Temporary rules to govern the use of Broker Price Opinions (BPOs) for a fee have been approved by both the North Carolina Real Estate Commission (NCREC) and the North Carolina Rules Review Commission, and will take effect October 1, 2012. Permanent rule-making will commence in early 2013.
The rules establish minimum standards that brokers must comply with in order to perform BPOs in exchange for a fee without the expectation of receiving the listing for the property. Specifically, a broker shall:
Only accept an assignment to provide a BPO or CMA if the broker has knowledge of the real estate market, direct access to real estate market sales or leasing data and brokerage or appraisal experience in the subject property’s geographic location.
Not provide a BPO or CMA for a property unless the broker can exercise objective, independent judgment free of any influence from any interested party in the performance of his or her analysis of the facts relevant to determination of a probable selling or leasing price.
Not provide a BPO or CMA for a property unless the broker has personally inspected the exterior and interior of that property, provided, however, that an inspection of the exterior or interior shall not be required if this is specifically waived in writing by the party for whom the opinion or analysis is being performed.
When developing a BPO or CMA for a particular property or interest therein, a broker shall utilize methodology such as analysis of sales or income of recently sold or leased properties comparable to the subject property or capitalization, as is appropriate for the particular assignment and type of subject property.
When analyzing sales of comparable properties, a broker shall comply with the following standards:
The broker shall select from reliable information sources a minimum of three recently sold or leased comparable properties for use in his or her analysis that are similar to the subject property with regard to characteristics such as property type, use, location, age, size, design, physical features, amenities, utility, property condition and conditions of sale. Comparables shall reflect the factors or local market conditions influencing the sales or lease prices of the comparables.
The broker shall make adjustments to the selling or leasing price of selected comparable properties for differences between the characteristics of the comparable properties and the subject property that would significantly impact the estimate of the probable selling or leasing price if no adjustment is made. Adjustments shall be considered for differences in property characteristics such as location, age, size, design, physical features, amenities, utility, condition, economic or functional obsolescence and conditions of sales. The amounts of adjustments shall reflect the values that the local real estate market places on the differences in the characteristics in question.
Address, in addition to matters required to be addressed by G.S. 93A-83 and other provisions of this section, a description of the comparable properties used in the analysis (including any unsold properties listed for sale or rent that were used as comparables), the adjustments made to the selling or leasing prices of comparable properties, local real estate market conditions, and each method used in deriving the estimate of probable selling or leasing price.
In connection with a BPO or CMA, an estimated probable leasing price may be reported by a broker as a lease rate and an estimated probable selling or leasing price may be reported by a broker either as a single figure or as a price range. When the estimated probable selling or leasing price is stated as a range and the higher figure is more than one hundred ten percent (110%) of the lower figure, the broker shall include an explanation of why the higher figure exceeds the lower figure by more than ten (10%) percent.
Source: David McGowan, NCAR