We have an appraisal less than 6 months old. In the past we did not do an evaluation if the appraiasal was less than 6 months old but with the new guidelines are we required to either order a new appraisal or do an evaluation?

Yes.

Thank you so much!!! I wanted confirmation before I talk to the loan officers.

"but with the new guidelines are we required to either order a new appraisal or do an evaluation?"

can anyone direct to me to where in the guidelines I can find that?

That has not changed. All loan transactions regardless of dollar amount either requires an appraisal or an evaluation. The new guidelines are just more precise in what constitutes an evaluation.

Search the the guidelines using evaluation or in lieu of as your search term.

Dan, does the term "subsequent transaction" in the guidelines equate only to loan modifications?

I guess i'm referring to this:

The Agencies allow an institution to use an existing appraisal or evaluation to support a subsequent transaction in certain circumstances. Documentation in the credit file should provide the facts and analysis to support the conclusion that the existing appraisal or evaluation may be used in the subsequent transaction. A new appraisal or evaluation is necessary if the originally reported market value has changed due to factors such as:

• Passage of time.

• Volatility of the local market.

• Changes in terms and availability of financing.

• Natural disasters.

• Limited or over supply of competing properties.

• Improvements to the subject property or competing properties.

• Lack of maintenance of the subject or competing properties.

• Changes in underlying economic and market assumptions, such as capitalization rates and lease terms.

• Changes in zoning, building materials, or technology.

• Environmental contamination.


I guess the key issue would be what a "subsequent transaction" is, which i read as a subsequent loan or refinancing using the same collateral, but that may not be right.

As a speaker said the the other day in a FDIC teleconference. "In today's market RE values can drop overnight" and I can't dispute that statement in today's market. So dependent on your location a 30 day old appraisal could be obsolete.

To use the evaluation or appraisal for a subsequent event you would have to IMO certify that none of the bullet points you listed have changed to substantially affect the property's market value. IOWs a re-evaluation of the appraisal or evaluation.

Thanks Dan for the clarification: i'm speaking to my lenders tomorrow on this topic (for the first time ever) and i don't want to give bad info.

Would you think it odd if a new appraisal ordered about 3 months after the first appraisal had a huge difference in the value of the property? I'm talking $200,000 +. I would think that equated to either a problem with the first appraisal or a problem with the second. It didn't seem to raise any eyebrows around here. I asking this because as Dan pointed out from the FDIC teleconference "in today's market RE values can drop overnight". Well in this case they went the other direction.

You are talking about an increase of $200,000? What percentage of value are you talking about? Is this a 100% or is this a $5MM property?

property is under $1MM. I'm talking about a roughly 35% jump.

I would say that there is definitely a problem with one of them.