Lending & Pre-Purchase

Who orders this appraisal

• Banks & credit unions
• Private lenders
• Investors
• Buyers

What the engagement covers

• Bank-ready reports
• Acquisition due diligence
• Refinancing support
• Investment analysis

The rules that govern it

FIRREA Title XI. Why appraisal is regulated at all, The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 followed the savings and loan crisis, in which unreliable valuations contributed to widespread losses. Title XI required federally related transactions to be supported by appraisals performed by licensed or certified appraisers to uniform standards, which is the origin of both USPAP’s authority and state appraiser licensing.

De minimis thresholds, when no appraisal is required, Below defined thresholds a federally related transaction does not require an appraisal, though an evaluation is generally still needed. The interagency thresholds are $400,000 for residential real estate (set in 2019), $500,000 for commercial real estate (set in 2018), and $1,000,000 for business loans secured by real estate where the loan is not dependent on the property’s income. Confirm the current figure with the lender, since these are amended periodically.

Interagency Appraisal and Evaluation Guidelines, The federal banking agencies’ guidelines set out how institutions should select appraisers, manage the appraisal function independently of loan production, and review the work they receive. They are why a lender cannot let the loan officer pick the appraiser.

Appraisal independence, who may talk to the appraiser, Appraisal independence requirements bar anyone with an interest in the transaction from influencing the appraiser’s judgement. No coercion, no promise of future work conditioned on a value, no selecting an appraiser because they reliably hit numbers. A lender may ask an appraiser to consider additional information or correct a factual error; it may not ask for a different conclusion.

The borrower pays but is not the client, In a mortgage transaction the borrower typically pays for the appraisal while the lender is the client, because independence requires the lender to control the engagement. Federal rules entitle a residential mortgage applicant to a copy of the appraisal.

How it works

1. Establish who the client is. For a lending assignment it is the institution, and the report is prepared for its reliance.
2. Confirm whether an appraisal or an evaluation is required. Below the de minimis threshold the institution may need only an evaluation.
3. Confirm the engagement route, which must be independent of loan production.
4. Complete the appraisal to USPAP and to the institution’s stated scope and reporting requirements.
5. Expect review. A reviewer will test the comparable selection and the adjustments, and that is the system working.

What you receive

Lender-ready commercial appraisal report. Standard turnaround is 1–3 weeks. Rush appraisals available for urgent deadlines.

Common questions