What Is a BPO?

BPO stands for ‘broker price opinion.' It is associated with short sales and foreclosures. BPO involves a process that is almost the same as real estate appraisal but not as complicated. Banks and companies usually hire the services of a real estate broker to prepare an opinion of value for a particular real estate. The representative of the broker, who is a real estate agent, will compare a least three similar properties and arrives at a range of values, and then make some adjustments — the overall analysis results is an opinion of the market value. 

A BPO may be controversial if the agent preparing it is not experienced enough especially when it comes to appraisal techniques. Also, BPO costs less than a full-blown appraisal. 

Types of BPOs 

There are two standard types of BPO: interior and a drive-by. The interior BPO has to do with assessing and taking pictures of the home interiors while a drive-by BPO involves the exterior of the home. In some cases, the agent may not inspect the home exterior personally and may depend on the pictures of the home's exterior posted on an MLS website. Also, the drive-by BPO does not involve the inspection of the home interior. 

Who Needs a BPO? 

In most cases, a financial institution orders a broker price opinion and not an individual. Below are some of the uses of BPO. A Broker price opinion is used to settle the estate of a homeowner that has passed away. It will help you decide if a foreclosure or a short sale is ideal considering the value as compared to the debt amount. It also offers a more recent value amount whenever you choose to sell mortgages on the secondary market. BPO helps homeowners to determine the amount of equity in their homes to see if they qualify for exemption from private mortgage insurance requirements. 

Why Banks Order BPOs

The two reasons why banks order BPOs are as follows:

- They order a BPO for a house in foreclosure that is about to REO homes of bank inventory

- Banks also order a BPO for a short sale 

Banks might request a BPO from two different real estate companies to get an estimate for a range of values. This method helps the bank to avoid the inaccurate BPO values by dishonest agents.