DFW REI Club

 Dallas/Fort Worth Real Estate Investor Club

BPO vs Certified Appraisal

  • 13 Jan 2021 9:34 PM
    Message # 9858029

    Hi Everyone,

    I am learning a lot as I'm continuing my real estate journey and wanted to share this with the hope that it helps someone else.

    Made an offer that was accepted by seller. I put some contingencies in the contract. One was that the property would appraise for offered purchase price. If not, earnest money is returned in full.

    Our bank requires a bpo - broker price opinion - and they choose the broker from their approved list to come out and determine the value of the property.

    The broker does not know the selling or purchase price of the property.

    The broker who completed the bpo for the bank came back with a figure that was almost 20 dollars less per square foot than the price.

    The seller contested the bpo. Hired an approved broker from the bank's list and had another bpo completed.

    Property still came back under the price, but it is much higher than first one.

    One difference between bpo and appraiser - appraiser usually knows the selling and purchase price. 

    What difference does that make?

    The bpo is going to make the appraisal without consideration of what it "needs" to appraise for. The appraiser sometimes knows what the property should be in order for the sell to occur.

    We could hire an appraiser, pay out of pocket for the appraisal, and see where we stand. We are not ready to do that yet, but it is still an option. 

    Again, just posting to share the information in case anyone is in a similar situation.

    Melinda

    - in VERY rural northeast Texas 


  • 14 Jan 2021 9:34 AM
    Reply # 9858773 on 9858029
    Melinda McGuire Burson wrote:

    The seller contested the bpo. 

    What difference does that make?

    The seller is only required to release the contract if an appraisal is lower than the sale price.  BPOs are not appraisals and so the seller can ignore them. It's a bit of a technicality, but they can use it.

      Neil Aggarwal
      Property Financing, LLC

  • 18 Jan 2021 10:41 AM
    Reply # 9873469 on 9858029

    Hi Neil,

    In this case, the wording stated that if the financing did not come through, we could walk away from the contract. The funding was not in place because the bank would not finance based on the low bpo. 

  • 18 Jan 2021 11:58 AM
    Reply # 9873769 on 9858029

    Melinda,

    The significant difference between a BPO and appraisal is that the BPO is just a broker's opinion of selling price, where an appraisal is an opinion of value. A broker is not an appraiser (unless licensed as an appraiser by TREC), and legally can only give an estimate of price for which a property might sell. It's great that your lender only requires a BPO.

    However, if your purchase contract uses the word "appraisal" and you did not get an appraisal from a licensed appraiser, you may not be entitled to have your earnest money returned when you terminate the contract.

    I suggest you check with the Title company for your legal options. 

    Terry


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