A real estate agent is preparing a Broker's Price Opinion (BPO) for a lender. The subject property has a unique architectural style that makes it difficult to find truly comparable sales. To provide a credible BPO, what should the agent prioritize when selecting comparables?
- AUsing only properties with identical architectural styles, even if they are older sales or far away.
- BFocusing on properties with similar square footage and bedroom count, even if sold in different market conditions.
- CSelecting properties that are geographically close and recently sold, making adjustments for architectural differences.
- DRelying solely on the tax assessed value, as unique properties are hard to compare.
Show answer & explanationAnswer & explanation
Correct answer: C. Selecting properties that are geographically close and recently sold, making adjustments for architectural differences.
When dealing with unique properties, it's often more important to prioritize recent sales and close proximity, as these factors significantly influence market value. While architectural style is a factor, it can be adjusted for. Distant or old sales in different market conditions, even with identical architecture, would likely lead to less accurate results. Geographic proximity and recency are usually paramount for market relevance.
Why the other options are wrong
- A. Prioritizing identical architecture over recency and proximity can lead to outdated or irrelevant data in a BPO.
- B. Ignoring market conditions (time of sale) is a critical error, especially with unique properties where market trends might be subtle.
- D. Tax assessed values are generally not reliable indicators of market value and should not be solely relied upon for a BPO.
BPO Comparable Selection
For a Broker's Price Opinion, the most critical factors for comparable selection are typically geographic proximity and recency of sale, allowing for adjustments for property characteristic differences.
- Proximity and recency are key.
- Adjust for differences in features.
- Tax values are not market values.
Memory trick: Location 'L'eads, 'R'ecency 'R'eigns, 'A'djustments 'A'llow.