What is a BPO Broker price opinion?

Answer 1

A "BPO" is an acronym for the phrase, "Broker Price Opinion." For many of you this phrase is a completely new and foreign term. In actuality, it is something that many brokers, agents, appraisers or members of the general public know about.

A Broker Price Opinion report is an opinion of value that is conducted by real estate professionals to help determine the estimated current market value of a specific property. A typical BPO form is 2-3 pages, is either an exterior or interior inspection and is seen within the valuation industry as an option to a full appraisal report.

Some banks, lending institutions and asset management companies offer options to their customers and clients. Some of the reasons these companies will ask that a Broker Price Opinion be done on a property are: when doing refinance loans, home equity loans and lines of credit, the removal of private mortgage insurance and portfolio acquisitions of performing loans. This option gives everyone choices so they don't have to pay for a full appraisal and instead pay a lesser amount to have a real estate broker, agent; complete a Broker Price Opinion.

Also, some BPO's are used to help banks, government-backed mortgage providers and lending institutions determine the "Current Market Value," for a property that they are financing and the mortgagor is defaulting on their monthly mortgage payment that they are contractually bound by. They can use broker price opinions to help with determining if a property should go into pre-foreclosure or foreclosure. Perhaps, they want to check out other less expensive alternatives that are available instead of foreclosing on a property, such as: deed in lieu of foreclosure, bankruptcy, loss mitigation, a forbearance plan, a short sale situation, charging it off, or using a junior lien protection plan.

-Provided by and Copyright Protected by Nicole Ocean of BPO University

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On March 31,2009 Freddie Mac revised its Seller/Servicer Guide to strictly prohibit its lenders from using broker price opinions to value properties for mortgage purchases. Though Freddie had refrained from using BPOs as a matter of policy, the changes made to section 44.7 of its Selling Guide leave no room for loopholes.

The revised Selling Guide states that to be acceptable for a transaction, each mortgage file must contain one of the following reports:

- A written appraisal report

- A written inspection report

- A print-out of the Last Feedback Certificate with the Minimum Assessment Feedback of Form 2070 or PIA

Also clearly stated in the revised language of Freddie's Selling Guide is the requirement that the Seller may not use tax-assessed valuations or BPOs to determine value.

More recently, on July 22, 2010, President Obama signed into law the Frank-Dodd Wall Street Reform and Consumer Protection Act (HR4173). The bill has significant appraisal reforms which include changes to FIRREA, ASC, the use of BPOs and AVMs. "Broker price opinions may not be used as the primary basis to determine the value of a property for purchase money transactions".

Appraisers, under the requirements of their license, are not permitted to complete a BPO as it is not a USPAP compliant method of valuation. Doing so would be a violation of USPAP.