[cbsimpson]

Hello all. I have a commercial real estate loan that meets the exemption for an appraisal. The loan is to renovate a portion of a shopping center. We have the shopping center as collateral and was appraised in 2014 at over $3m. The loan is for $200k. Is it a regulatory requirement to obtain an evaluation for this situation?

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[rcooper]

The interagency thresholds for requiring an appraisal was recently adjusted. Generally, the appraisal threshold was set at $250,000 meaning any loan at or below that limit could use an evaluation of the property rather than an appraisal. A final rule issued on April 9 of this year changed that threshold for commercial real estate loans to $500,000 meaning loans at that threshold and below are not required to have an appraisal and may rely on an evaluation. If transaction is exempt from the requirement to obtain an appraisal because it meets the threshold you must still obtain an evaluation of the property.

There are instances when you may rely on an existing appraisal or evaluation. However, considering this appraisal is four years old I would be hesitant to do that. Here are links to resources you might want to review:
2010 Interagency Appraisal Guidelines here: https://www.fdic.gov/regulations/laws/rules/5000-4800.html

Interagency Advisory on Use of Valuations: https://www.federalreserve.gov/supervisionreg/srletters/sr1605a1.pdf

2018 Amendment to Threshold for Commercial Loans: https://www.fdic.gov/news/board/2018/2018-03-20-notice-sum-c-fr.pdf

[cbsimpson]

Hi. Thank you for your response. I actually have and read all the information you supplied, my problem is FDIC states we are “permitted,” to use an evaluation. I know we don’t need an appraisal, but do you we NEED (regulatory requirement) an evaluation?

We have taken photos of the shopping center and there is no obvious depreciation that would decrease the appraisal (done in 2014) so significantly (from $3m down to less than $200k) that we couldn’t assume its worth is substantial.

[Author]

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