BPO rules head to rules review commission
By David McGowan, Director of Regulatory Affairs, North Carolina Association of Realtors®
Temporary rules to govern the use of the Broker Price Opinions (BPOs) for a fee now head to the N.C. Rules Review Commission after being approved Sept. 5 by the N.C. Real Estate Commission (NCREC). If accepted without change, the temporary rules will be effective Oct. 1, 2012. Permanent rule-making will commence in early 2013.
The rules establish minimum standards that brokers must comply with in order to perform BPOs in exchange for a fee without the expectation of receiving the listing for the property.
Specifically, a broker shall:
- Only accept an assignment to provide a BPO or CMA if the broker has knowledge of the real estate market, direct access to real estate market sales or leasing data, and brokerage or appraisal experience in the subject property’s geographic location.
- Not provide a BPO or CMA for a property unless the broker can exercise objective, independent judgment free of any influence from any interested party in the performance of his or her analysis of the facts relevant to determination of a probable selling or leasing price.
- Not provide a BPO or CMA for a property unless the broker has personally inspected the exterior and interior of that property, provided, however, that an inspection of the exterior or interior is not required if this is waived in writing by the party for whom the opinion or analysis is being performed.
- When developing a BPO or CMA for a property or interest therein, a broker shall utilize methodology such as analysis of sales or income of sold or leased properties comparable to the subject property or capitalization as is appropriate for the assignment and type of subject property.
- When analyzing sales of comparable properties, a broker shall comply with the following standards:
- The broker shall select from reliable information sources a minimum of three sold or leased comparable properties for use in his or her analysis that are similar to the subject property with regard to characteristics such as property type, use, location, age, size, design, physical features, amenities, utility, property condition and conditions of sale. The comparable properties shall reflect the prevailing factors or market conditions influencing the sales or lease prices of similar properties in the subject property’s local market.
- The broker shall make adjustments to the selling or leasing price of selected comparable properties for differences between the characteristics of the comparable properties and the subject property as necessary to produce a credible estimate of the probable selling or leasing price. Adjustments shall be considered for differences in property characteristics such as location, age, size, design, physical features, amenities, utility, condition, economic or functional obsolescence and conditions of sales. The amounts of adjustments shall reflect the values that the local real estate market places on the differences in the characteristics in question.
- Address, in addition to matters required to be addressed by G.S. 93A-83 and other provisions of this rule, the following items:
- a description of the comparable properties used in the analysis (including any unsold properties listed for sale or rent that were used as comparables)
- the adjustments made to the selling or leasing prices of comparable properties
- local real estate market conditions
- and each method used in deriving the estimate of probable selling or leasing price.
- In connection with a BPO or CMA, an estimated probable leasing price may be reported by a broker as a lease rate and an estimated probable selling or leasing price may be reported by a broker either as a single figure or as a price range. When the estimated probable selling or leasing price is stated as a range and the higher figure exceeds the lower figure by more than ten (10%) percent, the broker shall include an explanation of why the higher figure exceeds the lower figure by more than ten (10%) percent.