Learn how a Broker’s Opinion of Value can help you buy or sell multifamily assets
Thinking of selling or bidding on a multifamily property? Before you do either, it’s essential that you know the true market value of the asset.
For owners, underpricing or overpricing your property when you sell can dramatically affect your return on investment. If you price your asset too low, you’re missing out on money that you could use to fund your next investment. If you price too high, you risk the property being left sitting on the market for an extended period of time, becoming increasingly less appealing to prospective buyers as the weeks pass.
For buyers, you may only get one chance to make an offer on your ideal multifamily investment property. That’s why it’s crucial that you know how much to bid.
In both cases, this is where a Broker’s Opinion of Value comes in.
What is a Broker’s Opinion of Value?
A Broker’s Opinion of Value (BOV), also known as a Broker Price Opinion (BPO), is an analysis provided by a licensed real estate broker to assist a buyer or seller.
A BOV will help a seller decide the right listing price for their multifamily asset, and will help a buyer decide upon a suitable bid for purchase.
What’s the difference between a Broker’s Opinion of Value and an appraisal?
While a Broker’s Opinion of Value is less detailed than an appraisal, it’s a valuable tool to make sure you’re listing your property for—or bidding at—the right price.
A BOV is also significantly less expensive and quicker to obtain than an appraisal. An appraisal must be conducted by a licensed appraiser and can take as long as 3–6 weeks; a BOV often takes only a few days to be completed.
Note that a BOV is also different from a Comparative Market Analysis (CMA), which is primarily used in residential real estate.
What does a Broker’s Opinion of Value include?
When conducting a Broker’s Opinion of Value, your broker will analyze the property in the market to understand what the value is. At 100Units.com, we use both the income approach and the sales comparable approach to analyze multifamily properties.
Using the income approach, we gather all of the income and expense information for the property. We typically look at the rent roll to get an idea of the gross income, then subtract the expenses and vacancy to put together the net operating income. We then use the appropriate market cap rate to calculate the price of the asset.
Using the sales comparable approach, we also look at the comparable properties that have recently been sold and compare them on a price per unit, price per square foot, and cap rate basis.
As the final component of the Broker’s Opinion of Value, we research the available financing that a new buyer would be able to get, or indeed what the owner themselves could use to refinance the property. We also look at the active buyers in the market, and any 1031 Exchange buyers that we are dealing with at that time. That way, when we’re going over your BOV with you as a seller, we’re able to present the buyers who are the most likely prospects, as well as discussing the available financing options.
Why do I need a Broker Opinion of Value?
Whether you’re a buyer or a seller, it’s important to understand that anyone can write a value of a property on a piece of paper.
An experienced multifamily broker will give you a figure that’s based on the facts, and is a reasonable amount to anticipate a buyer will actually pay for the property.
With a comprehensive Broker’s Opinion of Value from an experienced multifamily broker, you have a price that reflects the true market value of the property you’re hoping to sell or buy.
How do I get a Broker’s Opinion of Value?
Whether you are looking to buy or sell a multifamily asset, the team at 100Units.com are here to help. Our experienced multifamily brokers have several years of combined experience helping buyers secure the right property at the right price, and helping sellers maximize the return on their investment.
Contact us today to learn more.
Be the first to know with our new property alerts! You’ll find the subscription box at the bottom of the homepage.
For more investor insights, you can follow us on Facebook and LinkedIn, plus you can subscribe to our YouTube channel.
]]>