Question

1) What is the difference between an appraisal and a broker price opinion? 2) What market transactions require an appraisal?

Answer 1

1. Difference Between an Appraisal and a Broker's Price Opinion

a. Underlying motivations behind a broker price opinion may be different than that of an appraisal.

b. Broker's Price Opinion can be used in place of an appraisal for specific mortgage-related transaction.

c. Appraisals provide photos of the subject property and comparable properties used for establishing the appraised value whereas Broker Price Opinion (BPO), is not as detailed as Appraisals.

d. An appraisal completes the service and their obligation under the Uniform Standards of Professional Appraisal Practice (USPAP) and law and Broker Price Opinion (BPO) is completed by a real estate broker or agent.

e. Appraisal requires more time and cost than a Broker Price Opinion.

2. Market transaction that requires an appraisal-

a. All real estate-related financial transactions engaged in by financial institutions

b. both commercial and residential transactions.

c. Commercial real estate transaction - a real estate-related financial transaction that is not secured by a single 1 to 4 family residential property.

d. Complex appraisal for a residential real estate transaction - one in which the property to be appraised in the form of ownership.

c. Federally related transaction - real estate-related financial transactions entered into after the effective date.