Appraisals vs. BPO’s – What Are the Differences?

decorum valuationsThere is a lot of confusion in regards to the differences between a BPO and an appraisal in regards to valuing real estate.

An appraisal is a professional appraiser’s estimate or opinion of value. An appraisal involves research into the local market area; collection and analysis of information pertinent to a particular property; and the knowledge, experience, and professional judgment of the appraiser.

Real estate appraisals may be required for any type of property, including single-family homes, apartment buildings and condominiums, office buildings, shopping centers, industrial sites, farms, and more. The reasons for performing real property appraisals are just as varied. They’re usually required whenever real property is sold, mortgaged, taxed, developed, insured, or the division of real estate is required.

A “BPO” on the other hand is a “broker price opinion.” It is used by real estate agents to assess what the current value of a home is. It can be completed for a homeowner or a bank. The banks often hire realtors to complete BPO’s for them in lieu of appraisals which are usually more costly and take longer to complete.

Reasons a bank or financial institution might order a BPO include:

  • A cross check or 2nd opinion to an appraisal
  • Home equity loans or lines of credit less than $250K
  • Refinancing a relatively new mortgage
  • REO properties (Real Estate Owned)
  • Foreclosures and Short Sales
  • Due diligence for financial institutions
  • Establish purchase price for a portfolio of homes including thousands of loans

Some of the factors that a broker will consider when pricing a property include: the value of similar surrounding properties, sales trends in the neighborhood, an estimate of any of the costs associated with getting the property ready for sale and/or the cost of any needed repairs.

In conclusion, it’s important to note that a BPO is “not” the same as an appraisal and generally provides a value conclusion that is less precise than a professional appraisal would provide.

I hope you found this helpful and if you have any additional questions, thoughts, or comments please leave them down below.

Decorum Valuations specialize in appraisals for divorce, bankruptcy, estate, date of death, tax appeals, pre-listings, and more throughout the greater Baltimore area. For more info contact us at 800-619-5309, visit us at DecorumValuations.com, or email us @ info@decorumvaluations.com.

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