In addition to our primary services, J&B has expertise in the following topics as well.
Broker Opinion of Value (BOV)
The broker opinion of value (BOV), also known as a broker price opinion (BPO), is an effective preliminary technique to estimate the value of a property. Whether you are acquiring or disposing of a real estate asset, having a basic understanding of the surrounding marketplace, its recent transaction history, as well as the financial performance of the asset is essential in determining the market value of any real estate investment.
Licensed real estate professionals will provide opinions of value to clients for a variety of purposes. This can range from a determination of a potential listing price for a prospective sale or purchase to underwriting collateral value when securing new financing. The ultimate goal of a BOV is to determine a fair market value for a piece of real estate.
In order to determine a fair market value, broker opinions of value will usually utilize a blend of three different valuation techniques to arrive at the most probable price a client could expect. The three valuation techniques utilized in determining value are as follows: Sales Comparison Approach – The sales comparison approach attempts to accurately determine the current market value of a piece of real estate by equating its value to prices that buyers have recently paid for like type properties in the surrounding area.
Income Capitalization Approach – The income capitalization approach is based on the mantra that a property’s value is derived from the positive cash flow it produces. This value is usually determined through the use of either the direct capitalization method or the discounted cash flow method.
Replacement Cost Approach – The replacement cost approach attempts to value a property based on what it would cost to replace the property less any depreciation or obsolescence. Once the replacement cost is determined, that cost is then added to the value of the land the improvements sit upon to determine a fair market value for the property.
In addition to financially analyzing any prospective real estate play it is also essential to have a firm understanding of the surrounding market and how it may positively or negatively impact your investment.
A market analysis will provide a business owner or real estate investor with the tools and information they need to determine whether a particular property or potential market melds with their business demands.
This type of analysis usually focuses on factors that may impact a business or prospective location outside of financing and cost concerns. These factors include demographic and neighborhood income research, business sector gap analysis, local thoroughfare traffic counts, proposed new development and any other ancillary items that may impact the success and operation of a business or property.