Broker price opinions (BPOs) may be used to support an appraisal or evaluation, but not in lieu of an appraisal or evaluation. The Interagency Appraisal and Evaluation Guidelines (“Guidelines”) specifically state that a BPO should not be used instead of an evaluation: “For example, a valuation method that provides a sales or list price, such as a broker price opinion, cannot be used as an evaluation because, among other things, it does not provide a property’s market value.” Section XII, Evaluation Development, of the Guidelines. The Guidelines also note that the Dodd-Frank Act prohibits the use of BPOs as the “primary basis” for determining the market value of property in the context of mortgage loans secured by a borrower’s principal residence. 12 USC 3355. However, the guidelines state that BPOs and other sources of information about property values “while insufficient as an evaluation, may be useful to develop an evaluation or appraisal.”

We also note that legislation may pass the Illinois General Assembly this year that further regulates the use of BPOs. The legislation, Senate Bill 3044, as amended by House Amendment 1, would limit when brokers may provide BPOs and would impose format and content requirements for BPOs. The legislation reiterates that BPOs cannot be used as the “primary basis to determine the market value of an interest in real estate for the purpose of a mortgage loan origination by a financial institution secured by such real estate.” You can follow the progress of this legislation on the Illinois General Assembly’s website here to check for updates (the bill currently has a deadline extension until May 30, 2014).