NC Real Estate Commission: BPOs Can Violate Appraisers Act

We’ve touched on this issue before, but the North Carolina Real Estate Commission feels this issue is important enough to write about it in the March 2011 issue (page 4) of the Real Estate Bulletin.

According to the NC REC, brokers are well within their rights to perform a Broker Price Opinion (BPO) if it is reasonable to expect that the broker will end up listing the subject property:

A broker who is not also a licensed or certified appraiser may provide a BPO only under the circumstances allowed for CMAs: a broker may receive a fee for performing a CMA or BPO as long as the CMA or BPO is performed for a present or prospective seller or buyer brokerage client on the property which is the subject of a present or prospective brokerage agreement. There must be a genuinely reasonable likelihood that the broker will enter into a brokerage agreement as a seller’s or buyer’s agent for the property that is the subject of the BPO for this exception to apply.

Ok, fair enough.  But what about the myriad of BPO’s performed by agents at the request of lenders for properties that are already listed?  According to the article, if there is no mention of the purpose of the BPO and no mention of whether the broker might receive the listing, then the broker has no reason to think he may receive the listing.  So, according to the Commission, it is unacceptable for the agent to perform the BPO.

Regardless, BPO agents continue to fill requests for lenders on properties that are already listed with other agents.  What gives?  Well, considering that a BPO can usually be ordered for $50-$100, and a full appraisal can run from $300-$400, banks are more inclined to save a few bucks and go with the BPO (especially for lower-priced properties).  Many of these BPOs are done for short sales, and most short sales (at least those with retail buyers) do not close.  So, if you’re a bank and faced with hundreds or thousands of files, many of which will not close, which property valuation method would you choose?  The BPO of course!

The Commission stated in the article that:

Anyone who obtains a copy of a BPO that appears to have been done in violation of the Appraisers Act may send a complaint to the North Carolina Appraisal Board and to the North Carolina Real Estate Commission. Both agencies will open and investigate the complaint and take whatever action is deemed necessary.

Of course, the lender is not likely to complain.  Lenders are well-versed on appraisal and real estate law; they know what they are doing when the request a BPO.

But as long as real estate agents need work and lenders need property valuations at economical prices, BPOs will continue in North Carolina, at least until the Real Estate Commission takes a proactive approach to curbing them.

certified appraiser may provide a BPO
only under the circumstances allowed
for CMAs: a broker may receive a fee
for performing a CMA or BPO as long
as the CMA or BPO is performed for
a present or prospective seller or buyer
brokerage client on the property which
is the subject of a present or prospective
brokerage agreement. There must be a
genuinely reasonable likelihood that the
broker will enter into a brokerage agreement
as a seller’s or buyer’s agent for the
property that is the subject of the BPO
for this exception to apply.
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