In April 2018, federal bank examiners raised the appraisal threshold for commercial real estate properties from $250,000 to $500,000. For many business owners, this has provided a degree of relief, as it’s accordingly reduced both loan fees and the time required to get to closing. Many banks now seek to obtain evaluations instead of appraisal reports, when appropriate.
Appraisal and evaluation reports are theoretically similar, but evaluations come with less stringent requirements regarding who performs the service, the level of analysis required, and the amount of information reported. Appraisers must be licensed in the state in which they are conducting an appraisal, and they are required by law to meet Uniform Standards for Professional Appraisal Practice when performing appraisal services. Banking regulations do not require this standard to be met for evaluation reports.
Who performs evaluation services for banks? Well, it can vary. Several third-party companies have sprung up recently, offering low fees and fast turnaround times – propositions that many banks have found too tempting to pass up. After all, a $750 fee and a five-day turnaround sounds pretty great. It gets everyone to the closing table faster, which seems like a win for all involved.
I’ve had conversations with many of these salespeople. And, I’ve come to believe there’s a lot of truth in the following maxim: "When it comes to a trade-off between fast, cheap, and good, you’ll only ever be able to pick two."
These conversations often go something like this:
What you're offering sounds like a pretty good service. Can I ask, what sort of inspection is performed?
- “We hire someone local to perform an exterior inspection.”
So, they drive by. Okay. And the people who generate the report…where do they work?
- “They’re all based here in Connecticut.”
So, they’re not local. Right. Where do they get their data from?
- “We rely upon data from Major National Data Firm™.”
Now, as a business owner, this real estate is likely a major asset in your life. It may be more valuable than even your home. You deserve a valuation report on this property that is not performed by someone half a country away using photos from the street and relying upon spotty data from a national firm.
You deserve an evaluation report generated by someone with expertise in the local real estate market, supported by an inspection performed by your local bank staff and relying upon market data that has been properly verified. When you choose State Bank of Cross Plains, you can be sure that the information in your evaluation is as comprehensive, pertinent, and nuanced to the local market as possible – giving you the peace of mind of knowing exactly what your property is worth.