Interagency Appraisal and Evaluation Guidelines

Evaluation Content
An evaluation should contain sufficient information detailing the analysis, assumptions, and conclusions to support the credit decision. An evaluation's content should be documented in the credit file or reproducible. The evaluation should, at a minimum:

• Identify the location of the property.

• Provide a description of the property and its current and projected use.

• Provide an estimate of the property's market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions.

• Describe the method(s) the institution used to confirm the property's actual physical condition and the extent to which an inspection was performed.

• Describe the analysis that was performed and the supporting information that was used in valuing the property.

• Describe the supplemental information that was considered when using an analytical method or technological tool.

• Indicate all source(s) of information used in the analysis, as applicable, to value the property, including:

o External data sources (such as market sales databases and public tax and land records);

o Property-specific data (such as previous sales data for the subject property, tax assessment data, and comparable sales information);

o Evidence of a property inspection;

o Photos of the property; o Description of the neighborhood; or o Local market conditions.

• Include information on the preparer when an evaluation is performed by a person, such as the name and contact information, and signature (electronic or other legally permissible signature) of the preparer.


Validity of Appraisals and Evaluations
The Agencies allow an institution to use an existing appraisal or evaluation to support a subsequent transaction in certain circumstances.

Therefore, an institution should establish criteria for assessing whether an existing appraisal or evaluation continues to reflect the market value of the property (that is, remains valid).

Such criteria will vary depending upon the condition of the property and the marketplace, and the nature of the transaction.

The documentation in the credit file should provide the facts and analysis to support the institution’s conclusion that the existing appraisal or evaluation may be used in the subsequent transaction.

A new appraisal or evaluation is necessary if the originally reported market value has changed due to factors such as:

• Passage of time.

• Volatility of the local market.

• Changes in terms and availability of financing.

• Natural disasters.

• Limited or over supply of competing properties.

• Improvements to the subject property or competing properties.

• Lack of maintenance of the subject or competing properties.

• Changes in underlying economic and market assumptions, such as capitalization rates and lease terms.

• Changes in zoning, building materials, or technology.

• Environmental contamination.


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