Difference between BPO vs Appraisals

Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Danny: Hi, this is Danny Regalado and you’re watching the REI Classroom. Today, we’ll be talking about the differences between a BPO and an appraisal.
Mike: This REI Classroom real estate lesson is sponsored by FlipNerd Investor Coaching, your blueprint to investing success.
Danny: A BPO is a broker price opinion. These are limited valuations that are performed by real estate agents or real estate brokers. These usually give a general view of the market, but are not very specific, as they usually don’t include adjustments. These reports are provided by real estate experts that are trained in the sales department of the industry rather than the valuation department of the industry. Therefore, these values are not as accurate as an appraisal report.
An appraisal report is performed by a certified or licensed appraiser. The difference here is you have a college-level graduate that has spent many, many years getting certifications in different titles and different expertises in how to determine value with different techniques and methodologies. This is the most accurate form of valuation that exists now. The appraisal reports are more in-depth. They usually include physical measurements of the subject property, complete interior, exterior inspections and an analysis of not just closed sales but pending sales and active sales.
They also analyze the market. Is it an increasing market, is it a stable market, is it a declining market? The ratio of how many sales have sold in the last six months, three months, one month, and different aspects, as far as absorption rates, supply and demand factors in each different market.
The benefits of using a BPO are cost and timeliness. BPOs are usually 50% if not lower cost than an actual full appraisal, but conversely, they are turned around much quicker than a normal appraisal. You can get a BPO in one or two days versus five to seven days on a certified appraisal in certain markets.
The difference is BPOs can’t be used for federally related transactions where the appraisals can be used for federally related transactions. Some of the benefits of the appraisal is a more accurate valuation that can be relied upon and much more information, such as the sketch, interior photos, flood maps, location maps and general market data having to do with economic factors.
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