It is common practice for small balance and private money lenders to rely on commercial BPO reports (Brokers Pricing Opinion) when providing small balance loans to borrowers.
The reason for the BPO report is to meet funding time constraints and costs.
The Commercial BOV or BPO is a fraction of the cost of commercial real estate appraisals and can be delivered to the lender within 24 – 48 hours.
Commercial BOV’s and BPO’s are provided by brokers nationwide. Most brokers specialize in their field or asset type.
The above lenders’ LTV (loan to value) are typically low and so are the loan amounts. The lenders deem these transactions to be low risk as compared to the larger commercial loans…hence, the popularity of the Commercial Broker Price Opinion BOV or BPO report.
Unlike a full blown certified appraisal issued by a certified appraiser, the Commercial Broker Price Opinion BOV or BPO is only an opinion of the price of a property if it were being placed on the market for a sale. It is not a report that leads into the value of a property such as a certified appraisal would reflect.
The Commercial Broker Price Opinion BOV or BPO takes into account (when available) comparable sales of like-for-like properties, cost per square foot comparables or per unit comparables, lease comparables, capitalization rate comparables and gross rent multiplier (GRM) comparables.
This along with other economic and financial factors of the borrower is also surveyed and considered.