CMA & BPO Services
"The property next to mine just sold for $3 million, so my property must be worth that."
Not exactly. A comparative market analysis is an essential aspect of any real estate transaction. For the Seller, a comparative market analysis accurately establishes a sale price to remain competitive in the market. For the Buyer, a comparative market analysis will guide the decision-making process to ensure a fair offer.
A comparative market analysis (CMA) serves to situate the price of the property accurately from the beginning, as studies have shown that overpriced buildings will linger on the market and will end up selling for much less than the estimated, true value. A CMA provides you with information, referred to as "comps", which consists of buildings similar to yours in size, location, and characteristics such as ceiling height. The Agent will select a ceiling value comp—which is a property that is definitely more valuable than the client's—as well as a floor price comp—which is a property that is definitely worth less than the client's. Thus, the client has a clear understanding of the price range for the building, as well as the confidence of valid, quantitative data showing what to expect, keeping the process transparent and ethical. Furthermore, a CMA will allow the client to see what properties in the area that are similar are selling for, how long the properties have been on the market, and lastly what the difference was—if there was any—between sale and listing prices. The CMA includes properties that are currently on the market, properties that are in escrow, properties that have sold within the last 3-6 months, and properties that have been taken off the market because they were overpriced.
Ultimately, a CMA is a quantitative analysis that requires local market expertise of the Agent. The comparative market analysis allows the building to be priced at its highest point while still remaining competitive in the open market—to not only minimize time on the market, but also to receive an offer that is reasonable and fair.
A broker's price opinion is the process used by a hired sales agent to determine the potential selling price or estimated value of a real estate property. A BPO is widely used in situations where a financial institution believes the expense and delay of an appraisal is unnecessary.
Broker's price opinions are initiated by financial institutions such as banks, mortgage companies, and loss mitigation companies.
BPO serves the following purposes:
- Situations that do not support the cost or time of a full real estate appraisal
- Real Estate Owned (REO) properties
- Pending Foreclosures or Foreclosure
- Short Sales
- An addition or a cross-check to an appraisal
- Due diligence by financial institutions
In most cases, Brokers will do either a drive-by BPO—because they do not have access to the interior of the property and must rely on exterior appearance, neighborhood information, comps, and other documentation—or Interior BPO—which is more thorough, it requires advanced contact with property residents, evaluation of the interior and exterior, measuring to verify room dimensions, and additional photos.
In essence, a broker price opinion determines fair market value in the surrounding area, thus it is essential to align yourself with a brokerage who is knowledgeable in property inspection, market evaluation, and property pricing.