![]() ![]() These opinions would logically encompass suggestion of appropriate pricing for the listing, purchase, or lease of a property (i.e., a fundamental activity performed by brokers). Therefore, licensed real estate brokers may provide opinions of value in connection with brokerage activities. The term ‘appraisal’ does not include an opinion given by a real estate licensee or engineer or land surveyor in the ordinary course of his or her business in connection with a function for which a license is required…and the opinion shall not be referred to as an appraisal.”(6) “‘Appraisal’ means the act or process of developing an opinion of value for real property. In California, broker opinions of value are generally not considered “appraisals.”(5) Section 11302(b) of California’s Business and Professions Code defines the term “appraisal” to explicitly exempt opinions of value for real property made by licensed real estate brokers in connection with their brokerage activities. The Bureau of Real Estate regulates licensed California brokers and can discipline its members for professional violations.(2) In addition, California has enacted a comprehensive statutory scheme to ensure brokerage professionals comply with applicable laws and regulations.(3) Licensed California appraisers, who render opinions of value pursuant to stringent professional standards, are subject to their own statutory regulation.(4) ![]() As an added benefit, broker opinions of value typically cost less than a formal appraisal (perhaps explaining the increased usage of these opinions in modern California real estate transactions).Ĭalifornia Law Differentiates Broker Price Opinions of Value From Appraisals In Certain Circumstances Owners or prospective purchasers may rely on a broker’s opinion of value to determine a suggested listing or purchase price. Now, broker price opinions are commonly used in many arenas-for example, property owners seeking to determine a fair market rental price for a lease arrangement often rely on broker opinions of value to determine a reasonable rental rate. Over time, the real estate community utilized broker price opinions in other contexts, outside of the foreclosure market. Banks, in particular, used these evaluations to inexpensively and efficiently evaluate the approximate fair market value of a property, instead of investing in a detailed, costly, and time-consuming appraisal. Only a licensed appraiser can provide an appraisal.īroker’s price opinions initially gained prevalence in foreclosure sales. ![]() The broker provides this evaluation to suggest a selling or listing price, potential offer price, or general assessment of a California property’s value as it pertains to a possible purchase, sale, or lease.(1)īy contrast, an appraisal is a formal report prepared by a licensed California appraiser pursuant to established, often data-driven metrics, for determining value. Is a Broker Price Opinion of Value an “Appraisal” Under California Law?Ī broker’s price opinion of value and an appraisal each provide a way to assess the estimated market value of a property.Ī broker’s price opinion of value, in the context of this article, refers to a licensed California broker’s evaluation of a property’s worth. In response, this article addresses the legal parameters of providing broker opinions of value in California, and concludes that in almost all circumstances, brokers can continue to do what they have always done-use their expertise to advise clients as to property value. This guidance includes, perhaps most importantly, input as to a possible listing or offer price, based upon the broker’s assessment of the property’s worth.Ī recent article in a trade magazine suggested that a broker providing such an opinion may violate the rule requiring an appraiser’s license to render an opinion as to value. As licensed professionals whose day-to-day work requires a multifaceted understanding of a property’s potential value, brokers occupy a unique position to provide specific pricing guidance to their clients. Licensed California brokers provide an essential resource for their clients. Written By: Lee Dresie and Lauren Fishelman of Greenberg Glusker ![]()
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