I'm having trouble determining how "Transaction Value" should be interpreted in the Interagency Appraisal and Evaluation Guidelines (12/2/10). Basically, I'm trying to determine which the appraisal threshold applies to - the loan amount or the property value (many of our loans are secured by multiple mortgages).

The Glossary (Appendix D) has the following: "Transaction Value As defined in the Agencies appraisal regulations: For loans or other extensions of credit, the amount of the loan or extension of credit; For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property. For purposes of this definition, the transaction value for loans that permit negative amortization should be the institution’s total committed amount, including any potential negative amortization." This leads me to believe it is based on the loan amount.

However, Appraisal Exemptions (Appendix A) states the following in the (1) Appraisal Threshold section: "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." This makes me think it's based on the property value of each mortgage... How do you guys interpret Transaction Value at your institutions?

I do not see a conflict. Have you searched the entire guidelines for the use of the term transaction value? It is always used in the context: "Has a transaction value equal to or less than.........."

Nowhere does it say that if the transaction value is more than $XXX you need an appraisal.

Sorry for the late reply, I'm just now seeing your response.

I think this is an example of what you're referring to:

"Appraisals required. An appraisal performed by a State certified or licensed appraiser is required for all real estate-related financial transactions except those in which:

(1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less;

(2) A lien on real estate has been taken as collateral in an abundance of caution;

(3) The transaction is not secured by real estate;

(4) A lien on real estate has been taken for purposes other than the real estate's value;

(5) The transaction is a business loan that:

(i) Has a transaction value of $1 million or less; and

(ii) Is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment;"