Pennsylvania recently approved a law which removes many restrictions on performing Broker Price Opinions (BPO). Pennsylvania’s Real Estate Licensing and Registration Act (RELRA) (formerly House Bill 863) was signed into law and is effective August 28, 2018.
“This legislation ultimately helps real estate professionals meet the changing needs of the real estate industry” said Rep. Greg Rothman, a third generation Realtor®, a broker, an appraiser and a former State Real Estate Commissioner.
“It’s taken hard work by dedicated PAR members, staff and legislators to get this bill passed,” said Pennsylvania Association of REALTORS (PAR) President Todd Umbenhauer. “These changes will provide a greater level of service and competency to our clients.”
Over the course of several years, PAR has met with representatives from the State Real Estate Commission, State Board of Certified Real Estate Appraisers, Coalition of Pennsylvania Real Estate Appraisers, Real Estate Valuation Advocacy Association and the Pennsylvania Bankers Association to negotiate specifics of the bill. The final version incorporates many of the requests from these groups.
A core concept in determining a price is the concept of Supply vs Demand.
The principle of supply and demand states that the price of any commodity (Real Estate) varies directly with demand and inversely with supply i.e. as demand goes up, prices will go up and vice versa; and, as supply goes up, prices will go down and vice versa. In Real Estate, Supply is the amount of a type of real estate available for sale or rent at various prices in a given market for a given period of time. Demand is the desire and ability to purchase or rent Real Estate at various prices in a given market for a given period of time.
A growing local economy that produces a sudden influx of new workers into a market area, will increase the demand and result in an increase in both market prices and market values for the type of housing the workers are seeking. A sharp increase in mortgage interest rates will increase housing costs and will tend to lessen demand and therefore the property prices in the market area.
Rental properties are an influence on supply and demand and must be considered in valuations. Rent is also affected by supply and demand. A high level of vacancies or an influx of new rental properties (increased supply) will cause rents to go lower to attract renters that may otherwise purchase a property.
The single greatest factor affecting negotiations between buyer and seller usually will be the principle of supply and demand. The cost of any property will be influenced by the number of other similar properties for sale relative to the number of buyers in the marketplace. If there are few buyers and many properties for sale, the seller’s bargaining position is effectively reduced and the buyer can negotiate a lower price. This is a buyer’s market. If the situation is reversed, and there are few properties for sale and many buyers seeking to make a purchase, the seller can hold out for the maximum price. With fewer competing properties to choose from, a buyer will pay a higher price and therefore the value of a property will increase. This is also known as a seller’s market.
Most Real Estate agents and/or brokers perform BPOs to supplement their real estate income. BPOs are a very reliable and consistent source of income for real estate agents and brokers. Even agents and brokers, who don’t necessarily need to augment their real estate income, perform BPOs to stay on top of their market, keep their valuation and pricing skills sharp, and for the marketing opportunities which are presented while they are in the neighborhoods completing BPOs. Simply stated, performing BPOs makes a better agent/broker.
Some of the many benefits agents and brokers enjoy performing BPOs:
Opportunities for listings (REO, foreclosure, short sale)
Increased Skills as a Real Estate Professional
Become a more Proficient and knowledgeable Real Estate Professional
The Real Estate industry and the BPO industry are certainly skilled professional industries with the need for certifications. NABPOP Members distinguish themselves and increase their BPO credibility by obtaining a BPO Certification from NABPOP. Active BPO certified members of NABPOP receive the C-REPS designation (Certified Real Estate Pricing Specialist).
The NABPOP BPO Certification and C-REPS designation are recognized throughout the BPO Industry. Many BPO/REO Companies give extra consideration for certified BPO vendors.
Performing Broker Price Opinions BPOs is a great way for real estate agents and brokers to make extra real estate income. agents and brokers often have inconsistent Real Estate income flow between deals. Performing BPOs not only put agents and brokers in their service area in front of potential clients, agents and brokers get paid to do BPOs increasing their real estate income. Performing BPOs can also be an “in” with banks and lenders to get REO/foreclosure listings further increasing real estate income.
