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 A Broker Price Opinion or BPO is an opinion of value based on three comparable sales and three comparable listings.  It usually involves the exterior drive-by inspection of the subject property.  It is reported on a one-page form with additional pages for photos of the subject, the comparable sales and listings, and a map.  If the comparable sales and listings are not inspected and photographed from the curb, MLS photos are often used in the report. 

  BPOs are usually prepared by real estate agents and not by appraisers.      The turn-around time (TAT) is typically 24 - 48 hours and the fee is usually about $50.00.  Sometimes the agent will waive the fee for the BPO as part of the listing agreement.  The enormous number of homes in foreclosure and pre-foreclosure has created a huge demand from lenders for fast and inexpensive evaluations.  Thus, there has been an explosion in the use of BPOs.  "Fast" and "inexpensive" are the key words here.  Notice I didn't say accurate, supportable, or unbiased.  

  There are  several reasons why most appraisers don't do BPOs.  For one thing, there is USPAP.  The Uniform Standards of Professional Appraisal Practice sets minimum standards regarding the development and reporting of appraisals.  Whenever an appraiser gives his or her opinion of value it is expected that they have met these minimum standards, and meeting them takes training, experience, time and effort.  An appraiser who has failed to comply with USPAP may be subject to disciplinary action, including loss of certification.  It is simply not worth the $50.00 to an appraiser to prepare a BPO. 

  Real estate agents, on the other hand, have no such minimum standards.  They can say whatever they want when they are asked for their opinion of value.  If their opinion turns out to be way off the mark, the worst that can happen is loss of a customer or potential commission, not their license.  Also, there is no minimum experience required.  All that is required of an agent is a real estate license.  An agent can have little or no experience in the market and still prepare BPOs for lenders.  Even so, unless preparing BPOs is part of the listing agreement, the fee is so low there is little incentive to put in the time and effort required to establish a credible value.  You've probably already spent a good chunk of your $50.00 fee in gas driving out to photograph the subject property. 

  The agents that are busy listing and selling homes for a living generally are not doing BPOs for the money; they do BPOs for lenders on properties they have listed for sale.  Those agents that prepare BPOs as part of a listing agreement may have a tendency to arrive at a value that is very close to what they want to list the property for.  It's not hard to imagine an agent manipulating the value on a BPO to effect a quick sale when that agent has been working with a buyer and knows what the buyer wants and what they can afford.              

  As I have diversified into new appraisal-related services, I have had the opportunity to look at quite a few BPOs.  Among the worst I saw was a BPO prepared by an agent on a property in California.  The BPO showed three closed sales and three active listings.  None of the adjustments were consistent and all six of the adjusted values miraculously equalled $233,000!  It was pretty obvious this agent had an idea of what he wanted to list the house for.