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#1598207 - 08/30/11 05:07 PM Reliance on Prior Appraisal
complygirl Offline
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Joined: Oct 2004
Posts: 822
midwest
Auditing appraisal and I have two questions. Bank renewed a loan in Oct. 2010, and relied on an existing appraisal dated Aug. 2007. It is my understanding that we can rely on an existing appraisal as long as there is documentation to support that the value given remains valid. Is this correct? What type of documentation is required? Just a memo in the file or should an appraisal review checklist be completed (this is what use use to complete our review of appraisals)?

I know there are other factors that must be considered as well to determine whether the value remains valid, one being the passage of time. In this given market, how old is considered "too old" of an appraisal to be relying on for subsequent loans? Any feedback is appreciated.

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#1598227 - 08/30/11 05:42 PM Re: Reliance on Prior Appraisal complygirl
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
Posts: 46,860
Bloomington, IN
Quote:
n this given market, how old is considered "too old" of an appraisal to be relying on for subsequent loans?


In our area an appraisal 12 to 18 months would still have a fairly accurate value.

In certain areas of Northern IN a day old appraisal could very well be outdated.

Quote:
What type of documentation is required? Just a memo in the file or should an appraisal review checklist be completed


A note to the file is not sufficient. How did you determine the market value has not decreased, how did you determine the building's condition has not deteriorated?

An exert from the interagency guidelines.

The documentation in the credit file should provide the facts and analysis to support the institutionís 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:
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1598283 - 08/30/11 06:41 PM Re: Reliance on Prior Appraisal Dan Persfull
Likes to Comply Offline
Diamond Poster
Joined: Nov 2008
Posts: 1,060
In the mountains
You could conduct an evaluation (that meets Interagency Guidelines). Even if the evaluation does not produce the same value as the previous appraisal the following would apply -- Appendix A under Renewals, Refinancings and Other Subsequent Transactions states that a subsequent transaction is exempt from the appraisal requirment if no new monies are advanced (other than funds necessary to cover reasonable closing costs) even when there has been a obvious and material change in market conditions or the physical aspects of the property that threatens the adequacy of the insititution's real estate collateral protection...
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