Valuation Matrix

This matrix explains the four most common valuation services used for real property transactions. The methods below are not necessarily mutually exclusive. Lenders, servicers, investors, and other professionals use one or more valuation depending on the type of transaction (purchase, refinance, short sale, due diligence, mediation, etc.) Often one valuation service is used to confirm or quality check the results of a primary valuation. For example, some lenders use AVMs to confirm results of an appraisal report in a purchase money transaction. Valuation Appraisal Defined As defined by USPAP, it is the act or process of developing an opinion of value. Who Licensed or certified appraisers Use Generally used to value collateral in a real estate transaction. Appraisals are required for most federally related transactions above $250,000. Exceptions include transactions where no new money is involved. In practice, appraisals are used for the vast majority of purchase money transactions involving a loan. For the most part, lenders or servicers determine use of appraisal or other methodology for transactions that are not purchase money. Often used by lenders or secondary markets to confirm valuations provided in appraisal report; but should not solely be used to value collateral in a real estate transaction where a mortgage is being originated. May be used as a valuation option for other transactions, such as refinances. Also used to verify appraisal reports. May be used, depending on state laws, for a variety of purposes including, loan modifications, short sales, and foreclosure/REO purchases, value trend analysis, mediation, and negotiation; but should not solely be used to value collateral in a real estate transaction where a mortgage is being originated.* A CMA helps identify or project a houses listing or selling price. The CMA is not the only factor in determining listing price, rather it is a guide for the owner to see the active and sold competition, and is used to help the seller in choosing the listing price. May also be used, depending on state laws, for a variety of purposes including loan modifications, short sales, and foreclosure/REO purchases, value trend analysis, mediation, and negotiation; but should not solely be used to value collateral in a real estate transaction where a mortgage is being originated.*

Automated Valuation Model (AVM)

Service or software that provides property valuations often based on mathematical modeling.

Lender, servicer appraisal staff, investor

Broker Price Opinion (BPO)

An estimate of the probable Real estate licensees selling price of a property.

Comparative Market Analysis (CMA)

An estimate of the probable Real estate licensees selling price of a property.

*Where permitted by states, BPOs and CMAs are technically permitted for purchase money transactions when the home is less than $250,000. However, CMAs are not typically used for this purpose. In June 1994, the federal regulators published a final rule that increases to $250,000 the threshold below which national banks are not required to obtain appraisals prepared by licensed or certified appraisers for real estate loans.

2013 Code of Ethics National Association of REALTORS Article 11 The services which REALTORS provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate. REALTORS shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10) Standard of Practice 11-1 When REALTORS prepare opinions of real property value or price, other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, such opinions shall include the following unless the party requesting the opinion requires a specific type of report or different data set: 1. 2. 3. 4. 5. 6. 7. identification of the subject property date prepared defined value or price limiting conditions, including statements of purpose(s) and intended user(s) any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants basis for the opinion, including applicable market data if the opinion is not an appraisal, a statement to that effect (Amended 1/10)

Standard of Practice 11-2 The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR is an agent or subagent, the obligations of a fiduciary. (Adopted 1/95)