BROKERS PRICE OPINION OF RURAL PROPERTY

Knowing what a property is worth is the basis of any real estate decision. Enlisting a knowledgeable land broker when buying or selling rural property is fundamental and one of the main functions they can provide is their estimate of most probable sales price for a particular property.

What is a comparable market analysis (CMA)?

A Comparable Market Analysis (CMA) is frequently used for residential property. The report consists of a list of actual sales of properties very similar to the subject property. The CMA usually includes minimal analysis and does not require an interior inspection. This report is excellent for single family residential located in subdivisions.

What is a Brokers Price Opinion

Rural property is very different from a single family residence in a subdivision. A Brokers Price Opinion is probably better suited for rural property. Typically the BPO report will include a detailed description of the property together with an interior inspection. The subject neighborhood is usually described. It usually has an analysis of the different factors regarding several comparable sales and listings. The BPO will generally have more information and analysis than the CMA.

What a BPO or CMA Report is not.

Neither a BPO or a CMA is an appraisal nor an estimate of market value. In fact, the terms appraisal and value should not be used in either report. Having said that, the estimate given you by a knowledgeable land agent will probably be accurate of the probable sales price.

A BPO or a CMA report is not a property inspection. A property inspection reports on construction issues such as condition or governmental compliance.

Who prepares a BPO or CMA?

In Texas any licensed agent can write either a BPO or a CMA however it must be signed by the sponsoring broker. The Texas Real Estate Commission (TREC) allows an agent to charge a fee for preparing these reports.

Each report must include the following disclaimer in size 12 font or larger;

“This represents an estimated sale price for this property. It is not the same as the option of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice.”

What is the difference between a BPO and an appraisal?

An appraisal is an estimate of market value of a particular property as of a certain date. It is fully documented with a description of the property and neighborhood, appropriate data fully analyzed, list of contingent conditions and a certification of value.

An appraisal must be prepared by a state certified appraiser. The BPO must be prepared by a licensed agent along with the brokers signature.

The writer of the BPO has a financial interest (commission) in the property while the appraiser does not. This goes to perceived objectivity and is one reason almost always a lender will require an appraisal. The appraiser does not provide any additional advice or counsel. The land broker will provide consulting and advice in addition to the report.

What is a BPO used for?

A BPO report is first and foremost a decision making tool. It is very much a part of proper due diligence. Regardless of whether the client is a potential buyer or seller, an objective market based estimate of price rather than one based on sentiment or individual circumstances is essential.

The time and effort involved in preparing a BPO is significant. Accordingly, they are usually performed on a fairly substantial property.

Ideally the situation would involve an owner who has decided to list or a buyer who is serious about purchasing a particular property. If a prospective seller is the client, the land broker will ask for as much information as is possible to include surveys, mineral ownership, etc.

Some land brokers will provide a BOP on other than the subject property but will charge a fee for the report.

What should a BPO include?

The amount of information and analysis in The BPO will vary depending upon the property and what the client requires. The content of the report is negotiable but the following represents a typical minimum.

County Appraisal District account information
Disclosure Statement
Utilities to include water, electricity, sewer, phone, internet
General neighborhood boundary
Site improvements to include fencing, ponds, barns, etc.
Current competitive listings
Last two years comparable sales
Analysis data grid
Road frontage and access
Floodplain and wetlands

SUMMARY.

One of the most valuable services a potential land broker can provide their client is a thorough Brokers Price Opinion. If you are at the point of listing or buying a substantial rural property, ask your broker for a BPO.

LET US HEAR FROM YOU

Please share your experience with Broker Price Opinions. Did your land broker offer this service? Would you be willing to pay for a BPO?

CHECK IN WITH US

Allen Realty Advisors represents buyers and sellers of fine quality rural land near Houston. We specialize in weekend retreats, country estates, farms and ranches, recreational property and investment land. Our market area is generally within 100 miles (two hours) of Houston.