Detailed Definition
A Broker’s Opinion of Value (BOV), also known as a Broker’s Price Opinion (BPO), is an estimate offered by a real estate broker to determine the plausible value of a property. This evaluation helps sellers decide on an appropriate listing price and assists buyers in formulating offers. It’s made using various factors, such as the condition of the property, recent sales of comparable properties, and current market trends.
Characteristics of BOV:
- It’s generally less formal than an appraisal.
- May involve a fee, though this is less than that of an appraisal.
- Lacks the legal weighting of an official appraisal, particularly for loan underwriting.
- Basis on the broker’s experience and market knowledge.
Note that for mortgage and lending purposes, a state-licensed appraiser must carry out an official appraisal.
Examples
Example 1: Selling a Home
A homeowner wishing to sell their home might request a BOV from a trusted broker to determine a fair listing price. For example, the Howards, who recently secured a home equity loan through an official appraisal, decided to list their home using a BOV provided by their broker.
Example 2: Purchasing a Property
A potential buyer may seek a BOV to assure themselves of the investment’s value before making an offer. This helps in bidding appropriately on competitive properties.
Example 3: Analyzing Investment Properties
Real estate investors often use BOVs to analyze multiple investment properties quickly. This analysis aids in generating a snapshot review without the costs associated with formal appraisals.
Frequently Asked Questions (FAQs)
What differentiates a BOV from an appraisal?
A BOV is less comprehensive than an appraisal and is mainly used for estimating listing prices or initial bids rather than for securing mortgage loans.
Is a BOV legally binding?
No, a BOV is not legally binding and lacks the formal recognition and regulatory compliance of an appraisal.
How accurate is a Broker’s Opinion of Value?
While a BOV draws on the broker’s experience and expertise, it might not be as accurate as an appraisal. The accuracy can vary due to market volatility and the broker’s familiarity with the local market.
Can I use a BOV for tax purposes?
No, a BOV cannot be used for tax, lending, or legal purposes requiring certified appraisals. It is primarily an initial opinion rather than an official valuation.
Will a lender accept a BOV for mortgage approvals?
No, lenders require a formal appraisal by a state-licensed appraiser to process mortgage applications.
Related Terms
Appraisal
An official estimate of property value conducted by a licensed appraiser, often required for loan underwriting.
Comparative Market Analysis (CMA)
A method used by brokers to determine the list price of a property based on the sales of similar properties in the area.
Real Estate Broker
A licensed professional who arranges real estate transactions, manages property sales, and provides substantiate property valuations.
Online Resources
- National Association of Realtors (NAR): Link
- Appraisal Institute: Link
- Federal Housing Administration (FHA): Link
- Real Estate Broker Network: Link
References
- Zillow Guide on Broker’s Opinion of Value: Link
- Real Estate Markets and Valuations by the Appraisal Institute
- National Association of Realtors: Professional Guidebooks
Suggested Books for Further Study
- Real Estate Valuation and Strategy: A Guide for Hotel Owners and Investors by David Harper
- The Appraisal of Real Estate by the Appraisal Institute
- Real Estate Market Analysis: Methods and Applications by John M. Clapp and Stephen Messner
