What is a BPO ? I am asked this question all the time.
BPO is an acronym for Broker’s Price Opinion. In general, the term Broker’s Price Opinion (BPO) is a method that 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) that includes local and regional Real Estate market information, neighborhood analysis, and (comps) properties that compare to the (subject) house that is 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 that 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:
• home equity lines of credit
• home equity loans
• requests to remove PMI - Private Mortgage Insurance
• REO/Foreclosures, short sales
• due diligence for investors or investment bankers
• Any other reason that a bank/lender needs to make a financial decision on a property
Qualification to perform a BPO
A Real Estate Professional with an active license. For purposes of this website, Real Estate Professional are:
• agents/salespeople (REALTORS)
• appraisers (acting in an agent/broker capacity)
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. Due to the fact that 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 are not restricted and/or mentioned in FIRREA - Financial Institutions Reform and Recovery Act - the federal law that governs the appraisal industry.
What is the BPO industry
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 Real Estate Professionals. 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.
What is a BPO Company ?
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. They also gather the BPOs that are submitted from the Real Estate Professionals, ensure BPO accuracy, and submit the QC’d BPOs to the banks/lenders.
Numerous BPOs are being conducted all 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.
BPO Process Example (this is one example of the many uses of BPOs)
1. A Wall Street investment firm decides to buy a portfolio of home loans as an investment (sometimes thousands of loans are in one deal).
2. 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 BPOs (usually within a week).
3. The BPO Company maintains a list of Real Estate Professionals that perform BPOs. The BPO Company locates a BPO practitioner that service the areas where the properties are located. The BPO Company contacts the Real Estate Professionals to perform the BPOs. The Real Estate Professionals' due date is a few days before the final BPOs are due.
4. 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).
5. The Real Estate Professionals physically inspect the homes/properties.
6. The Real Estate Professionals gather Real Estate market information and compile the information to determine a probable selling price - BPO.
7. The Real Estate Professionals submit their finished BPOs to the BPO Company.
8. The BPO Company conducts a quality review of each BPO.
9. The BPO Company submits the final BPOs to the investment firm.
10. The BPO Company pays the Real Estate Professionals.
11. The investment firm pays the BPO Company.
12. The investment firm makes a cumulative financial decision based on the opinion of price contained in each of the BPOs.