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.