The Real Estate Licensing and Registration Act (RELRA) was amended by Act 75 of 2018 to legalize the practice of performing broker price opinions (BPOs). Pennsylvania State Real Estate Commission regulations establishing necessary educational requirements were not published until March 27, 2020, which is the date that BPOs became legal to perform in Pennsylvania.
The definition of a Broker Price Opinion is: “An estimate prepared by a broker, associate broker or salesperson that details the probable selling price of a particular parcel of real property and provides a varying level of detail about the property’s condition, market and neighborhood, and information on comparable sales, but does not include an automated valuation model.” (§ 455.201)
There are lists of permitted uses and prohibited uses, but a BPO does not have to be attached to an existing or potential transaction, unlike a Comparative Market Analysis (CMA).
When did it become legal for a licensee to perform a Broker Price Opinion (BPO)?
Though the statutory changes went into effect in 2018, the State Real Estate Commission regulations establishing necessary educational requirements were not published until March 27, 2020. Remember that any licensee who wants to perform a BPO must complete certain prerequisite education requirements, that a BPO may only be performed for certain purposes and can’t be used for others. (§ 455.608f)
What is a Comparative Market Analysis (CMA)?
The definition of a Comparative Market Analysis is: A written analysis, opinion or conclusion by a broker, associate broker or salesperson relating to the probable sale or rental price of a specified parcel of real property in an identified real estate market at a specified time, which is prepared for any of the following:
An existing or potential seller, buyer, lessor or lessee of the parcel of real property.
A person making decisions or performing due diligence related to the potential listing, offering, sale, option, lease or acquisition price of the parcel of real property. (§ 455.201)
The main limitation on a CMA is that it must be done for an actual or potential client – whether that is a transactional party (buyer/seller/lessor/lessee) or someone making substantive decisions on whether to list or acquire a particular property.
Is it still legal to perform a Comparative Market Analysis (CMA)?
Yes, CMAs are still legal. The definition has been slightly rewritten, but is essentially the same as before these amendments. CMAs and BPOs are both permitted, with differences in their preparation and permitted uses.
How does a BPO differ from a CMA?
A BPO and a CMA are similar, in that they each provide an analysis/estimate of the probable sale price of a particular property. Both require a standard disclaimer (the same language that had previously been required for a CMA) that the pricing estimate is not an appraisal and has not been prepared according to the rules that govern appraisals.
The main differences are in the minimum required content of each type of pricing estimate, and the uses for each.
A CMA has no required content beyond the required disclaimer. A BPO requires a minimum of seven additional pieces of information (included in § 455.608f(c)), plus the signatures and license numbers of both the preparing licensee and the broker or a designated associate broker. Though some of these additional items might also be included in a CMA, they’re only required in a BPO.
Further, a CMA must be related to an actual or potential sale/lease transaction, while a BPO can be done in a set of four situations that are not necessarily transaction-related. For clarity, there is also a list of scenarios in which a BPO is not allowed.
Are there any additional education or experience requirements before I can do BPOs?
Yes. Before performing a BPO, a licensee must:
hold a license for at least three years;
complete a commission-approved initial education course in the preparation of broker price opinions;
continue to complete at least three hours of continuing education in broker price opinion topics during the current or prior license period.
All BPOs must be signed by both the preparing licensee and a broker or designated associate broker. The broker/associate broker must meet the same initial and ongoing educational requirements as the licensee who prepares the BPO.(§ 455.608f(i))(regulations § 35.404(a)-(d))
Are there any additional education or experience requirements before I can do CMAs?
No. Any licensee – salesperson, associate broker or broker – may perform a CMA.
Where can I find the required educational courses?
The commission has been approving initial education courses since early 2019 and has pre-approved four broker prelicensure courses on valuation for this purpose as well. Many real estate schools have already been offering these courses, and any licensee who took an approved course prior to the publication of the regulations will be in compliance with these rules. Contact your local school for additional information on course availability.
** NOTE: While in-person real estate education is being cancelled or postponed due to the various COVID-19 business closure orders it may be very difficult to find an approved course, as it is unclear whether any online providers are offering that curriculum at the moment.
How will I be able to prove that I have taken the required educational courses?
Individual licensees must retain transcripts or certificates of completion for all qualified education courses as this information is not reported to, or maintained by, the State Real Estate Commission. Since the requirement is to take ongoing education every renewal cycle the best advice is to maintain the transcript for your initial education course indefinitely, and your continuing education transcripts for at least several renewal cycles to prove ongoing compliance.
For the most part, BPOs are limited to certain specific uses related to lenders and loan servicers. A BPO may be prepared only in conjunction with the following:
a property owned by a lender after an unsuccessful sale at a foreclosure auction;
a modification of a first or junior mortgage or equity line of credit;
a short sale of a property; or
an evaluation or monitoring of a portfolio of properties. (§ 455.608f(e))
Are there specific BPO uses that are prohibited?
Yes. Though the law dictates that a BPO can only be used for certain purposes, it also contains a list of specific prohibitions. A BPO may not be used for:
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 court proceeding; or
the distribution of an estate.
If a valuation is required for one of these purposes it would have to be a full appraisal performed by a qualified appraiser. (§ 455.608f(f))
Can an appraiser do a BPO?
