I need some help focusing. At this point, if I were on the debate team, I swear I could make reasonable arguments either way!

Is an appraisal by a state-certified appraiser REQUIRED in the following scenario, or can the bank perform an evaluation on the properties securing the loan?

Commercial/Business-purpose loan to an individual for $700,000.

The loan is secured by a 1st lien on a commercial property with an assessed value $800,000;

Additionally, the loan is secured by a lien on 15 of the borrower's owner-financed promissory notes, (said notes secured by 1st liens on various properties the borrower has sold in the past), with a total assessed value of $600,000. Keep in mind we don't have a lien on the real estate, only a security interest in the promissory notes he holds.

Thus the total L-T-V is 50%. The borrower is an attorney by trade and the majority of his income is from his law practice. BUT he also buys and sells real estate and also is in the business of developing real estate. Thus he derives income from the SALE of real estate and he receives monthly payments from the buyers. (The owner-financed loans mentioned above.)

Will the $1,000,000 exemption work here? Would we be required to get a certified appraiser to appraise the commercial property AND individual appraisals on the 15 other pieces of real estate?

My opinion: If part of the source of repayment is from the sale or income of real property, a certified appraisal is needed on the commercial property. You would not need appraisals on the real estate promisory notes, because your collateral is the note, not the real estate.

My personal opinion would be that it would come down to what the "primary" source of repayment is. If the "primary" source of repayment is not dependent on the sale of or rental income from real estate then an appraisal would not be required. It would appear that in this case the "primary" source of repayment is income derived from the law practice and thus an appraisal would not be required.

Could someone direct me to a source for the provisions of FIRREA? One of our lenders has asked me to research the exceptions for appraisals under $1,000,000. He stated the exceptions state if it is a refinance or renewal but does that mean it must be at the same financial institution? Thanks.

Betsy,
Two sources I use for the appraisal guidelines are Kirchman's Big Orange Book, pages 4.7 thru 4.14.1 and the Federal Reserve Commercial Compliance Handbook, Section 4140.1.
They both make it pretty easy to wade through the myriad of exemptions. Best of luck.
MarkB