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Real Estate Commission Issues BPO Regulations

By: Hank Lerner, Esq. on in  | 

PAR successfully lobbied for Real Estate Licensing Registration Act amendments that would allow real estate licensees to prepare broker price opinions (BPOs), which were passed in May 2018. The implementation has taken until now as the Pennsylvania Real Estate Commission needed to create regulations to implement these changes, which were finally published on Friday.

That’s the good news. But of course, it’s never that simple, is it? Before running out to get BPO assignments, read on to understand the legal limitations on this type of work, as well as a giant practical limitation that is in place at the moment. This article will hit a few of the highlights, but you can get more details on the PAR website.

With these changes fully in place, there are now two ways for a real estate licensee to put a dollar figure on a property: a broker price opinion and a comparative market analysis (CMA). Both products allow a licensee to determine the probable selling price of a particular property, while a full appraisal is still the method that must be used to determine the underlying value of a property.

CMAs have been permitted for years. The primary limitation on a CMA has been – and continues to be – that it must be done for an actual or potential buyer, seller, lessor or lessee of the property, or for an individual making decisions regarding the potential listing or purchase of a property.

A BPO, on the other can, can be done in limited situations that do not involve an actual or potential transaction:

  • Property owned by a lender after an unsuccessful sale at a foreclosure auction
  • Modification of a first or junior mortgage or equity line of credit
  • Short sale of a property or
  • Evaluation or monitoring of a portfolio of properties.

That’s it. Period. If the reason you’re asked to do a BPO isn’t on this list, it’s not legal.

But to double-down, the statute also includes a list of common situations in which a BPO is specifically prohibited:

  • Determining property value for originating a mortgage loan, equity line of credit or refinance
  • In connection with eminent domain, tax appeals, bankruptcy/insolvency proceedings
  • Divorce or equitable distribution proceedings
  • Any other court proceeding or
  • The distribution of an estate.

Just to be clear, there’s no “gray area” here. If your particular use-case is on that second list or it isn’t on either list, then it’s not legal. Period. You don’t need to ask – it just isn’t.

Now here’s the hard part.

Every BPO must be signed by the licensee who prepares it, and if prepared by a salesperson must also be signed by the broker or a designated associate broker. Both the preparer and the additional signer must:

  • Have had a license for at least three years
  • Have completed a commission-approved initial education course in the preparation of broker price opinions and
  • Continue to take at least three hours of CE in BPO topics each license renewal cycle.

The State Real Estate Commission began approving course outlines for the initial education course in the beginning of 2019, so some real estate schools have been offering those courses for a year or more. With the latest regulation, certain broker education courses can be used for this purpose as well. If you and the broker or designated associate broker have already taken one of those courses, and if your brokerage practice allows it, you are now able to perform BPOs.

But with most or all in-person real estate education shut down for the moment, if you and/or your broker/associate broker hasn’t yet taken the required education it may not be possible to do so unless an online school is offering an approved course. If you’re in that position, the only advice we can provide is to not do BPOs until you are able to take an approved course.

Finally, remember that brokers have the ability to set certain practice rules so they can dictate that BPOs are or are not permitted within the brokerage practice. And just as importantly, since BPOs are now considered to be licensed real estate activity it’s clear that any payments for a BPO must be run through your broker.

This article is not a comprehensive review of every provision of the law and regulations. See the PAR’s BPO FAQs for more details, and discuss with your broker before trying to move forward in this new practice are.

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Comments (13)

Comments

  • Lawrence Dellegrotto   April 1, 2020 at 1:28 pm

    Thank you for the clarity.

    Reply to Lawrence Dellegrotto
  • Dennis A. Cestra, SRA   April 1, 2020 at 1:52 pm

    I have just finished reading the article published by PAR titled Real Estate Commission Issues BPO Regulations. Having been involved with the original negotiations with PAR, I would like to note that the article is very well written and clearly conveys the intent of the revision to the Real Estate Registration Act. I am one of the original members of the Coalition of Pennsylvania Real Estate Appraisers which was formed to represent the interest of all real estate appraisers in the Commonwealth at the time that PAR made public their desire to amend the Act so that licensees would be permitted to complete BPOs. BPOs were being performed by licensees for a number of years in Pennsylvania in an illegal fashion. In many cases, this activity was completed for a fee. The Coalition worked hand in glove with representatives of PAR and were able to construct a draft amendment to the Act that was acceptable to both parties. We now find ourselves at the end of a long journey to put the amendment into effect. I think this is a compromise that will benefit both parties – licensees and appraisers. My one concern, however, is enforcement of penalties for violations to the Registration Act. If violations are not enforced, I fear that our best efforts will have been in vain.

    Reply to Dennis A. Cestra, SRA
    • Hank Lerner, Esq.   April 1, 2020 at 2:52 pm

      Thank you, Dennis. It has been a long ride, hasn’t it?

      Reply to Hank Lerner, Esq.
  • Holly N   April 1, 2020 at 2:24 pm

    Is it required that the Broker has to take the class as well as the agent?
    In other words if I as an agent took the course but my Broker (who is also an appraiser) has not taken the class am i still able to do BPO’s?

    Reply to Holly N
    • Hank Lerner, Esq.   April 1, 2020 at 2:55 pm

      As noted in the article, both the salesperson and the broker or associate broker who will sign off on the BPO need to take all the relevant education. There is nothing in the regulations that says a broker who also holds an appraiser license is authorized to sign, so a broker in that circumstance would presumably need the additional coursework.

      Reply to Hank Lerner, Esq.
  • Paul Matthews   April 1, 2020 at 5:26 pm

    Do you have a list of any schools offering online course. It’s been very difficult to find anyone offering the course at all.

    Reply to Paul Matthews
  • Deneen Heffernan   April 2, 2020 at 10:12 am

    Do we know who is actually offering it? All of these schools direct to CE shop and they don’t appear to be offering anything.

    Reply to Deneen Heffernan
  • Mike Marchese   April 10, 2020 at 8:33 am

    Can a certifed appraiser do or sign a BPO sor a sales person without taking a courde?

    Reply to Mike Marchese
  • Lorrie   April 10, 2020 at 11:39 am

    Polley has a course I’m currently taking called Performing Quality BPOs. I purchased this about a month ago so I’m not sure if it qualifies or not.

    Reply to Lorrie
  • Joe Kandala   August 4, 2020 at 1:54 pm

    Just to clarify: an associate broker cannot do a BPO without both he and his broker completing BPO Course?

    Reply to Joe Kandala
    • Hank Lerner, Esq.   August 4, 2020 at 3:15 pm

      The rules state that any BPO prepared by a salesperson must be signed by the broker or a designated associate broker, and that the broker or associate broker who signs must also take the relevant educational course. So if a salesperson is doing BPOs at least one person higher up on the food chain (broker or associate broker) must have taken the appropriate education.

      A broker or associate broker can prepare a BPO without anyone else signing off on it, however. If the broker’s policy only allows BPOs to be conducted by associate brokers, it’s possible that the broker would not have to take the required education since the broker wouldn’t ever have to review or sign off on the BPO report.

      Reply to Hank Lerner, Esq.

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