Evaluation FAQ
An evaluation is an affordable alternative to an appraisal and is allowed by bank regulations.
Frequently Asked Questions
When can evaluations be used instead of appraisals?
They can be used for commercial real estate loans less than or equal to $500,000 but this amount for credit unions is $1,000,000.
What type of loan situations allow the use of evaluations?
Evaluations can be used for new loans, loan renewals, loan refinancing, lines of credit, and portfolio management.
Are evaluations less expensive than appraisals?
They are much less expensive and are ideal for lower risk loan situations.
What should evaluation reports include?
There are minimum standards and requirements for evaluation reports that are described in detail in the bank regulations.
Who can perform evaluations?
The bank regulations state that evaluations be performed by individuals with the appropriate experience and knowledge of the market and type of real estate involved.
Can licensed appraisers perform evaluations?
In Massachusetts and several other states licensed appraisers can only perform appraisals.
Can an evaluation be performed by the lender?
The bank regulations state that the person performing the evaluation is required to be independent and have no direct, indirect, or prospective interest in the real estate or loan transaction. They also prohibit the loan production staff from performing an evaluation and require that the person performing the evaluation is able to render an unbiased opinion of value.
Who is qualified to perform commercial real estate evaluations?
A person with professional commerial real estate brokerage and valuation experience is ideally qualified. However, the person must have the skill to generate a clearly written evaluation report that conforms to the bank regulations. Plus, the person must be able to produce a credible valuation analysis and a supportable value.