ORS 696.010(7) defines CMA. ORS 696.294 defines BPO.
For many years, “competitive market analysis” (CMA) and “letter of opinion” or “broker price opinion” (BPO) were terms of art used to describe the analysis and opinion used by real estate brokers when establishing a listing price. Competitive market analysis was intended to convey the idea that what was being analyzed was the housing market to determine a competitive listing price. Broker price opinion was used to distinguish the work of brokers from that of appraisers.
Eventually, “competitive market analysis” and “letter of opinion” (BPO) came to be defined in statute. According to ORS 696.010(7), “Competitive market analysis” means a method or process used by a real estate licensee in pursuing a listing agreement or in formulating an offer to acquire real estate in a transaction for the sale, lease, lease-option or exchange of real estate. “The object of a CMA must be “a recommended listing, selling or purchase price or a lease or rental consideration.” A “letter of opinion” is
‘a document that expresses a real estate licensee’s conclusion regarding a recommended listing, selling or purchase price or a rental or lease consideration of certain real estate and those results from the licensee’s competitive market analysis.”
Administrative rules have been used to flesh out these statutory definitions. All is thought necessary to distinguish a broker’s opinion on “price” from an appraiser’s opinion of “value.” As the real estate lending market heated up in the 1990’s, banks were able to successfully lobby Congress to loosen appraisal rules for residential lending. The federal rule change caused something of a legal dust-up between lenders and appraisers that untimely lead to an exception being carved out of the (brokers do price opinions and appraisers do value opinion) paradigm. This compromise and the traditional rules that distinguish BPO’s from appraisals are now found in a single administrative rule.
OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter of opinion in the normal course of their business.
OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter of opinion in the normal course of their business. The authority, however, is expressly limited to the “pursuit of a listing, to assist a potential buyer in formulating an offer or to provide a broker’s price opinion, weather or not done for a fee” This limitation applies whether the opinion is done for a fee or not.
The rule specifically declares that the term “value” when used in a CMA or letter of opinion is not intended to mean or imply “value” as used in appraisals. To make certain there is no confusion, the rule requires that a CMA or BPO be in writing and contain the following: “(a) A statement of purpose and intent; (b) A brief description of the property;
(c) The basis of reasoning used to reach the conclusion of value including the applicable market data and/or capitalization computation; (d) Any limiting conditions; (e) A disclosure of any existing or contemplated interest of the licensee in the subject property; (f) The signature of the licensee issuing the competitive market analysis or letter of opinion and the date of its issuance; (g) A disclaimer that, unless the real estate licensee is also licensed by the Appraiser Certification and Licensure Board, the report is not intended to meet the requirements set out in the Uniform Standards of Appraisal Practice; and (h) A disclaimer that the competitive market analysis or letter of opinion is not intended as an appraisal and that if an appraisal is desired, the services of a competent professional licensed appraiser should be obtained.” Click Here for a sample letter of opinion form.
CMAs and BPOs have become an ordinary part of professional real estate activity. If the dictates of OAR 863-015-0190 are followed, there are few problems. When the requirements of the rule are not followed, however, the result can be violations of real estate license law. It is, for instance, a violation of ORS 696.301(8) to accept employment or compensation “for the preparation of a competitive market analysis or letter of opinion that is contingent upon reporting a predetermined value or for real estate in which the licensee had an undisclosed interest.” But, far and away the most common violations result from agents doing CMAs and BPOs for purposes other than in “pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion in pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion.”
A common way in which the limitation placed on the authority to do CMAs and BPOs is to do them for a home owner challenging a property tax assessment or a lawyer in a divorce case or other real property action. It is not that CMAs and BPOs cannot be used in such context; rather it is that often the agents hired forget they cannot offer opinions of value and must use their CMA and letter of opinion authority only in pursuit of a listing or to aid a buyer in making an offer. A seller who received a letter of opinion in contemplation of selling the property might later use the letter to contest a property tax assessment, but the agent could not provide the letter for the purpose of contesting the property tax assessment. It is for this reason, that every letter of opinion should be accompanied by a cover letter that explains its purpose. Click here for a sample letter of opinion cover letter.