Appraisers Move to Offer BPO Type Reports

Since federally insured lenders now often don't need a full appraisal report, demand has strengthened for broker price opinions (BPOs) in many states. Appraisers have seen real estate agents getting valuation work that they assumed would belong to them, so a move is on to find an appraisal product that will allow appraisers to compete for the work.

Since most appraisers are not “brokers” it is not possible for them to offer a broker price opinion (BPO), it’s simply a misrepresentation for appraisers to indicate that they can since they are appraisers and not brokers.

In an article written for the 1st Quarter, 2009 issue of Valuation, published by the Appraisal Institute entitled "Matter of Opinion" by Stephanie Coleman, MAI, SRA, an attempt has been made to steer appraisers through the Uniform Standards of Professional Appraisal Practice (USPAP) maze in an attempt to position them to competitors for BPO work. Notably the article talks about the definition of a broker price opinion (BPO), and the author concludes that "price opinion" is a "contradiction in terms" and a “misnomer.” She makes an argument is that “price” is a fact while an “opinion” is not by definition.

The article goes on to discuss the fact that the term “price analysis” is a more appropriate term for use since it correctly defines what occurs during the BPO process.

A case is made in the article that BPOs may be based on listing prices, offering prices or sales prices, and that they generally do not consider the normal “market exposure time” that is analyzed in an appraisal. Thus the author concludes that a broker price opinion (BPO), that is not based on the most probable price that a property will bring in the market given a normal market exposure time, “might be more or less than its market value.”

It is argued that a price analysis can be an appraisal or simply a method of establishing the correct price of a property being offered for sale.

An Appraisal Institute form (Form 200.03) is suggested for price analyses, then the author talks about the fact that “there are several BPO forms available from various software providers and others,” and states that “some BPO forms currently in circulation to not comply with USPAP unless supplemented.” Why would the author talk about the use of BPO forms with USPAP supplements after she just discussed the fact that BPOs can’t be completed by appraisers unless they are brokers?

Why would an appraiser, or an appraiser / broker for that matter, want to provide a BPO or a “price analysis” based on listing price, offering price or sales price information if there are unanswered exposure time issues related to the price analysis concluded?

I found fault with the article because it does not discuss the fact that an appraiser can be held to a higher standard than a broker, so doing BPOs as an appraiser / broker can invite problems. Everyone forgets that you are a broker when they have a copy of your work in hand and you represent yourself as an appraiser in the market.

Finally, I found fault with the fact that an “ethics and standards” counseling manager associated with the Appraisal Institute would suggest that appraisers are “capable of providing clients with information for purposes of pricing a property for sale.” If appraisers move toward pricing properties and away from valuing properties, I can’t imagine that the future will be bright for them. Appraisers who chase BPO work are likely to find themselves flailing in the abyss, providing data and analyses supporting a “value” conclusion while calling it a “price.”

I guess that I was confused when the appraisal industry fought hard for licensing in an attempt to raise the education and experience bar. It managed to exclude real estate brokers, but now that they have found a cheap, albeit flawed product, appraisers want to move backward to provide the service?  In my opinion it's a bad idea for appraisers to become involved supplying BPO's.

Update 2013: Yes BPO's are still being completed and relied upon by some users.  It's a mockery that should stop and it should show appraisers just how powerful being united is, if it's NAR versus a bunch of diverse appraisal organization then they win and we lose.
 
For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/623-Appraisers-Move-to-Offer-BPO-Type-Reports.html