Of course, if an investor actually wants to get financing, they will still need to go through the official appraisal process, but getting an appraisal is generally overkill for someone who is merely considering purchasing a property.īPOs don’t necessarily follow a standard format, which means that they may look somewhat different based on the individual practices of the broker. In contrast, BPOs can cost as little as $250 and rarely cost more than $2,000.
For instance, commercial appraisals typically begin at $2,000 (and can go up to $25,000 for very large properties) and can take several weeks. The main reason that multifamily investors like to use BPOs instead of appraisals is the fact that they are significantly faster and less expensive. For instance, tiny bathrooms and closets may have been par for the course for apartments in the 40s and 50s, but are no longer appropriate for 21st-century residents. This refers to the fact that some older buildings are no longer a good fit for the needs of modern residents. The cost analysis approach must not simply look at actual, physical depreciation of the property, but must also look at the property’s functional obsolescence. The income capitalization approach values property based on the income it can generate, while the cost analysis approach attempts to estimate the cost of replacing the property, minus depreciation. They will also often use other valuation methods, such as the income capitalization approach and the cost analysis approach.
However, this is not the only way that the professional performing the BPO can estimate the price of a property. This is a version of the sales comparison approach that is often used for traditional appraisals. Generally, they will use at least three properties that are currently on the market, as well as three properties that have recently sold, in order to create a reasonable estimate. Then, they’ll use their MLS to find similar, comparable properties to create an accurate estimate of the subject property’s value.
Whether a BPO is a drive-by or involves an interior inspection, the broker, appraiser, or agent will typically drive through the neighborhood to get a better understanding of the local area.
A BPO, also referred to as a BOV, or broker opinion of value, can help a buyer get an estimate of the price of a multifamily or commercial property. Unlike an appraisal, a BPO/BOV cannot be used to get a multifamily loan or for taxation purposes, but can generally be obtained for much less money than a traditional appraisal.Ī BPO can be done either as a drive-by visit or as a full inspection of a property’s interior. A broker price opinion or BPO is a report that can be prepared by a broker, appraiser, or agent.