Broker Opinion of Value vs an Appraiser's Valuation

When a Utah building owner asks "what is my property worth?", there are two common ways to get an answer. One is a broker opinion of value, usually called a BOV. The other is a formal valuation from a licensed or certified appraiser. They sound similar, but they are built for different jobs, and using the wrong one can cost you time or money.

Here is what each one is, when you need which, and what to send a broker so the BOV is actually accurate.

What a broker opinion of value is

A BOV is a licensed real estate broker's estimate of the price your property would likely bring in today's market. A commercial BOV usually includes:

• A value or a value range
• How the broker got there, often an income approach (NOI divided by a cap rate) plus recent comparable sales
• The assumptions behind the number, such as vacancy, expenses and lease terms
• Thoughts on who the likely buyers are and how to position the property

Utah law allows this. Under Utah Code 61-2g-301, a licensed principal broker, associate broker or sales agent may give an opinion of value in the ordinary course of business to a potential seller or buyer when recommending a listing or purchase price. The same section says that kind of opinion may not be presented as a formal appraiser's valuation. That is why a BOV should always say clearly that it is not an appraisal.

Brokers usually don't charge for a BOV. Be honest with yourself about why: the broker hopes to earn your business if you decide to sell. That is not a reason to distrust a BOV, but it is a reason to ask the broker to show their work.

What a licensed appraiser's report is

A licensed or certified appraiser is an independent professional whose job is to produce an opinion of value with no stake in whether you sell. In Utah, appraisers are licensed and regulated through the Utah Division of Real Estate, the same state division that licenses real estate agents and brokers.

Appraisers follow USPAP, the national ethical and performance standards for their profession. A formal appraiser's valuation typically:

• Follows a set methodology and documents it in a written report
• Is prepared for a specific purpose and a named client, such as a lender
• Costs a fee, and often takes longer than a BOV
• Is independent of any sale or listing

The key differences

When a BOV is the right tool

A BOV fits when you need a practical, market-based view of price and you are not handing the number to a lender, court or taxing authority. For example:

• You are deciding whether to sell, or when
• You want to know what your equity is before thinking about a refinance or a new purchase
• You are weighing hold versus sell and need a starting value for the math (see cap rate vs cash-on-cash vs IRR)
• You got an unsolicited offer and want to know whether it is in the right range
• You are setting an asking price

A good BOV also gives you something a formal valuation often does not: a broker's read on buyer demand, how to present the property, and what might raise its value before you sell.

When you need a licensed appraiser instead

Use a licensed appraiser in any situation where an appraisal is required, or where another party needs an independent value they can rely on. Common examples include:

• Bank financing. Lenders generally order their own valuation from an appraiser they choose.
• Estate, gift and charitable donation matters. Your CPA or attorney will tell you what the tax rules call for.
• Divorce, partnership buyouts and lawsuits. Courts and opposing parties usually expect an independent, standards-based valuation.
• Some property tax appeals, depending on what the county or your attorney expects.

When in doubt, ask the attorney, CPA or lender involved what they will accept before you order anything. A BOV should never be used where an appraisal is required.

How to tell a solid BOV from a sales pitch

Because brokers compete for listings, some BOVs come in high to win the business. A high number that does not hold up costs you months on the market. A solid BOV should:

• Show the math. NOI, the cap rate used and why, and how vacancy and expenses were handled. If you want to check it yourself, run the numbers in our cap rate calculator.
• Use your real income, not asking rents. Our guide on how to calculate cap rate covers the NOI mistakes to watch for.
• Explain the comparables, including why each is similar or different from your building.
• Address your leases. Lease type, term and expense pass-throughs change value.
• State the risks that could push the price down, not just the upside.

What to send a broker for an accurate BOV

A BOV is only as good as the information behind it. A broker working from a street address alone is guessing. The more of this you can send, the tighter the number will be:

Income and leases

• Rent roll: each tenant, suite, square footage, lease start and end dates, current rent, scheduled increases, renewal options and security deposits
• Copies of every lease and amendment, so expense pass-throughs and options can be read, not assumed
• Expense reconciliations (CAM, taxes, insurance) billed to tenants for the last year or two
• Notes on any tenant who is late, in default, asking for relief or planning to leave

Operating history

• T-12: a trailing 12-month operating statement showing income and expenses month by month
• The prior one or two years' operating statements, to show trends
• Current property tax and insurance bills
• Service contracts: management, landscaping, snow removal, janitorial and similar

The physical building

• Capital improvements with dates and costs: roof, HVAC, paving, electrical, and the like
• Known issues and deferred maintenance, which will surface in a buyer's inspection anyway
• Site plan, floor plans and building size, if you have them
• Any environmental reports, surveys or title issues you know about

Your situation

• Your loan, including whether it can be assumed and any prepayment penalty
• Your goals and timing: sell now, sell later, exchange into something else, or simply know your number
• Any offers or interest you have already received

You do not need every item to get started. Send what you have, and a good broker will tell you which gaps matter most for your property.

Get a real number on your building

This article is general education, not legal, tax or investment advice, and not appraisal advice. If you want to know what your building is likely worth, call or text 801-664-3370 for a broker opinion of value (no charge and no obligation; we're paid only if you later hire us to sell or lease). It is not an appraisal. It is a licensed broker's view of likely price, based on your income, your leases and the current market.

Stockton Farnsworth, Utah Associate Broker, Team Utah Commercial, brokered by RE/MAX Associates.

General education only, not legal, tax, investment or appraisal advice. Information is believed reliable but not guaranteed. This article was drafted with the help of AI from the sources listed. Published by Stockton Farnsworth, Utah Associate Broker, Team Utah Commercial, brokered by RE/MAX Associates.