FAQ

How to get rid of my mortgage insurance

As you browse real estate listings, the prices attached to those properties help you get an idea of ​​how much money you’ll need to purchase each home. however, who sets those numbers? If the home seller is working with a real estate agent or broker to handle your transaction, the home’s listing price is likely to be the broker’s price opinion, or BPO.

what is a broker price opinion?

broker price opinion definition

A broker’s price opinion, commonly known as a BPO, is a real estate professional’s opinion of a property’s value. BPOS are most often used when establishing a property’s list price, similar to a comparative market analysis, and in the event of a foreclosure or short sale.

Reading: How to get rid of my mortgage insurance

To determine BPO, a real estate agent or broker will use their expertise to assign a dollar amount to a property based on certain factors. bpos are typically done by a broker who is familiar with the local real estate market.

“Usually the broker does this as part of their listing agreement when they sell a home,” explains Rocke Andrews, president of the National Association of Mortgage Brokers and owner of Lending Arizona. “examine similar properties that have recently sold and provide an estimate of what the home should be listed for.”

There are two main types of bpos: internal and external. An in-house BPO involves a broker spending time inside the property to assess the condition of the home, take measurements, and capture photographs. With an outside BPO, sometimes referred to as a drive-by BPO, a broker can simply assess the exterior of the property before giving you a sticker price.

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A bpo is useful in the early stages of a real estate transaction when establishing the list price of a home. The home seller understands what the property will require, and the buyer understands what he will have to pay to own it.

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in the mortgage loan process, however, bpos are not the method of access. In most cases, a lender will request a professional property appraisal to determine its value, rather than a BPO.

Bpos are not accepted for mortgages sold to fannie mae or freddie mac or guaranteed by the federal housing administration (fha), the department of veterans affairs (va), or the department of agriculture (usda), according to jefferson l. sherman, president of the appraisal institute.

“There are 14 states where BPOS is only supposed to be used for the purpose of providing a buyer, seller, prospective buyer or prospective seller with a listing or purchase price,” says Sherman. “However, each of these laws has nuances.”

how appraisals and bpos are different

There are some important characteristics that differentiate an appraisal from a broker’s price opinion.

First, an accurate appraisal requires a higher level of experience and training.

“Appraisals are performed by duly certified appraisal professionals who have attained extensive appraisal education, experience, and testing standards, have demonstrated appraisal competence by passing a national exam, and adhere to generally uniform appraisal standards. accepted,” sherman says.

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Second, professional appraisers generally do not have conflicts of interest that could influence their opinion. While a real estate professional is likely paid a commission based on the home’s sales price, an appraiser is paid solely for the work of determining the property’s value.

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bpos are also less expensive than the cost of an appraisal. A BPO costs about $50, according to Andrews, while an appraisal can cost $300 to $450 or more.

when a bpo makes sense

In certain situations, such as a foreclosure or short sale, BPOS can play an important role.

“In the housing recession, there were so many foreclosures and properties on the market that lenders would use them because of the quicker turnaround time and lower fee,” Andrews says.

That thinking still applies today, albeit in a much healthier real estate market. Sherman notes that Pennsylvania recently passed a law that “provides that BPOS cannot be used for any type of mortgage purpose, except for short sales and pre-foreclosure work.”

so if you’re buying a distressed property, a bpo might be the closest thing to the truth than a professional appraiser if you’re applying for a mortgage; however, your lender will most likely request an appraisal to get a home value reading, not a bpo.

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more information:

  • how to avoid a low home appraisal
  • how to prepare for fha appraisal requirements
  • pros and cons of mortgage refinance appraisals
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