Why broker price opinions (BPO) may cut home values

Kenneth Harney:

Are lowballed valuation estimates on short sales and bank-owned foreclosures artificially depressing property values in neighborhoods across the country?

Growing numbers of appraisers and consumer groups believe the answer is yes - and are demanding that either Congress or state regulators crack down. Their complaints focus on what are called "broker price opinions," also known as BPOs, that substitute for actual appraisals.

Unlike standard property valuations performed by licensed appraisers - which can run to hundreds of dollars - the opinions often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight. Realty agents defend the opinions, arguing that their extensive knowledge of local market trends equips them to render accurate estimates.

The opinions have become a booming business as foreclosures and short sales have risen sharply. When banks that own foreclosed houses need to put values on them for resale, increasingly they order opinions that can be delivered quickly at rock-bottom fees.

Short sales - when a lender agrees to take less than the principal amount owed by a delinquent owner provided the property is sold to a new buyer - also frequently entail use of the opinions.