CMAs, broker price opinions and appraisals
Licensees talk about value every day. Florida law lets them, but it draws a clear line between a licensee's opinion of price and an appraisal.
Three ways to estimate value
| CMA | Broker price opinion (BPO) | Appraisal | |
|---|---|---|---|
| Prepared by | A broker or sales associate | A broker or sales associate | A state-certified or licensed appraiser (or a trainee under supervision) |
| Usual purpose | Helping a seller set a list price or a buyer decide on an offer | Often ordered by a lender, loan servicer or investor | Value for a loan, court case, estate or other formal use |
| Paid? | Usually free, as part of seeking or serving a listing | Usually a fee | A fee |
| May be called an appraisal? | No | No | Yes |
What Florida law says
Only appraisers do appraisals. Under Fla. Stat. 475.611(1)(a), "appraisal" or "appraisal services" means services provided by certified or licensed appraisers or registered trainee appraisers. The definition includes appraisal assignments, appraisal review assignments and "analysis assignments," a category that covers analyses and opinions given in connection with activities such as real estate brokerage. And 475.612(1) says only a certified or licensed appraiser may issue an appraisal report.
Licensees may still give value opinions, including for a fee. Two exceptions in 475.612 matter to sales associates:
- 475.612(2): A Florida licensed broker, sales associate or broker associate who is not a certified or licensed appraiser may provide valuation services for compensation, so long as he or she does not represent himself or herself as certified, licensed or registered as an appraiser. ("Valuation services" are services relating to the value of a property, 475.611(1)(cc).) So a licensee may be paid for a BPO.
- 475.612(3): The section does not apply to a broker or sales associate who, in the ordinary course of business, performs a comparative market analysis, gives a price opinion, or gives an opinion of the value of real estate. But that CMA, price opinion or opinion of value may never be referred to or construed as an appraisal.
The practical rules:
- A sales associate may prepare CMAs and price opinions.
- A sales associate may be paid for valuation services.
- A sales associate may never call the work an appraisal, or present himself or herself as an appraiser.
Federal limit on BPOs
Federal law defines a broker price opinion as an estimate prepared by a real estate broker, agent or salesperson that details the probable selling price of a particular property, with varying detail about the property's condition, market and neighborhood and information on comparable sales (12 U.S.C. 3355(b)). An automated valuation model is not a BPO.
In connection with the purchase of a consumer's principal dwelling, a BPO may not be used as the primary basis to determine the property's value for originating a residential mortgage loan secured by it (12 U.S.C. 3355(a)). The limit is narrow: it applies to loans made to buy a consumer's principal dwelling, not to every use of a BPO.
Exam tip: CMA and BPO are both opinions of probable selling price by a licensee. Neither is an appraisal, and neither may be called one.