A broker opinion of value (BOV) is a method of estimating the value of a property. Typical reasons for ordering a broker price opinion include estimating value prior to purchase or sale, understanding collateral value when securing a new loan or refinancing, estimating liquidation value, or providing a second opinion on an existing appraisal. The end result is an educated valuation of a property based on an assessment of the market and property.
How does a BOV differ from an appraisal?
• Practitioner – A BOV is conducted by a real estate broker while an appraisal is performed by an appraiser.
• Scope – There are three basic appraisal approaches: the cost approach, income approach, and sales comparison approach. An appraisal will consider all three. BOV may or may not use all three approaches. A BOV prepared by RSG will include all three approaches.
• Standards – An appraisal is written in light of Uniform Standards of Professional Appraisal Practice so it must meet the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice set forth by the Appraisal Institute. These standards help maintain a degree of objectivity. A BOV may not be objective. Usually the brokers are hired by the landlord or owner to do the appraisal. When conducting a BOV, RSG strives to maintain objectivity and fairness when assessing a property’s value.
So why should you choose a BOV instead of an appraisal?
• Cost – A BOV incurs a fraction of the cost of an appraisal. And some firms (like RSG) uphold the standards and comprehensiveness of an appraisal without the high price tag.
• Time – Because there are fewer standards for a BOV, it can be done in a relatively shorter time.
• Marketing – A BOV can be used as a marketing tool. Because there is not standard format for a BOV, a broker may choose to include pictures, market data, and other elements.
Written by Jeff Khau, an Analyst at RSG.