BPO/BOV: Broker Price Opinions in Commercial Real Estate

What is a BPO in Commercial Real Estate? 

A BPO, or broker price opinion (also known as a BOV, or broker opinion of value) is an estimate provided by a real estate broker to help a potential investor know how much to bid for a property. A BPO/BOV is not held to the same standard as an appraisal, but it is typically faster and less expensive. 

When creating a BPO/BOV, a broker usually takes a few different approaches, including: 

  • Sales Comparison: A broker looks at comparable properties to see how much they have sold for, in particular, those that have sold in the last 6-12 months.

  • Income Capitalization: The broker looks into how much income the property can make. To do this, they can calculate income via two different methods:

    • Direct Capitalization: Looks at net operating income (NOI) using a cap rate.

    • Discounted Cash Flow Analysis: Looks at the time value of money by using projections of future cash flow and discounting them.

  • Cost Analysis: Looks at how much it would cost to reproduce the property itself.

BPOs vs. Traditional Appraisals 

Appraisals for multifamily and commercial real estate can be pricey (often costing between $5,000 and $25,000) and time consuming (often taking between 3-6 weeks.) In comparison, a BOV can be more cost efficient, often costing between $250 and $2,500, and only taking a few days. So, no matter what type of property you're considering purchasing-- whether it's retail space, an office building, or even a hotel property, it pays to get a BPO/BOV before bidding.

To learn more, speak with a commercial real estate loan specialist today.

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