A BPO and a BOV are both estimates provided by a real estate Advisor to help investor know how much to bid for a property and are often used to help landlords achieve the highest price when it comes time to sell. It is important to know that A BPO/BOV are not held to the same standard as an appraisal and are used to price a property for listing or to determine a reasonable offer price. Appraisals, on the other hand, are more formal evaluations that are typically required for lending and other financial purposes.

The benefits of obtaining a BOV for a commercial real estate transaction include:

• A BOV is typically faster and significantly less expensive than an appraisal.
• A BOV can provide an estimate of the value of a property to help a potential investor know how much to bid.
• A broker can look at comparable properties to see how much they have sold for, with a particular eye on those that have sold in the last six to 12 months.

A BOV is used in commercial real estate financing to help lenders determine the value of a property. The advisor analyzes how much income the property can generate by calculating income using two different methods: Direct Capitalization and Discounted Cash Flow Analysis. Direct Capitalization looks at the Net Operating Income (NOI) of the property using a cap rate. Discounted Cash Flow Analysis looks at the time value of money by using projections of future cash flow discounted to the present day. The advisor also looks at comparable properties to see how much they have sold for in the last six to 12 months. Properties with more similarities to the asset are weighted more heavily into any calculation.