Broker Price Opinions
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). However, Pennsylvania State Real Estate Commission regulations which established necessary educational requirements were not published until March 27, 2020, making that the date BPOs became legal to perform in Pennsylvania.
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).
Broker Price Opinion:
“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)
Comparative Market Analysis:
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: (1) An existing or potential seller, buyer, lessor or lessee of the parcel of real property; (2) 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 Difference Between BPOs and CMAs
A BPO and a CMA are similar because they both:
- Provide an analysis or estimate of the probable sale price of a particular property.
- Require a standard disclaimer that the pricing estimate is not an appraisal and has not been prepared according to the rules that govern appraisals.
The main difference between BPOs and CMAs is the minimum required content of each type of pricing estimate.
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 items might also be included in a CMA, they’re only required in a BPO.
- can be done in one of four situations that are not necessarily transaction-related. For clarity, there is also a list of scenarios that a BPO is not allowed.
- can only be performed by licensees that meet specific requirements.
A CMA:
- no required content beyond the required disclaimer.
- must be related to an actual or potential sale/lease transaction.
- can be performed by any licensee.
Fees
You may charge a fee to perform a BPO or a CMA. Keep in mind that 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. Performing either a BPO or CMA is a 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)
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)
The statute does not dictate 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.
Performing a BPO
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))
BPO Uses & Prohibitions
In general, BPOs are limited to 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))
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))
BPO Supervision
Like any other licensed service, the ultimate right to set rules belongs to the broker. The broker has the authority to prohibit BPO practice within an office, or to establish whatever legal limits they wish. 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.
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 recently 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.
Every BPO prepared by a salesperson must be signed by both the salesperson and 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))
Frequently Asked Questions
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 the 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 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. Performing a CMA would not be appropriate because it is not related to an actual or potential transaction.
The executor of an estate 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 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 no actual or potential transaction contemplated. A BPO is not permitted because the 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 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 home’s value 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 no actual or potential transaction contemplated. The property will be transferred to one of the parties in the divorce. A BPO is not permitted because use in divorce and equitable distribution proceedings are specifically prohibited.