Ask any good mechanic, and they will tell you to use the right tool for the job.
More sales associates are preparing broker price opinions, but when third parties are involved, you open yourself up to new liabilities. Here are the top risks you need to know about.
1. Not having a policy. Your broker should have a policy that spells out when it’s appropriate to prepare a BPO, what you can charge, who handles the fees, and who keeps records. Not having a policy is risky for you and your broker because state law could impose a penalty if BPOs are prepared improperly or mischaracterized. A BPO fact-finding group in Nevada found that in most cases, real estate professionals were preparing and getting paid for BPOs without their brokers even knowing about it. "There was no record-keeping," says Pamela Kinkade, a member of the Nevada BPO task force. "And that’s a big part of our law."
2. Using the wrong terminology. Appraisers determine property market value; sales associates preparing a BPO determine a recommended property price. Make sure that third parties aren’t calling your BPO a "market valuation," which is the work of appraisers.
3. Breaking state laws. State regulations governing BPOs vary greatly. Nevada, for example, permits real estate licensees to prepare BPOs for clients only in a sales transaction. Many states don’t allow fee-based BPOs. Some states require that BPOs include a disclaimer that they are not appraisals and are not to be used for lending purposes. Certain laws also require that only appraisers provide an opinion of market value, and that BPOs must be limited to determining a purchase or sales price. Be sure to investigate what’s legal in your state.
4. Being uninsured. If your E&O policy doesn’t specify that it’ll cover liability for BPOs, get a policy that does. "Most brokers have no coverage for liability arising out of the purpose for which the BPOs are being done," says Kinkade.
WHERE DOES IT SAY ANYTHING ABOUT THE DANGER OF GETTING VALUATION SERVICES FROM THE UNQUALIFIED, UNLICENSED, UNINSURED ?
Oh, one more thing in my state NJ, it is illegal for a real estate salesperson, or broker to prepare a BPO for any purpose other than setting list price.