The Commission has noted an increasing number of reports of brokers providing, for a fee, a “broker price opinion” (BPO) for a party who is not a client or potential client of the broker.
The downturn in the real estate market has apparently resulted in more demand for informal estimates of the most probable sale/purchase prices for properties that are less expensive than a full appraisal.
Brokers may be requested by lenders, loan servicers, potential investors or others to provide this service for a fee, or brokers may simply be seeking alternative sources of income in a slow market.
Brokers should remember that the North Carolina Appraiser Act requires any analysis, opinion or conclusion as to the value of real estate performed for compensation to be performed by a licensed or certified appraiser.
However, the statute does provide a limited exception to this requirement that permits real estate brokers to perform a “comparative market analysis” for compensation ONLY for prospective or actual brokerage clients or for real property involved in an employee relocation program.
A “comparative market analysis” (CMA) is defined as “the analysis of sales of similar recently sold properties in order to derive an indication of the probable sales price of a particular property by a licensed real estate broker.”
A “broker price opinion” (BPO) that is based on recent sales of comparable properties is, therefore, a CMA, and may be performed for a fee only as noted above.
The Real Estate Commission considers the performance by a broker of a BPO for compensation in violation of the Appraiser Act to also constitute a violation of the Real Estate License Law.
When performing a comparative market analysis or broker price opinion for a client or potential client, be sure to:
• Document your relationship with the client or prospective client.
• Document the recent sales of comparable properties upon which you base your analysis.
• Identify the results of your analysis as a “probable sales price” only and not as the “market value” or an “appraisal”.
This article came from the May 2009-Vol40-1 edition of the bulletin.