A written, independent opinion of a property's market value as of a specific date, prepared by a qualified appraiser.
The OCC’s rule defines an appraisal as a written statement independently and impartially prepared by a qualified appraiser, setting forth an opinion of the market value of an adequately described property as of a specific date, supported by relevant market information.
Independence shapes the process. The lender orders the appraisal and chooses the appraiser. A report the borrower ordered is generally not one a bank can use, so ask before paying for one.
Whether a full appraisal is required depends on size. For national banks, a commercial real estate transaction of $500,000 or less is exempt, and so is a residential transaction of $400,000 or less. In those cases the bank must still obtain an evaluation, a less formal estimate of value. A commercial real estate transaction above $500,000 needs a State certified appraiser. Credit unions follow the NCUA rule, which requires a State certified appraiser at $1,000,000 or more and, below that, a written estimate of market value where no appraisal is obtained.
Any lender may ask for an appraisal below these lines. The borrower usually pays the fee, and the report takes time, so ask the lender when it will be ordered.
How it shows up in the data here
Not in the data. No appraisal or appraised value is in any bank or credit union filing on this site. HMDA does report a property value for the loans it covers, which is how loan comps can show loan-to-value on multifamily and 1-4 unit investor loans. To test a value against a loan amount, use the LTV and LTC calculator.
Go further
- LTV and LTC calculator: Loan-to-value and loan-to-cost from the figures you enter.
- Loan comps: Loans made on similar property, from public records.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
- What a lender-ready loan package looks like: A lender decides in minutes whether to keep reading. A package that answers the first five questions on one page, and backs each answer with a document, gets read.
- Investor commercial real estate loan checklist: On an investor property the rent pays the loan. The package is the evidence for the rent: who pays it, for how long, what it costs to collect, and who stands behind the borrower if it stops.
Related terms
- As-is value: The market value of a property in its actual physical condition, use and zoning on the appraisal's effective date, with no credit for planned work.
- As-stabilized value: An appraiser's estimate of what a property will be worth on the future date it is projected to reach stabilized occupancy.
- As-complete value: An appraiser's estimate of what a property will be worth on the date construction is expected to be finished.
- Loan-to-value ratio (LTV): The loan amount divided by the value of the property securing it. A $700,000 loan on a property valued at $1,000,000 is 70 percent loan to value.
- Capitalization rate (cap rate): A property's stabilized net operating income divided by its price or value. Divide income by the cap rate and you get an estimate of value.
- Supervisory LTV limits: Loan-to-value ceilings in the federal real estate lending guidelines, from 65 percent for raw land to 85 percent for improved property, that a bank's own limits should not exceed.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.