What are SBA's rules for a commercial real estate appraisal?
Short answer
A 7(a) appraiser must be independent and state-licensed or certified, follow Uniform Standards of Professional Appraisal Practice (USPAP) and date the report within 12 months of the guaranty application. Above $1,000,000, the appraiser must be state-certified. Source: SOP 50 10 8.1, App. 19, Para. A.
The appraiser must be independent, properly licensed and engaged for the lender. SOP 50 10 8.1, Appendix 19, Para. A, sets the rules for a 7(a) commercial real estate appraisal under 13 CFR § 120.160(b).
The appraiser
- State-licensed or State-certified, and State-certified when estimated value exceeds $1,000,000.
- Independent of loan production and approval, with no appearance of a conflict of interest.
The report
- A USPAP Appraisal Report, dated within 12 months of the application for guaranty.
- It must identify the lender as client or intended user. An appraisal prepared for the seller or applicant cannot be used. The cost may be passed to you.
- It may not include the contributory value of rental income or intangible assets.
New construction and renovation
The appraisal must estimate market value on completion for new construction or a substantial renovation. Substantial means rehabilitation costs above one third of the purchase price or fair market value. An existing building needing no construction is valued as-is.
After completion, the lender needs a statement that construction materially conforms to plans. Without one, it needs a new appraisal.
On a 504
SBA requires an appraisal when estimated value exceeds $500,000. Below that, listed cases still need one and others need an evaluation. The appraisal must identify SBA as client or intended user (Section C, Ch. 1, Para. E.2.b).
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