RELRA relates only to the roles and responsibilities of real estate licensees. Appraisers are regulated by the State Board of Certified Real Estate Appraisers and are subject to laws and regulations of that Board. Any questions about appraiser duties and responsibilities should be directed to the State Board of Certified Real Estate Appraisers.
A buyer has asked me to provide an estimate of value for a tax assessment appeal. Can I prepare a CMA or BPO for that purpose?
No. Tax appeals are specifically excluded as a use for BPOs, and a CMA would not be proper because it is not related to an actual or potential transaction.
The executor of an estate has asked me to list a property that is part of the estate. Can I prepare a CMA or BPO for that purpose?
A CMA for the executor would be permissible in this circumstance because it would be done for an actual or potential client, or to assist that executor in their due diligence related to the potential listing price. A BPO is not permitted because it is not one of the permitted uses in the statute.
The executor of an estate has asked me to value several properties that will be inherited by various heirs. Can I prepare a CMA or BPO for that purpose?
No. A CMA is not permitted because there is not actual or potential transaction contemplated. A BPO is not permitted because distribution of an estate is a specifically prohibited use.
A couple needs to sell their home as part of their divorce proceedings, and I’ve been approached to do a listing presentation. Can I prepare a CMA or BPO for that purpose?
Yes, a CMA would be permissible in this circumstance because it would be done for an actual or potential client. A BPO is not permitted because it is not one of the permitted uses in the statute.
As part of a divorce, a home will be transferred from the couple’s joint ownership to full ownership by the wife. Her attorney would like to know the value of the home as part of the overall property distribution. Can I prepare a CMA or BPO for that purpose?
No. A CMA is not permitted because there is not actual or potential transaction contemplated –the property will simply be transferred to one of the parties in the divorce. A BPO is not permitted because use in divorce and equitable distribution proceedings is specifically prohibited.
Can I charge a fee for a BPO?
Yes. Keep in mind that and the law/regulations generally require a written agreement between a broker and a consumer where a licensee is providing a service and the consumer may be obligated to pay a fee. A BPO is licensed activity, so there should be a written contract that spells out the services to be performed and the fee to be paid. (§ 455.608a)
Can I charge a fee for a CMA?
Yes. Keep in mind that and the law/regulations generally require a written agreement between a broker and a consumer where a licensee is providing a service and the consumer may be obligated to pay a fee. A CMA is licensed activity, so there should be a written contract that spells out the services to be performed and the fee to be paid. Many licensees do not charge a fee for a CMA. If no fee will be charged there is no requirement for a written contract. (§ 455.608a)
How are fees for CMAs and BPOs to be determined?
There is nothing in the statute that dictates how fees for CMAs and BPOs are determined or negotiated. Any fees are fully negotiable between the licensed providers and the recipient of the work product.
Remember that like any other licensed service, the ultimate right to contract and negotiate fees rests with the broker. Licensees should check with their brokers about any internal rules or policies related to BPO fees.
I have agreed to do BPOs for a lender that does periodic portfolio reviews. They want to know who the checks should be written to.
All fees for all licensed activity must be paid to the broker, at which point the broker can then pass those fees on to individual licensees under whatever compensation agreement is in place. Under no circumstances can fees for BPOs or CMAs be paid directly to a salesperson or associate broker. Ever. (§ 455.608f(d))
My broker has said that he doesn’t want any agents in his firm to do BPOs and has established an office policy that prohibits us from doing so. Can he do that?
Yes. Like any other licensed service, the ultimate right to set rules belongs to the broker. The broker has authority to prohibit BPO practice within an office, or to establish whatever legal limits he wishes. If you want to do BPOs you need to first check with your broker to ensure that they are willing to allow those services to be performed in the brokerage. Brokers are encouraged to check with their errors & omissions insurance providers to ensure that adding BPO services to a brokerage will be properly covered.
My broker has informed me that if I perform BPOs she will pass through those fees on the same split that applies to my transactional commissions instead of paying me the full amount received from the lender. Is that permitted?
All questions of salesperson compensation are handled contractually between the broker and salesperson. If you want to do BPOs you need to first check with your broker to determine if that type of practice is permitted in the brokerage, and then how those fees will be handled. Since BPOs have not been legal until now it is highly unlikely they would be called out separately in any existing independent contractor agreement. If there’s an agreement to handle these fees differently than others it may be necessary to update/amend independent contractor agreements to account for this new type of business.
Once I have my broker’s approval to do BPOs are there any additional supervisory responsibilities for the broker?
Yes. Every BPO prepared by a salesperson must be signed by both the salesperson and by the broker or an associate broker designated by the broker. That broker or associate broker must complete the same educational requirements as the licensee doing the BPO. (§ 455.608f(j))
BPO Insurance Coverage
Will BPO practice be covered by my broker’s errors and omissions insurance?
Brokers should check with their E&O carriers to see if there are any coverage restrictions and/or if there are any best practices to implement if they decide to allow this as a brokerage service.
If a licensee is unable to pay a court judgment after a suit related to a BPO, is that award going to be covered by the Real Estate Recovery Fund?
No. The amendments included a specific exclusion so BPOs are not covered by the rules of the recovery fund.