Understanding Florida Property Valuations

Are you looking to sell or refinance a property in Florida? If so you will eventually require an official valuation of the price. In obtaining a valuation you have three options.  You can get a broker price opinion, a comparative market analysis, or an appraisal. These terms refer to three distinct types of property valuation that should not be confused with each other. In understanding which of these valuation options best match your requirements, it’s important to know who makes them, what they consist of, how they are done and when it’s appropriate to obtain them.

Ultimately, you can rely on an experienced Florida real estate attorney to help you decide which valuation option you need based on your circumstances.

Who does property valuations?

“Appraisal” is a protected term reserved only for property valuations conducted by a state-licensed and state-certified appraiser.  Likewise, a registered trainee appraiser can also do an appraisal under specific circumstances.

Broker price opinions (BPOs) and comparative market analyses (CMAs) are terms used to describe types of valuations performed by real estate licensees.  These are “broker services” and are necessarily conducted by someone who is not a state-licensed, state-certified or registered trainee appraiser.  These cannot in any circumstances be called an “appraisal.” 

Only real estate licensees are authorized to conduct BPOs or CMAs. Furthermore, BPOs must be performed under the direction and control of a broker, and payment for BPOs must be made directly to the broker. Sections 475.25(1)(t) and 475.01, Florida Statutes govern these rules and include disciplinary action that includes fines and potentially the loss of one’s real estate license if one is found to be in violation.

What?

A broker price opinion, or BPO, is a property dossier that includes the professional estimation of a property’s value based on a real estate agent’s observations. If the property is a residence, a BPO may include such information as the number of bedrooms/bathrooms, the area in square feet, the acreage of the plot of land and a survey of surrounding properties. Some brokerages provide more in-depth information in their BPOs with a wide degree of variance between providers.

A comparative market analysis or CMA is a document that includes some of the basic elements of the BPO, but places more emphasis on the property’s relative value based on comparable properties in the area. In particular, a CMA estimates the value based on the sale price of other properties sold recently within the same vicinity. The final value in the CMA depends on the comparable state of the client’s property versus other properties in the analysis.  The market data included in the CMA could be extensive, making CMA’s typically longer documents than BPOs.

Appraisals are detailed reports based on information obtained from an appraiser’s careful inspection of a property’s interior and exterior.  While BPOs and CMAs give client’s a good idea of the list price of a property, the appraisal process is designed to gauge the eventual sale price of the property, an important distinction.

Besides examination of the site and the property, the appraiser includes similar elements to that of a CMA in the analysis by making in-depth observations about adjoining sites, the neighborhood or district of the property.  Appraisers scour their findings for data that can impact the property’s appeal and marketability. Adjustments are then made to the base price depending on the factors determined in the appraiser’s report.

Unlike BPOs and CMAs which are usually done by real estate agents with a stake in the outcome of the deal, the appraiser must be an unbiased third party with no conflict of interest. According to Florida statute appraisers must also maintain a detailed archive of their work. If asked, they must be able to explain how they arrived at the conclusions they made in the appraisal.

How?

To create a BPO or CMA report, the broker or agent will do an exterior inspection of the property and drive through the property’s neighborhood. In many cases, agents will meet the property owner and may inspect the interior of the property. However, this is not a requirement and is often not done. Instead, a broker or agent will lean on data, usually via local real estate listings (using the MLS or public records). 

Appraisers, by contrast, are required to be more thorough in their due diligence.  They must meet the property’s owners, enter the property and ensure that their comparative analysis shows no bias.  The levels of legal accountability are higher in appraisal work.

“Unlike BPOs and CMAs which are usually done by real estate agents with a stake in the outcome of the deal, the appraiser must be an unbiased third party with no conflict of interest.” 

When?

Since BPO’s don’t require any contact with the property owners, they’re often used to determine the value of foreclosed homes. Also, because BPOs can be done quickly and are generally less expensive, many sellers opt to use them to get an idea of a good list price.

CMA’s are often done by buyer’s agents on behalf of the clients to determine if the home is worth what is being asked and so the buyer can make an informed decision.

Appraisals are often done when they are required such as when a bank asks for an official appraisal or when an owner is appealing their property taxes. 

The importance of a Real Estate Lawyer

If you are unsure of whether to do a BPO, CMA or appraisal, then it’s best to seek the advice of an experienced Florida real estate attorney. At South Florida Law, we specialize in providing high-quality advice to buyers, sellers and brokers to ensure that real estate transactions run smoothly and efficiently.  Buying or selling real estate in Florida and need advice on how to conduct a valuation of your property?  Reach out to us today via our contact form, or on (954) 900-8885.

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