Under current NC law, a real estate broker is prohibited from providing a client with a Broker Price Opinion (BPO) for a fee unless the broker has a “reasonable expectation” of obtaining the listing on that property. North Carolina is currently one of only 5 states that restrict a real estate broker’s ability to perform Broker Price Opinions. SB 521 will change that by allowing a broker to provide a BPO for a fee under specific conditions.
A BPO typically includes an inspection of the subject property, relevant neighborhood analysis, local and regional market information and trends, and a description of comparable properties and is prepared by a licensed real estate broker with intimate knowledge of their local market. BPOs provide critical information for decision-making and have been widely adopted as a tool in the mortgage industry due to their timeliness, cost effectiveness, and accuracy.
BPOs are commonly used for:
Fraud check and additional due diligence on a completed appraisal;
Internal non-lending purposes such as portfolio valuation and review;
Due diligence of loan portfolios by buyers and sellers in secondary market transactions and to help establish the purchase and sales price of a portfolio; and
Due diligence and disposition analysis on distressed loans, including short sales, REO sales, and foreclosure avoidance efforts.
Broker Price Opinions are NOT considered a certified appraisal and do not take the place of one. BPOs are intended to estimate a property’s selling or leasing price, while appraisals are estimates of a property’s value. BPOs and CMAs may NOT be used when an appraisal is required by state or federal law.
Some other important aspects of SB 521 include:
Defines Broker Price Opinions and Comparative Market Analyses as “an estimate … of the probable sellingor leasing price“ of a property or interest in a property, prepared by a licensed real estate broker that provides some detail about the property’s condition, market, neighborhood, and comps.
Does NOT allow use of an automated valuation model. (This does NOT exclude the use of ARGUS and similar DCF software).
Allows NCREC to adopt rules governing BPOs that are are consistent with the language in the bill;
Will also allow certified appraisers to provide BPOs and CMAs, as long as they are also licensed real estate brokers and do not represent themselves as appraisers in the BPO.
ONLY applies to BPOs and CMAs that are performed or issued for a fee or other compensation.
Who can prepare BPOs for a fee?
Actively licensed real estate brokers, but NOT provisional brokers
Who can PAY for a BPO?
Buyers and sellers;
Lessors and lessees;
A third party performing due diligence or making decisions about the potential sale or purchase of a property;
An existing or potential lienholder or third party (banks, investors, etc.), for any purpose other than the determination of value, or for a loan origination.
BPOs and CMAs may also be prepared for use in conjunction with or in addition to an appraisal.
BPOs and CMAs MUST include the following:
Statement of Purpose;
Description of the Property;
Basis of Estimate, including market data of cap computation used;
Any assumptions or limiting conditions;
Disclosure of broker’s interest in, or potential interest in, the property;
Broker’s name and license number;
Name of broker’s firm;
Copy of the assignment request;
A Disclaimer stating BPO is NOT an appraisal and may NOT be used for underwriting.
No broker may knowingly prepare a BPO or CMA in lieu of an appraisal, when an appraisal is required by federal or state law.
BPOs and CMAs MUST produce an estimate of the property’s sale or leasing price, and NOT the property’s value or worth!
Any estimate of value shall be deemed an appraisal, and may ONLY be prepared by a certified appraiser.
BPOs and CMAs must NOT be referred to as a valuation or appraisal.
BPOs and CMAs must NOT report a predetermined result.
Thanks to your help, this important bill is on this way to becoming law!