Broker Price Opinions, or BPOs as they are called in the trade, are increasingly popular because they are cheaper than valuations carried out by registered property appraisers.
But there is growing concern that real estate agents who carry out BPOs are setting values extra low to ensure quicker sales. Also they are more often carried out on banks owned foreclosure properties and therefore having more of an impact where prices are already low, critics say.
Appraisers and consumer groups are calling for regulation and a crack down against cheap valuations. They say that BPOs costing just $50 are often done by real estate agents with no or minimal training compared with those costing hundreds of dollars but carried out by full trained professional appraisers with extensive knowledge of local markets.
The appraisal industry also points out that there is no regulation of BPOs and selling BPOs to value houses violates the law in 23 states. They add that BPOs exert a downward pull on the values of other properties because, under lending industry underwriting guidelines, appraisers must consider recent listing prices as well as sale prices.
David Berenbaum, executive vice president of the National Community Reinvestment Coalition, wants BPOs used as appraisal substitutes in distressed property transactions to be banned. He said that real estate agents 'develop hasty and inaccurate BPOs that underestimate' the value of bank owned and other distressed real estate.
Research from the Affiliated Appraisers shows that BPOs frequently understate actual market values by as much as tens of thousands of dollars. And the Appraisal Institute points out that not only do its members lose revenue when property owners or lenders order BPOs, but that it brings down standards.
The National Association of Realtors, whose 1.2 million members include many agents who prepare BPOs, says it has no policy guidance but expects to issue a statement in May.
