BPO Defined
This page is for anyone who is not familiar with Broker Price Opinions BPOs and/or the BPO Industry. The following is discussed:
- What is a BPO (Click to auto-scroll) ⇓
- Who is qualified to do BPOs ⇓
- What is the BPO Industry ⇓
- What is a BPO Company ⇓
- BPO process example ⇓
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BPO is an acronym for Broker’s Price Opinion. In general, the term Broker’s Price Opinion (BPO) is a method which a Real Estate Broker (or an agent acting on behalf of their employing broker) uses to estimate the probable selling price of a Real Estate property/house. The estimate of price is submitted in a BPO report (2-3 pages) which includes local and regional Real Estate market information, neighborhood analysis, and (comps) properties which compare to the (subject) house being priced. This method of estimating a price has similarities to a Comparative Market Analysis CMA and a residential Real Estate appraisal.
Performing a BPO, in the BPO industry, means a Real Estate Professional (agent, broker, or appraiser acting in an agent/broker capacity) is requested by a financial institution to submit an estimate of a selling price for a property in a BPO report for a fee.
A financial institution may order a BPO for the following situations:
- Foreclosures
- Short Sales
- REO listings
- home equity lines of credit
- home equity loans
- requests to remove PMI – Private Mortgage Insurance
- due diligence for investors or investment bankers
- Mark to Market – a method banks/lenders use to assess the current value of assets (homes) on their books and for accounting purposes. Home values fluctuate over time.
- Any reason which a bank/lender needs to make a financial decision on a property
Click here for More BPO uses
A Real Estate Professional with an active license who holds a BPO Certification (at minimum). The most qualified brokers and agents have earned the designation Certified Real Estate Pricing Specialist – C_REPS. Brokers and agents who are C_REPS are BPO Certified through NABPOP and have access to the most comprehensive body of knowledge and BPO resources available. There is no law which requires a BPO certification, but there are too many fly by night real estate agents in the real estate industry. Fly by night agents typically won’t take the time and spend the money to educate themselves and go through the rigorous BPO certification process.
For purposes of this website, Real Estate Professional are:
- agents/salespeople (often REALTORS)
- brokers (often REALTORS)
- appraisers (acting in an agent/broker capacity)
- Please note: REALTORS is a designation held by association of REALTORS members.
If you are a Real Estate professional considering BPOs, you must discuss this with your employing brokerage and/or attorney to determine the ramifications of performing BPOs in your specific state as most Real Estate law is determined and enforced by each individual state. Some states may have specifications and/or certain restrictions to performing BPOs. In many cases, the specifications and/or restrictions are subject to interpretation and many BPO practitioners justify their practice and business model on their own individual interpretation of their specific state statutes and/or regulations. Since each state’s statutes and/or regulations are subject to interpretation, and for liability purposes, NABPOP does not give legal advice. Each BPO practitioner must determine for themselves if they are able to and comfortable with performing BPOs. BPOs, in various forms to comply with local and state laws/regulations, are done all across the United States.
BPOs are not restricted and/or mentioned in FIRREA – Financial Institutions Reform and Recovery Act – the federal law which governs the appraisal industry.
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A Broker Price Opinion BPO is an excellent means of information for banks and lenders to make financial decisions on residential properties.
Due to the financial practicality and quick turnaround time of a BPO, banks and lenders order BPOs from a BPO Company. The BPO Company in turn contacts a Real Estate professional to complete the BPO. The BPO Company pays the Real Estate professional for the BPO report. BPOs have become a lucrative niche in the real estate industry for C_REPS. Performing BPOs have become a reliable source of either supplemental income or the sole source of income for many Real Estate Professionals across the country. The BPO Industry is a thriving niche in the Real Estate Industry and is poised to grow. There are fewer and fewer appraisers entering the appraisal field while appraisers are retiring in large numbers. Valuations are still being demanded.
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A BPO Company acts as a clearing house for banks and lending institutions by contacting Real Estate Professionals and assigning BPO jobs to them, tracking and expediting BPO job status, and providing quality assurance/oversight for submitted BPOs from the Real Estate Professionals. A BPO Company is either a division of a financial institution or a stand-alone company.
A BPO Company is essentially a middle man between the financial institutions such as banks/lenders and BPO practitioners. BPO Companies qualify and maintain a list of Real Estate Professionals, typically across the country. Typically, a BPO Company will maintain a list of thousands of Real Estate Professionals. A BPO Company will typically receive requests to do BPOs from financial institutions (typically in bulk), BPO Companies then select and assign BPOs to agents/brokers, gather the BPOs that are submitted from the Real Estate Professionals, ensure BPO accuracy and order compliance, and submit the completed and QC’d BPOs back to the financial institutions.
Numerous BPOs are being conducted across the United States every day and offer an excellent opportunity for Real Estate Professionals to earn a reliable income. BPO Companies provide a tremendous property valuation service to the financial industry.
(this is one example of the many uses of BPOs)
- A Wall Street investment firm decides to buy a portfolio of home loans as an investment (sometimes thousands of loans are in one deal).
- The investment firm contacts a BPO Company to perform BPOs on each of the properties in question (they may even order multiple BPOs on one property for comparison). A due date is established for the all BPOs (usually within a week).
- The BPO Company maintains a list of Real Estate Professionals who perform BPOs. The BPO Company locates Real Estate Professionals who service the individual areas where the properties are located. The BPO Company contacts each individual Real Estate Professional to perform each BPO. The Real Estate Professionals’ due date is a few days before the final BPOs are due.
- Each Real Estate Professional contacts the respective homeowner of their assigned BPO to schedule an inspection of the home or property (if an interior inspection is required).
- Each Real Estate Professional physically inspects the home, property, and neighborhood.
- The Real Estate Professionals gather Real Estate market information and compile the information to determine a probable selling price – BPO.
- Each Real Estate Professionals submits their finished BPO to the BPO Company.
- The BPO Company conducts a quality review of each BPO.
- The BPO Company submits the final BPOs to the investment firm.
- The BPO Company pays the Real Estate Professionals.
- The investment firm pays the BPO Company.
- The investment firm makes a cumulative financial decision based on the opinion of price contained in each of the BPOs.