Comps, CMAs, BPOs and Appraisals

There are many, many different ways to ask about your home’s value. Some are more detailed than others, some may look a little more slick, but all should get you to roughly the same place. Here’s a look at your options in the Phoenix real estate market:

1) Comps. This usually is little more than a rundown of sales for similar homes in your area. From these, you can determine the average price per square foot, add or subtract depending on upgrades and other features unique to your home, and arrive at a pretty decent estimate of your home’s value.

The key is finding similar properties – if you own a home in a golf course community but are not on the golf course, you shouldn’t look at sales of golf course homes to determine what your home might be worth. There’s a premium that comes with a golf course or lakeview lot but that premium varies greatly from neighborhood to neighborhood and from one market to the next.

2) CMA, or Comparative Market Analysis. This starts with the same comps but adjusts for the upgrades so as to create an apples-to-apples comparison between properties. Common adjustments are for 3-car garages, pools, larger lots, upgraded interiors and the like. Think of a CMA as being like the comps, except all the adjustment work already has been completed.

3) BPO, or Broker Price Opinion. Sounds really impressive doesn’t it? Truth of the matter is a BPO is an expanded CMA. Much more information is included, such as competition from new homes (if there’s actually new home construction anywhere near you) and the BPO focuses on three closed sales and three active sales in order to determine your home’s value.

Now, want to know a helpful little secret from someone who’s done many, many BPOs? Agents completing a Broker Price Opinion nearly always run a basic set of comps and adjust CMA-style to determine roughly what a home’s value might be. Half of what you see in a Broker Price Opinion is window dressing. But, man, it sure does sound official and all, doesn’t it?

4) Appraisal. These only can be completed by a certified appraiser (all the other three can be completed by a real estate agent only if they have a reasonable expectation of gaining a listing, or so say the rules.) Many view appraisals as values etched in granite and sent down from Mount Sinai but they’re anything but. Appraisals vary considerably depending on whether they’re being conducted for a loan, for a refinance, or just for the sheer fun of it all. The reason? Appraisers determining value are hired by the bank to ensure the bank isn’t taking on too large a risk, so those values always will be lower than a refinance appraisal where there’s (presumably) equity already and far less risk.

And while my friends in the appraisal industry will disagree as I pull back the curtain a little further – an appraisal shouldn’t be all that much different than the value that can be determined by looking at the comps.

None of these methods are perfect; my past two years have been spent battling ludicrous appraisals and even more ludicrous BPOs conducted on behalf of one lender in short sale negotiations, not that I want to mention Bank of America by name.

But if you’re looking for a ballpark figure as you decide whether or not to sell or buy, any will do the trick.

About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.