Commercial appraisal loan question

appartment building, block, building-835817.jpg

Commercial appraisal loan question
Posted by: JN Mar 25 2004, 03:45 PM
Mr. LoanUniverse

Maybe you can help me with this situation. My parents own a couple of apartment buildings that are fully paid a big one that has 12 units and a small one that has 6 units. They are located one block from each other in their neighborhood. In December we wanted to find out how much they are worth and got an appraisal for both buildings.

Yesterday my dad and I met with a loan officer that told us that we will need to get a new appraisal in order to get a loan. This does not make sense tome the appraisal is only 3 months old and we only want to borrow $300k against two properties worth $600k.

Is this a scam to make more money in fees. All the cosing costs will be about $10,000 and the appraisal will be about $3,000 of that amount. This seems outrageously expensive.

What do you think?

John Novoa
Posted by: Mar 25 2004, 06:07 PM
As a rule of thumb, appraisals for most real estate financing will “usually” be honored for about 90 days. The lender does have the discretion to reject an appraisal for various reasons (sometimes due to the appraiser, or quality of the appraisal). Lenders guidelines vary, and also the appraisal is a 3rd party fee…so lenders don’t usually benefit monetarily from them.
Posted by: loanuniverse Mar 25 2004, 07:08 PM

Using the appraisal that was prepared for you would violate the requirement that the lending institution maintain an independent real estate appraisal and evaluation program for all of its lending functions. If the appraisal does not meet the “independence” test, the institution might be found to have based their loans on improperly prepared appraisals and subject to disciplinary action.

You have to remember that most US based financial institutions have one or more regulators.

Commercial Banks are regulated by the Office of the Comptroller of the Currency {OCC}.

Thrifts are regulated by the Office of Thrift Supervision {OTS}.

Credit Unions are regulated by the National Credit Union Administration {NCUA}.

On top of that you got the FDIC and the FRB on top of you.

Trust me, it is not that the bank wants to squeeze more fees from you. The appraisal fee will go directly to the appraiser. In fact, a good lender will shop around for the best quote in order to bring his customer the best deal. I think that you are going to have to pay the fee.

Good luck and I hope this helps.

P.S: You can probably get a finance company to take the appraisal. Even a Bank might be willing to take it as an exception to policy. Talk to a couple of more lenders. Now that I think about it, with that loan-to-value and amount of money, it might be possible.
Author: Commercial Loan Underwriter