BPO Overview
A Broker Price Opinion ("BPO") is an estimate of the probable selling price of a property. It includes an inspection of the subject property, subject neighborhood inspection and analysis, local and regional market information and trends, and a description of comparable properties that are similar to the subject property. This method of estimating a selling price has similarities in methodology and report appearance to a Comparative Market Analysis. Real Estate Professionals generally perform BPOs for a fee.
BPOs have a proven track record of reliability, accuracy, fast turnaround time, and cost effectiveness, and their use has been established in the mortgage industry (by banks, lenders, and all major loan servicers) over a significant period of time. Among the most common uses of BPOs in the industry are the following:
- fraud check and additional diligence on a completed appraisal
- internal non-lending purposes such as portfolio valuation and due diligence
- by buyers and sellers of loan portfolios in secondary market transactions, as due diligence and to help establish the purchase and sales price of a portfolio
- due diligence and disposition analysis on distressed loans, including loan modification, short sales, REO sales, and foreclosure avoidance efforts
- PMI removal, refinances, HELOC, and home equity loans (where allowed by FIRREA)
Contrary to characterizations that have been made, financial institutions generally do not use BPOs in lieu of an appraisal for purchase money loan origination purposes, except to the limited extent specifically permitted by Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA").