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A professional assessment of a property’s value in real estate is known as the broker price opinion, or BPO. Generally while determining the price of a property, the BPOs are used after a comparative analysis of the market, or when there is a case of foreclosure or short sale.
How is Broker Price Opinion Calculated?
A Realtor or broker’s expertise is what is key in determining the Broker Price Opinion (BPO), as the agent would assign a particular value for the property based on certain factors.
The broker often uses properties that are comparable to determine the cost of a particular property. Generally, the broker will select at least three properties to compare, which are either for sale, sold or pending sale, all in the past 90 days and within the radius of 1 mile. The radius rule is for the urban property, while for rural properties it can be more than a 1-mile radius. The components that the broker bases their determination are as follows:
- The present condition and appearance of the property
- The overall size of the property
- The square footage area
- The number of room in the house, including bedrooms and bathrooms
- The home’s age
- Any modifications that can affect the cost of the property
- Any exceptional features like a swimming pool, well-constructed garage, or even a fireplace
In BPOs, there are normally two types -- Internal and External.
Evaluation of the interiors of the property by the broker and the time spent in evaluation is called internal BPO. This includes measuring the interiors of the property, capturing photos for evidence, and developing a report around it.
The same process as the internal BPO is carried out but for the exteriors of the property.
BPOs are often used for:
- Real Estate Owned (REO) Properties
- Bankruptcy Cases
- Short Sales
- Pending Foreclosure Sales
- Home Equity Loans Or Lines Of Credit
- Due Diligence When Purchasing A Mortgage Note
- Loan Sale Preparation
Who Needs Broker Price Opinion?
Whoever wants a proper assessment of a property can benefit from a broker price opinion. For example, a lender in need of a property assessment for the refinancing of a mortgage or a foreclosure would need a BPO. To make any internal or external change to the property, an owner can also seek a BPO.
What are the Benefits of Broker Price Opinion?
Following are the benefits of a Broker Price Opinion:
- Subject property condition
- Price recommendation
- Prior sales and listing history
- Repairs or renovations needed to make the property marketable
- Details of property and neighborhood conditions
- Information on 'Just Sold’ properties in the area
- Comparative market analysis (CMA)
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