Opinions of Value – Broker Price Opinions vs. Appraisals

Broker Price Opinion vs. AppraisalA real estate licensee is prohibited from preparing an “appraisal” unless he or she also holds the appropriate appraisal classification. Appraisers are regulated by the Georgia Real Estate Appraisers Board (GREAB). GREC and GREAB are two separate entities each with its own set of members. However, GREC staff also provides administrative support for the GREAB.

A licensee may provide an “Opinion of Value,” so long as it is not conditioned upon some circumstance such as obtaining the listing if the value is determined to be in a certain price range. A licensee may also be paid for developing the opinion of value.  Sometimes the opinion of value is referred to as a BPO or Broker Price Opinion or Broker Property Opinion. No matter what it is called, it is merely an opinion and does not carry the weight or authenticity of an appraisal.

Although a broker or any licensee is trained to research comparable sales and be familiar with the market, a real estate licensee does not receive extensive and specialized training regarding valuing properties. A professional appraiser uses more complex valuation methods and is required to obtain experience in valuing different types of properties. An appraiser may use several approaches to value and apply a weighted average as appropriate: The most common approaches to valuation include:

1. Income Approach
2. Cost Approach
3. Comparable Sales Approach

When a licensee offers, or agrees, to provide a BPO, it is important that the licensee state very clearly that it is only his/her opinion and not an appraisal.  Before offering an opinion of value, the licensee should first determine the purpose of the BPO. The law provides that a real estate licensee, “in the ordinary course of real estate brokerage business,” may offer an opinion of value “to a potential seller, purchaser, landlord, tenant, or third party as to the recommended listing, lease, rental, or purchase price of real estate or real property” [O.C.G.A. § 43-39A-24].

Although there are national organizations promoting the charging of fees for BPOs and acting as middle men to schedule BPOs, they are not regulated or monitored by any licensing agency. They are basically marketing organizations and are not familiar with local real estate laws. Each state addresses the right of the licensee to provide opinions of value. Georgia allows the licensee to perform an opinion of value provided it is merely an opinion and is not contingent upon some service. In addition to being in compliance
with license laws, the licensee must also consider the ethical question as to whether he/she is qualified or has the experience to provide such an opinion. It may be best to refer the request to a professional appraiser.

By nature, real estate agents want to be helpful especially if their assistance will insure the specific real estate transaction will close. However, an occasional review of the type of support a licensee can provide has merit. In general terms, if the services are for the client, the licensee can provide many real estate services, but must be careful to be accurate and not go beyond his/her level of expertise, exaggerate or make unfounded promises. If the services are for the customer, the licensee must be very careful to provide only ministerial services. In other words, if the license must use his/her discretion, analysis or judgment, it is not ministerial and therefore cannot be done for the customer without the potential for dual agency. Opinions are often construed as giving advice. The real estate licensee is seen as an expert in the field of real estate and must be careful when offering opinions
especially when it may be a subject beyond their level of expertise.

Reprinted from the GREC RENewsletter, Volume 5, Issue 3, March 2009.

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