The Differences Between an Appraisal, Comparative Market Analysis and Broker Price Opinion

Many people know what an appraisal is or they’ve heard of a Comparative Market Analysis (CMA) and Broker Price Opinion (BPO); many don’t usually know the differences between them.

The appraisal is an unbiased opinion of value of a purchase, listing or refinance. The appraisal report contains exterior and interior property photos, physical data on the property including square footage of the living area, size of the lot, condition description, items that may need repair and the type of construction materials needed. Neighborhood and surrounding community information is also analyzed and included in the report because this information directly affects property values. Appraisals can be used by banks, insurance companies, homeowners and any other interested party that wants to know the market value of the property. Appraisals are also used for construction loans, insurance and tax valuations and estate planning.

Real estate agents perform a CMA when needing to come up with an initial listing price. This typically free report contains information on recently sold homes, pending sales, active listings, cancelled, expired and withdrawn listings. The CMA is a qualitative comparison, where the home features are compared to each other. Although this is not the rule, dollar adjustments are rarely used. Agents look at the different types of listings and homes similar to the subject home then decide what they sold for, how long it took to sell and the difference between the sales price and the listing price. This information is used to determine a competitive initial listing price for the home.

In years past, the BPO was considered a formal more concise version of the CMA. However, in recent years, the BPO has become has come to being used as a time and money saving alternative to the appraisal. Today’s BPO includes much of the same information used in an appraisal to determine the current Fair Market Value of a property. Where the CMA is used to establish an initial listing price the BPO establishes the current value of the property in both an “AS-IS” and “REPAIRED” condition.

In addition to homeowners ordering them, they can be ordered by a bank or lender, Probate Courts and others that need to value a property that may be in the process of a legal action. Homeowners typically order them when they a contesting a property tax evaluation or are considering a remodeling project to ensure they are not overbuilding for a neighborhood.