Learn the meaning of opinion of value for real estate and why you need it.
A real estate opinion of value is an estimate of the price that a property would likely sell for on the open market. A real estate opinion of value may be requested for a variety of purposes, such as to determine the value of a property for insurance purposes, estate planning, or tax assessments. It may also be used to help determine the amount of a loan that a lender should be willing to offer to a borrower, or to help settle an estate or divorce.
Residential real estate appraisal
A residential real estate appraisal is an opinion of value prepared by a real estate appraiser, who is professionally licensed or certified by the Department of Licensing (DOL). The appraiser typically does an on-site visit to visually inspect and take pictures of the property. They will research public records, drive the neighborhood to check on comparable sale properties, and measure and sketch the property. Appraisers consider a variety of factors that can affect the value of the property, such as its size, age, location, condition, and any special features or amenities. They also consider market trends and demand for similar properties in the area, as well as any other relevant factors. The end result of an opinion of value appraisal is usually a written report that provides the appraiser’s professional opinion of the value of the property and includes detailed narratives.
Broker’s opinion of value
A real estate broker opinion of value, also known as a broker price opinion (BPO), is an estimate of the value of a piece of real estate property prepared by a real estate broker. A BPO is similar to an appraisal, but it is typically less detailed and is often prepared more quickly. Unlike an appraisal, which is conducted by a licensed or certified appraiser, a BPO is prepared by a real estate broker. Real estate brokers are not required to certify their knowledge of an area in order to prepare a BPO. Therefore, when requesting a BPO, it is important to select a real estate broker who has a thorough understanding of the local real estate market to ensure they prepare an accurate estimate of the value of the property. The end result of a BPO is a written report that provides the broker’s professional opinion of the value of the property.
Which should I use?
Here are a few reasons why someone would choose to use a real estate appraisal instead of a real estate BPO (broker price opinion):
- Accuracy: Appraisals are generally more accurate than BPOs, as they are completed by a licensed or certified appraiser who has the necessary knowledge and expertise to thoroughly analyze a property and estimate its value.
- Formality: Appraisals are typically required for formal transactions such as mortgage financing.
- Thoroughness: Appraisals are more thorough than BPOs, as they involve a detailed analysis of the property, including an on-site inspection, a review of comparable sales data, and an evaluation of the property’s features and condition.
However, it is important to note that appraisals are generally more expensive and time-consuming than BPOs, and may not be suitable for all situations. BPOs can be a useful tool for quickly obtaining a rough estimate of a property’s value, but may not be as reliable or accurate as an appraisal.