What Does BPO Mean in a Short Sale?

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BPO stands for broker price opinion of value. The BPO is a type of real estate appraisal. Real estate brokers prepare BPOs for clients, usually lenders, who need to determine a property's current market value.

When Used

  • Banks and other lenders must determine a property's value for a variety of transactions. Uses include new loans, foreclosures and short sales. The lender needs an expert to establish the value of collateral for the transaction.

BPOs in Short Sales

  • In a short sale, the lender has already made a loan. The original loan included an appraisal that supported the loan amount. When a sale will result in full payment, a lender has no use for an updated appraisal. Before agreeing to release its lien without full payment of the debt, the bank needs to know for what amount the real estate should sell under current market conditions to mitigate potential losses. Banks use the BPOs to assess the reasonableness of offers submitted on the short sale of a home.

Who Prepares BPOs

  • As the term implies, real estate agents prepare broker price opinions. The agent doing the BPO might not be licensed as a broker, but will at least hold a real estate salesperson's license. Real estate appraisers also prepare real estate appraisals, but they do not require a real estate license to work in that profession. Appraisers generally have separate licensing requirements from real estate brokers in most states.

BPO Process

  • The real estate professional preparing the BPO conducts an on-site inspection of the property similar to any other appraisal. Brokers research recent sales of similar properties in the area, sales trends and other market data to estimate the home's current value.

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References

  • Photo Credit Real Estate image by Stephen VanHorn from Fotolia.com
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