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BPO? CMA? Appraisal? What's the Difference?

Posted by Jim Berg Team on Saturday, May 19th, 2012 at 6:37pm.

BPO, CMA, Appraisal -- what is the difference?  These are all various methods of valuing real estate, (properties, homes, houses, commercial property, investment property, and vacant land).

Appraisal = formal valuation by a licensed appraiser.  An appraisal is a subjective opinion of a real property's value.  Most appraisers are highly skillled, with many years of experience.  Besides single-family homes, some appraisers specialize in niche areas, such as rural acreage, estate homes, commercial/industrial property, apartment rentals.  In order to appraise property for an FHA loan, the appraiser must be experienced in the FHA loan procedures and requirements.  Appraisals are required as part of the underwriting process for mortgage lenders when they are financing a home which a buyer is purchasing.

BPO = Broker Price Opinion; formal valuation by licensed real estate agent.  Since these cost less than appraisals, most lenders and banks are ordering BPOs rather than appraisals:

  • (1) when they sell their bank-owned properties (also known as REOs); AND
  • (2) when they agree to take a loss for a homeowner who sells their house and the bank/lender must take a loss (short sale). 

A BPO, although called a "Broker" price opinion, can be performed by either a real estate Broker or a Sales agent, and is often completed in the lender's required format.

CMA = Comprehensive Market Analysis (or Comparable Market Analysis); informal valuation by real estate agent.  CMA are usually prepared by a Realtor® or real estate agent and presented to a home seller at no charge.  The CMA is used to help the homeowner sell their house by pricing the home correctly.  Also, an agent may also prepare a CMA for a buyer to help them make a competitive offer on a house they want to purchase.

In all of these methods, the value of a house is arrived at by comparing it to properties which have SOLD recently (called "comps" in the neighborhood.  The subject property is usually compared to at least 3 SOLD comps, and also ACTIVE listings are taken into consideration.  Usually the comps will have sold less than 3 months ago, especially in a fast-moving market (either moving up or down).  And the comps will be nearby, usually within 1/2 to 1 mile away.

Remember that although written valuations are important, there is ONLY 1 true measure of a property's value:  WHAT A QUALIFIED BUYER IS WILLING TO PAY FOR IT at a specific point in time.  So the CMA, BPO, and Appraisal mean nothing until a buyer shows how much he's willing to pay for the property by BUYING it.

WARNING:  Do NOT rely on Zillow.  It's a fast computation, and fun to see their numbers.  But a computer cannot do what a professional person can do; that is, evaluate the comps, which are each unique and must be examined with the human eye and analyzed by an experienced pro.


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