thu Sep 8, 2011
Everyone is pretty must correct.

May I ask why you are inquiring? Are you purchasing a home or going through a Short Sale or Foreclosure?

If it is a Short Sale or Foreclosure, you might want to work with a Certified Distressed Property Specialist (CDPE). They may be able to do a Short Sale instead of a Foreclosure which will be better for you and the Bank. Some Banks are even giving the Seller money for completing a Short Sale.

Contact me if I can assist.

Dottie Cordwell, Broker, REALTOR
Advance Realty Professionals, Inc.
0 votes Thank Flag Link Thu Sep 8, 2011
Looks like many questions came through correct! You should have a buyers agent working for you! If not than hire one ASAP...they will become your best advocate!
0 votes Thank Flag Link Wed Sep 7, 2011
A bpo is a broker price opinion and it's based on what an agent feels a property is worth to a buyer in the current market. An appraisal determines value based on recent sales information and indicates what a property is worth for lending purposes this is done by an appraiser.

All the best,
Gary Geer

0 votes Thank Flag Link Tue Sep 6, 2011
A BPO is a broker price option, which is done by an agent who has expertise in that market, often banks use these when they have short sales and foreclosures. An appraisal is what the bank orders, and has an appraiser come out and look at the property and then write a report with comps to justify the sales price.
0 votes Thank Flag Link Tue Sep 6, 2011
No, a BPO is NOT a Broker's Price Option- It is a Broker's Price Opinion...a HUGE difference!
An Appraser, does MUCH more than comes out, look at the property and write a report with comps to justify the sales price-they must physically meausure EVERYTHING and take photos of EVERYTHING-unless of course, they want to loose their license!! Please inform yourself before you give out information that is incorrect.
Flag Thu Feb 19, 2015
Hi, A BPO is done by a broker usually to support an appraisal done by a lending institution.

0 votes Thank Flag Link Tue Sep 6, 2011
A BPO is an opinion of value prepared by a licensed real estate agent who supposedly has valuation knowledge about the area in which the property is located. Banks use this info for the purposes of placing value on foreclosures, resales, and loan modifications. They do it because the cost of a BPO is $50-75 vs. over $350 for an appraisal. Banks are required to use a licensed appraiser for underwriting a mortgage loan. Appraisers are licensed by the states, have educational requirements and undergo additional scrutiny if the are doing government loans. That is not to suggest that either result is superior. It depends on the competency of the person performing the analysis. A highly experienced Realtor can routinely duplicate the accuracy of an equally qualified appraiser. But a BPO is not acceptable for underwriting a loan. Contrary to your suggestion, neither a realtor or or an appraiser have any incentive for either high balling or low balling a valuation. The BPO realtor gets so little compensation it's not worth the grief. The appraiser risks loosing assignments for inaccurate work.

Bob McGee
Advance Realty Timonium
(41) 560-4574
0 votes Thank Flag Link Tue Sep 6, 2011
To Home Buyer Iwannaknow
A BPO is not the same as an appraisal. A BPO is called a Broker Priced Opinion and that is exactly what it is, an opinion based on experience of what homes are selling for by agents, or a broker. BPO's are less costly than an appraisal and it is used by banks and investors to adjust their idea of what value are. An appraisal is from a certified appraiser who is licensed and practices in the state he is certified in. Both will usually be requested by a lender or owner of the note on a short sale. Both parties are independent and none are biased.

The BPO is ordered by a third party usually and Brokers or licensed agents who are hired as vendors and are given the appointment to fill a BPO request. The agent has to perform professionally and without biased and within a specified time frame.

An appraisal is usually ordered by a third party as well and is more detailed than a BPO.

The reality of value is simplistic and defined appropriately; what a willing and able buyer is willing to pay for and a willing and able seller will accept for his property. Value is really what a buyer and seller agree to in terms of a sale. That’s it!

All agents have an ethical duty. I hope this helps.
Best Personal Regards,
Mark Young
0 votes Thank Flag Link Tue Sep 6, 2011
A BPO and an appraisal is very similar, no one is more biased than the other. An appraisal is more complete with the appraiser including more detail and driving by each comparable taking pictures. A Brokers Price Opinion uses the same comparables as an appraiser would use, the broker is allowed to use MLS pictures in the report but is required to dirve by and take pictures of the property the report is being completed on. Banks DO NOT tell the agent what price range they want it to come in at, the agents job is an independant value. A BPO can be completed quicker than an appraisal and for less money.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Tue Sep 6, 2011
A Broker's Price Opinion is a process to determine the fair market price for a property. It looks at recent sales of very similar properties in close proximity to the target property within the last 3 to 6 months (depending on market conditions). Using the sales prices of these similar properties as a base, adjustments are made for specific features to determine an estimated sales price for the property.

An Appraisal is a much more involved process to determine the value of the property. The value of the home may be more or less than the price. The appraiser takes in to account the construction, the intended and potential use of the property, and many other factors in coming up with the value for the property.

It is a useful oversimplification to think of the BPO as a tool to set a price to ask for a property (or even make an offer with), and the appraisal as the tool to ensure that you don't pay more than the property is worth..
0 votes Thank Flag Link Tue Sep 6, 2011
A BPO is typically ordered during a short sale or foreclosure transaction. Typically, a local real estate agent or broker is assigned to assess a fair market value and provide it to the mortgagee, in order to determine a fair selling price. It is not a biased opinion as it is an arm-lengths process. The mortgagee wants to make sure that the selling price of a distressed sale is fair to both them and the buyer.

An appraisal is ordered through the purchaser's lender in order to determine a fair market value of any home. Lenders will not loan more than the house is worth to any buyer.

During a short sale process, the BPO is typically ordered first and if a buyer needs to finance their purchase than an appraisal will be ordered next. This appraisal is for the purchaser and the lending institute that plans on financing the purchase.
0 votes Thank Flag Link Tue Sep 6, 2011
A BPO is a broker price opinion, similar to a comparative market analysis (CMA). An appraisal is done by a licensed appraiser whose only job is to determine the value of the home for lending purposes.

Good luck!
0 votes Thank Flag Link Tue Sep 6, 2011
BPOs are often associated with foreclosures and short sales, but other companies such as relocation firms order BPOs. A BPO stands for "broker price opinion," and it involves using a process very similar to an appraisal.

Companies hire a real estate broker to prepare an opinion of value. The representative of the broker, generally a real estate agent, compares three similar properties that have recently sold to the subject property and adjusts up or down for differences. The final result in an opinion of market value.

Broker price opinions are sometimes controversial, especially if the agent preparing the BPO has little experience or knowledge about the neighborhood. But BPOs typically cost less than a full-blown appraisal.
0 votes Thank Flag Link Tue Sep 6, 2011
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