If you're considering buying or selling commercial real estate, you may have heard the term "broker opinion of value," or BOV. But what exactly is a BOV, and why is it important in the world of commercial real estate?
A BOV is a document prepared by a licensed real estate broker that provides an estimate of the value of a commercial property. It is based on the broker's knowledge and experience in the local real estate market, as well as on comparable sales of similar properties. A BOV is not an appraisal, which is a more formal and in-depth analysis of a property's value that is conducted by a licensed appraiser.
A BOV can be useful for a variety of purposes in the commercial real estate world. For example, if you are a buyer looking to purchase a commercial property, a BOV can help you understand the fair market value of the property and determine whether the asking price is reasonable. If you are a seller, a BOV can help you determine the right asking price for your property and give you a sense of how much you can expect to receive for it.
In addition to providing an estimate of value, a BOV may also include other helpful information, such as a property's strengths and weaknesses, the local real estate market conditions, and any potential risks or challenges that may affect the property's value. One way to organize this information is through a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. A SWOT analysis is a tool used to assess the internal and external factors that can impact a business or property. By identifying the strengths and weaknesses of a property, as well as the opportunities and threats it faces, a SWOT analysis can help buyers and sellers understand the potential risks and rewards of a property and make informed decisions.
So, how do brokers come up with their opinions of value? There are a few key factors that they consider when preparing a BOV:
- Comparable sales: One of the most important factors in determining a property's value is the sale price of similar properties in the area. By comparing the features and characteristics of a subject property to those of recently sold properties, brokers can get a sense of what the market is willing to pay.
- Location: The location of a property is also a key factor in its value. Properties in desirable areas with strong demand tend to be worth more than those in less desirable areas.
- Condition: The condition of a property can significantly impact its value. A well-maintained property with modern amenities is likely to be worth more than a property that needs significant repairs or updates.
- Size and layout: The size and layout of a property can also affect its value. For example, a larger property with a functional layout may be worth more than a smaller property with a less efficient layout.
- Zoning and zoning potential: Zoning regulations can impact a property's value by limiting or expanding the types of businesses or activities that can take place on the property. If a property is located in an area with favorable zoning regulations, it may be worth more than a similar property in an area with less favorable regulations.
Keep in mind that a BOV is just an estimate of value and is not a guarantee of what a property will sell for. The actual sale price of a property may be higher or lower than the BOV, depending on a variety of factors, such as the strength of the local real estate market, the demand for the property, and the negotiation skills of the parties involved.
While a BOV can be a useful tool for buyers and sellers, preparing one can be a time-consuming and complex process. That's where a commercial real estate marketing agency can come in handy. A marketing agency can help you prepare a professional and accurate BOV, as well as brand it and present it in a way that is attractive to potential buyers or sellers.