Appraisals of collateral are required as set forth in this section. The lender is responsible for ensuring that appraisal values adequately reflect the actual value of the collateral based on an arm's length transaction. Completed appraisals should be submitted when the application is filed. If the appraisal has not been completed when the application is filed, the lender must submit an estimated appraised value. Prior to the issuance of the loan note guarantee, the estimated value must be supported with an appraisal acceptable to the approval official. If an appraisal is received containing any value attributed to business valuation or as a going concern, the business valuation or going concern value must be deducted from the reconciled market value prior to discounting. The Agency expects that, for appraisals of existing facilities, the appraiser will physically visit the property unless prior permission from the Agency is obtained. Appraisals are not typically required when security consists of either a revenue or general obligation bond or liens on real estate for WWD projects which rely on revenues of the facilities for loan repayment.

(a) Newly-acquired chattel. A bill of sale may be submitted to support the value of newly-acquired chattel.

(b) Existing chattel. The lender must obtain appraisal(s) for existing chattel collateral when its value exceeds $250,000 and will be used to meet loan to value requirements.

(c) Real estate. The lender must obtain appraisals for real estate collateral when the value of the collateral exceeds $250,000 or the current limitation established under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) Public Law 101-73, 103 Stat. 183 (1989). Real estate and chattels with a value below these thresholds must be evaluated in accordance with the lender's primary regulator's policies relating to appraisals and evaluations or, if the lender is not regulated, in accordance with normal banking practices and generally accepted methods of determining value. For construction projects, the lender must obtain the “As is” market value and the “prospective” market value as of the date of construction completion to determine the value of the real estate property.

(d) Appraisal standards. (1) Each real estate appraisal must be conducted by an independent qualified appraiser in accordance with the USPAP or similar Agency approved standard. The appraiser must have the specific qualification, experience, and competency to appraise the type of facility being financed. All real estate appraisals must meet the requirements contained in the FIRREA, and the appropriate guidelines contained in Standards 1 and 2 of the USPAP or similar Agency approved standard, and, unless approved by the Agency approval official, be performed by a State Certified General Appraiser licensed in the State in which the real estate is located.

(2) Chattel appraisals must be conducted by an independent qualified appraiser and must be based on industry recognized standards and reflect the age, condition, and remaining useful life of the equipment.

(e) Interagency appraisal and evaluations guidelines. Notwithstanding any exemption that may exist for transactions guaranteed by a Federal Government agency, all appraisals obtained by the lender under this part must conform to the interagency appraisal and evaluations guidelines established by the lender's primary Federal or State regulator, if applicable.

(f) Environmental considerations. When the Agency will take a lien on real property, the real estate appraisals must include consideration of the potential effects from a release of hazardous substances or petroleum products or other environmental hazards on the market value of the collateral, as determined in accordance with the appropriate ASTM International Real Estate Assessment and Management environmental standards. Potential contamination that has been observed on the property or identified through research or interviews with individuals knowledgeable about the property should be immediately reported to the Agency.

(g) Appraisal review report. The lender must submit its complete technical review of the appraisal in an appraisal review report prepared in compliance with USPAP Standards 3 and 4 to the Agency before guaranteed loan closing.

(1) Appraisals must not be more than one year old. However, the Agency may request a more recent appraisal in order to reflect more current market conditions.

(2) The lender must provide documentation that, in addition to the other requirements of this section pertaining to appraisers, the appraiser has the necessary experience and competency to appraise collateral.

(h) Appraisal fees. Unless otherwise stated in this part, appraisal fees or any other associated costs will not be paid by the Agency. Appraisal fees are eligible loan purposes. The Agency does not pay for appraisals required at the time of loan application. Appraisals for servicing actions are handled in accordance with section 5001 subpart F.

[85 FR 42518, July 14, 2020, as amended at 89 FR 79718, Sept. 30, 2024]