Matter
of
Opinion
How (and when) appraisers can expand into BPO work
By Stephanie Coleman, MAI, SRA, senior manager of ethics and standards counseling
Bottom Line
• The large number of recent
foreclosures has prompted the
need for BPOs, however, only ap-
praisers who are also real estate
brokers or agents may call it a
“broker” price opinion.
• The development of a market
value opinion requires analysis
of the actions of market partici-
pants collectively, under normal
conditions of sale. Conversely, a
pricing decision must ultimately
consider the specific circum-
stances of the parties involved in
the transaction.
• While “value” is an opinion of
the relative worth of a property,
“price” is a fact. The term is
incomplete without a qualifier—
for example, “sales price,” “list
price,” “offering price” or
“option price.”
ederal regulations require federally insured lenders to obtain appraisals
F
prepared by state licensed or certified appraisers in certain circumstanc-
es. In other circumstances, lenders are required to obtain evaluations,
which are market value opinions that are not required to be prepared
by state licensed or certified appraisers. A third circumstance arises in
which lenders need to establish the price or the value of a property, but
they are not required by regulation to obtain either an appraisal or an
evaluation.
This third circumstance has become increasingly common due to the
large number of recent foreclosures. When property is foreclosed upon
and becomes real estate owned, many lenders obtain broker price
opinions (BPOs) to establish value and to move toward disposition of the property. In
addition, the Federal Deposit Insurance Corporation’s new Loan Modification Program
requires lenders to obtain some type of valuation, but it need not be as comprehensive
as an appraisal report as required for a new loan.
Appraisers are asking: May we do this work? If so, how? Do the Uniform Standards
of Professional Appraisal Practice apply? What form or format should I use? This article
answers these questions via a series of Q&As. It concludes by presenting sample report
formats that residential appraisers may use to provide either type of service.
1. May an appraiser provide a BPO?
An appraiser who is also a real estate broker or agent may provide a BPO. If you are
not a real estate agent or broker, you would be misrepresenting yourself if you characterized your work as a “broker’s” price opinion. That would be like providing a legal
opinion when you’re not a lawyer or a medical opinion when you’re not a doctor.
