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#1963383 - 09/19/14 07:41 PM Appraisal Question
beegee Offline
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We have a loan request for $1.5MM secured by 15 rent houses – each worth about $100M each.

Is it required to do a full blown appraisal on these or can we do a drive by on each one?

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#1963399 - 09/19/14 08:04 PM Re: Appraisal Question beegee
Dan Persfull Offline
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Dan Persfull
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From the Interagency Guidelines.


VII. Transactions That Require Appraisals
Although the Agencies’ appraisal regulations exempt certain real estate-related financial transactions from the appraisal requirement, most real estate-related financial transactions over the appraisal threshold are considered federally related transactions and, thus, require appraisals.33 The Agencies also reserve the right to require an appraisal under their appraisal regulations to address safety and soundness concerns in a transaction. (See Appendix A, Appraisal Exemptions.)34

1. Appraisal Threshold
For transactions with a transaction value equal to or less than $250,000, the Agencies’ appraisal regulations, at a minimum, require an evaluation consistent with safe and sound banking practices.54 If an institution enters into a transaction that is secured by several individual properties that are not part of a tract development, the estimate of value of each individual property should determine whether an appraisal or evaluation would be required for that property. For example, an institution makes a loan secured by seven commercial properties in different markets with two properties valued in excess of the appraisal threshold and five properties valued less than the appraisal threshold. An institution would need to obtain an appraisal on the two properties valued in excess of the appraisal threshold and evaluations on the five properties below the appraisal threshold, even though the aggregate loan commitment exceeds the appraisal threshold.

XII. Evaluation Development
An evaluation must be consistent with safe and sound banking practices and should support the institution’s decision to engage in the transaction. An institution should be able to demonstrate that an evaluation, whether prepared by an individual or supported by an analytical method or a technological tool, provides a reliable estimate of the collateral’s market value as of a stated effective date prior to the decision to enter into a transaction. (Refer to Appendix B, Evaluations Based on Analytical Methods or Technological Tools.)
A valuation method that does not provide a property’s market value or sufficient information and analysis to support the value conclusion is not acceptable as an evaluation. . . . . .
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#1963402 - 09/19/14 08:07 PM Re: Appraisal Question Dan Persfull
beegee Offline
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South
Perfect! Thanks Dan

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#1965735 - 09/30/14 05:12 PM Re: Appraisal Question beegee
beegee Offline
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South
Does this section trump the exception in the prior post? Meaning can we get just evals if repayment is from rental income? These are all rental houses valued at less than $250,000 but repayment is derived from rental income.

XI. Transactions That Require Evaluations
The Agencies' appraisal regulations permit an institution to obtain an appropriate evaluation of real property collateral in lieu of an appraisal for transactions that qualify for certain exemptions. These exemptions include a transaction that:
• Is a business loan with a transaction value equal to or less than the business loan threshold of $1 million, and is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.

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#1965833 - 09/30/14 08:32 PM Re: Appraisal Question beegee
fmissle Offline
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Pac NW
I would say no.

It's not less than $1MM.
I assume that the primary repayment is based on the rental income derived from the real estate.

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#2229545 - 01/23/20 08:41 PM Re: Appraisal Question beegee
Red Raiders Offline
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Let's say we have a customer who currently has 6 individual loans each secured by a 1-4 family residence valued at $150,000 each and the loans have a balance of $100,000 each. Customer wants to purchase an apartment building for $1.5 million and combine all of these properties into one loan. Do we only need to obtain an appraisal on the new apartment building and can do evaluations on the existing properties?
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#2229546 - 01/23/20 08:47 PM Re: Appraisal Question beegee
raitchjay Offline
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OK
I can't copy and paste from my pdf of the Interagency Appraisal Guidelines, but the short answer is yes, you can do evaluations on the homes if they are individually valued below the appraisal threshold. If you want to see this section for yourself, check out Appendix A, 1. Appraisal Thresholds.
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#2229547 - 01/23/20 08:47 PM Re: Appraisal Question beegee
raitchjay Offline
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OK
Well....i didn't realize this was an existing thread where Dan had already copied the information. See his post above.
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#2229549 - 01/23/20 08:49 PM Re: Appraisal Question beegee
Red Raiders Offline
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Thanks! I saw that and what I saw was dated 2010 so I didn't know if there was anything in the 2019 changes that revised this.
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#2229550 - 01/23/20 08:50 PM Re: Appraisal Question beegee
raitchjay Offline
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OK
I don't know of any changes to that section.
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