BPO vs Appraisal
You may wonder what’s the difference between a Broker Price Opinion (a BPO) and an Appraisal and why wouldn’t people just hire an appraiser to get a valuation of the property. Appraisals are the industry standard when underwriting new loans on purchases and refinances, but in light of the dramatic increase in mortgage defaults, BPOs have become extremely popular.
The cost of a BPO can range depending on whether the property is Residential or commercial, whether it’s rural or easily accessible, and whether the Broker is doing an interior or exterior BPO. Regardless of the variations in costs of different types of BPOs, they are generally speaking far less expensive ranging from $40 – $300 or so based on the factors previously mentioned. Most appraisals will begin at $250 and can go as high as $5000 based on those same factors.
Appraisers are often guided by strict guidelines and state mandated rules that do make an appraisal more thorough and more regulated. Whether this results in a more accurate valuation or just a more regulated one is up for debate. Appraisals often take longer to complete and generally in the range of a week, BPOs are often ordered and returned in 3 to 4 days.
With the increased cost and often longer deliver timeframes, banks and other interested parties have started putting more focus on BPOs in many situations. Ordering a BPO often allows them to get a quick opinion of market value multiple times over the course of 6 months. Given the higher cost of an appraisal a BPO is often the best choice to keep an eye on the change in value and market conditions.