Just say NO to BPOs

A recent NAR e-mail update (you do subscribe to these, right?) brought a blurb titled “Appraisers Say BPOs hurt Property Value” to my inbox. 

Ahhhh…the sweet smell of BPOs.

The full article goes on to explain that some experts believe BPOs done by real estate agents are far more inaccurate than full-blown appraisals, and that these inaccurate ‘lowball’ BPOs may actually be contributing to some of the market difficulties because they are setting the value of property too low. I’m not here to argue that point one way or the other (although you can certainly feel free to leave your comments and opinions below).

What got my attention was the statement that “one problem is that selling BPOs to value houses violates the law in 23 states.”

Of course none of YOU are doing BPOs in Pennsylvania, since THERE IS NO SUCH THING AS A BPO IN PENNSYLVANIA.  Really — neither “Broker Price Opinion” nor “BPO” appear in either RELRA or the Commission regulations. What a real estate licensee can do is a “Comparative Market Analysis” or “CMA.”

The definition of a CMA is:

“A written analysis, opinion or conclusion by a contracted buyer’s agent, transactional licensee or an actual or potential seller’s agent relating to the probable sale price of a specified piece of real estate in an identified real estate market at a specified time, offered either for the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller.”

BPOs are often requested by lenders (or entities working on a lender’s behalf) in order to determine pricing or market value for a foreclosed property or a property subject to a potential short sale. How does that situation square with the law? Well, a CMA has to be done “by a contracted buyer’s agent, transactional licensee or an actual or potential seller’s agent… offered either for the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller.”

Lots of use of the words ‘specific’ and ‘actual’ in here, eh?  If you are actually the broker working with the seller (lender) or you have a viable chance to be selected as the listing broker, you are permitted to do a CMA. But if you have no legitimate chance to get the listing, you can’t do it. How do you know this? Well…you could ask. In many cases (again, as I understand it), the lender specifically seeks property valuations from brokers who are not and will not become the listing broker in an attempt to get a reasonably objective opinion. If this is the situation you find yourself in, a CMA would be illegal.

There is lots of information out there about the hazards of taking on BPO assignments without understanding all the nuances. Check out NAR for a brief overview of things to consider, purchase a CD from PAR that explains the issue in depth, and you can also listen to an NAR Podcast that covers BPOs from a national perspective.