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  • Writer's pictureJulie Nelson

BPO vs CMA vs Appraisal


What is a broker price opinion and how does that compare to a comparative market analysis and compare to an appraisal? You might think that these are very similar. They are similar on the surface, but legally there is a big difference and you have to stay in your lane. It's more than how many jelly beans are in the jar.


First, the basics:

A BPO (Broker Price Opinion) is an estimate of a property's value, typically provided by a real estate broker or agent and typically provided for a third party such as a lender, the IRS, or a judge. It is used to help determine the potential selling price of a property and is based on recent sales of similar properties in the area, as well as the condition of the property being evaluated.

A CMA (Comparative Market Analysis) is also an estimate of a property's value, but it is typically provided by a real estate agent to a prospective seller or buyer to help determine a fair market price. A CMA typically takes into account recent sales of comparable properties in the area, as well as current market conditions and the specific features of the property being evaluated.

An appraisal, on the other hand, is a formal evaluation of a property's value conducted by a licensed appraiser. Appraisals are typically required by lenders when a property is being financed or refinanced, and they take into account a wide range of factors, including recent sales of comparable properties, the condition of the property, and any improvements or upgrades that have been made. Appraisals must comply with specific guidelines and standards set by industry organizations, and they are generally considered to be more comprehensive and accurate than BPOs or CMAs. Let's hit this from a few different angles ...


Audience:

With a BPO, the audience is typically for a third party, like a lender, the IRS, or a judge in a civil case. The CMA is for a client that is part of a transaction. Appraisal is for the buyers lender.


Licensing Requirements:

In some states, performing a BPO requires a real estate license, while in others it does not. In contrast, a CMA is usually conducted by a licensed real estate agent or broker as part of their professional services. A formal appraisal is done by a licensed appraiser in that state.


Liability:

Because a BPO is considered an opinion rather than an appraisal, the liability for inaccuracies or misrepresentations is generally lower than it would be for an appraisal. In contrast, a CMA is often used as a marketing tool to help a seller determine a list price, and can potentially be used as evidence in legal disputes over property value.


What you can and cannot say:

This will vary from state to state. My perspective is as a licensed Realtor in Texas (I am not a licensed Broker, and not a licensed appraiser). Now in TX (TREC rule 535.17), as a licensed Realtor if I was doing a BPO, then I have to stay away from using the word "value" since I am not an appraiser. This seems to be a critical detail. Appraisers identify value, I estimate a sales price based home detail & recent sales.


And in TX, we have to use this disclaimer:

"This represents an estimated sale price for this property. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice."

Stay in your lane, know your audience, know your state rules ... it's more than how many jelly beans in the jar.

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