Should I Get a Property Appraisal or a BPO?

Do you know how much your commercial property is really worth? There are two methods of assessing a property’s value, an appraisal or a broker’s price opinion (BPO).  Each one has its own purpose.  There is no need to spend more money than necessary on the valuation of your property.  In this article, I will talk about when properties need to be assessed by a certified appraiser and when it is ok to get a broker price opinion.

Appraisals

In an appraisal, the appraiser must be licensed with the California Bureau of Real Estate Appraisers. Appraisals normally include more thorough “macro” information, such as neighborhood characteristics and other outside factors affecting value.  A bank does not take a BPO into consideration when trying to evaluate financial risks of commercial real estate because BPOs are not as thorough as appraisals.

The reason that financial institutions get appraisals done is because they take on significant risk when lending money.  For example, a bank lends $1 million for a retail space when the true market value of the property is $900,000.  That means the bank is giving away $100,000, or a little over 11% of the true market value.  Banks must do their due diligence to make sure they are not lending any more money than they need to lend.  Sometimes banks will contact an appraiser themselves or will have a list of appraisers they trust in order to carry out accurate valuations. As banks are creditors of the property, an appraiser’s valuation is extremely important.

Broker Price Opinions

BPOs are more common because they are cost effective and do not require the same level of detail or time considerations as an appraisal.  In a BPO, it is a licensed real estate agent or broker giving their opinion on how much a property is worth.  A broker price opinion is sufficient if you are not acquiring a loan to purchase a property or trying to refinance a property, but still want a ballpark figure of how much your property is worth.  BPOs can be used for all kinds of things such as determining rental rates, finding the ideal time to sell your property, and more.  BPOs are less expensive and typically include an exterior inspection of the property and recent comparable transactions/listings. 

We Can Help You Get a Property Valuation (BPO)

BI agent Stuart Beilinson can help you assess your commercial property’s value.  His previous experience as a Senior Commercial Real Estate Agent for Coldwell Banker makes him the perfect candidate to perform a valuation for all asset classes.  If you are in need of a third-party estimate or simply want to know the value of your current assets, he can assess your property in a timely manner.  

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