C-REPS is a great designation for any real estate agent or broker to have. Not only does the C-REPS designation bring opportunities for more BPO work, the C-REPS designation is also a great avenue for more exposure and marketing to the general public. C-REPS are marketed to the general public i.e. people who are looking for a real estate agent/broker. Obtaining and maintaining the C-REPS designation sets agents & brokers apart from average real estate agents – “Price is one of the most critical parts of any transaction – buying or selling. Be sure your real estate agent or broker has the skills and knowledge to accurately determine prices”.
What is a C-REPS? Certified Real Estate Pricing Specialists (C-REPS) is a member of NABPOP who has passed the BPO Certification Test and meet the criteria to maintain the C-REPS designation. C-REPS are technically proficient at performing BPOs and contribute the the Body of Knowledge encapsulated in the NABPOP association.
In short, C-REPS are:
Technically Proficient at performing BPOs
Contribute to the Body of Knowledge encapsulated in the NABPOP Association
In spite of popular assumptions, valuation is not part of real estate licensing requirements; although, valuation is an integral part of real estate. Typically, the extent of a real estate agents valuation knowledge is performing a CMA – Comparative Market Analysis which is learned after receiving their license (not as a part of the licensing requirement). Most agents acquire their valuation knowledge and skills by trial and error and/or are taught by someone who acquired their skills and knowledge through trial and error. C-REPS are formally trained and tested in proper valuation techniques.
Members of NABPOP who are BPO Certified are conferred the designation Certified Real Estate Pricing Specialist – C-REPS. NABPOP provides members with a comprehensive BPO Course which has become the gold standard in the industry. The BPO Certification Test is a stringent test which was designed to test for true comprehension of the BPO process and not simply good test taking abilities. The initial failure rate is relatively high, but study materials are provided at the end of each test in order for members to identify their weaknesses and to further their studies in those particular areas. In short, the BPO Certification Test is not a “gimme” test, NABPOP members who pass the test have demonstrated a true understanding of the BPO.
NABPOP Members can make thousands $$$ per month performing BPOs. Getting started in the BPO industry can be challenging, but it is very rewarding and worth the effort.
Regardless of the direction of the real estate industry, there is always demand for BPOs. There will always be a need for brokers and agents to perform accurate and quality oriented BPOs. Not only are agents who perform BPOs better agents overall, they are earning extra real estate income. Most NABPOP members do BPOs to supplement their real estate income, but there are members who perform BPOs exclusively and can earn up to a 6 figure income.
NABPOP members enjoy a consistent and steady flow of BPO income between real estate deals. A regular Real Estate Professional’s income can be inconsistent at times. Once established and vetted with a few BPO Companies, NABPOP members earn a consistent and reliable income performing BPOs while they conduct their regular real estate business.
The longer an agent or broker waits to get started in the BPO industry, the more opportunity their competitors have to get in front of them in the industry.
The amount of money a NABPOP member can make is limited only by their dedication and perseverance. (Income results vary depending on competition, market area, and other variables and income can’t be guaranteed)
The BPO industry can be unforgiving to those who don’t know what they are doing. Trial and error doing BPOs will doom your BPO career. Don’t try to get started on your own, learn from the knowledge and experience of other BPO professionals. NABPOP has the resources to teach you how to do BPOs the right way, the way BPO/REO Companies expect them to be done.
BPOs have been used for many years by the lending industry and mortgage servicers. BPOs have proven to be accurate and reliable. NABPOP is not claiming BPOs are more accurate than appraisals. NABPOP is claiming BPOs and appraisals are relatively close in accuracy. Appraisal organizations often claim BPOs are inaccurate, but BPO accuracy certainly isn’t as bad as appraisal organizations claim them to be. Based on the continued use of BPOs within the lending industry, we knew that BPOs must be accurate and reliable. More