Appraisal required on assumption?

We made a commercial real estate loan for well over $1,000,000 to an individual in 2003. The loan is secured by two separate commercial properties in the individual's name. We have two appraisals on the properties dated 2001 and 2003.

Our borrower wants to deed the properties to a newly formed LLC. The bank wants to accomodate the borrower and is comtemplating allowing and documenting an assumption of the debt by the LLC. The loan balance is still well over $1,000,000.

Would it be acceptable for the bank to rely on the appraisals in the file (not have to obtain new appraisals by a certified or licensed appraiser) since the transaction involves an existing extension of credit at the bank and there is no advancement of new monies, as long as the bank properly evaluates the appraisals and documents that the existing estimate of value remains valid?

Yes, but 7-9 years is a long time not only in today's market, from what we are seeing in recent exams and from what we hear from our external loan review team.

You would need to be ready (with over the top, excellent "useful life validation" with supporting documention to address the market (ups & downs), zoning, competing properties, the availability of financing) to support the decision to not re-appraise should this come up during your next exam or loan review.

I know in our markets here it would be a very rare situation where a loan could support using an appraisal that old.

Thanks, Okie Banker - my thoughts as well!