Obligations for Appraisers Performing Appraisals for Use by a Federally Regulated Financial Institution (AO-30)

“If an appraisal is prepared by a staff appraiser, that appraiser must be independent of the lending, investment, and collection functions and not involved, except as an appraiser, in the federally related transaction, and have no direct or indirect interest, financial or otherwise, in the property. If the only qualified persons available to perform an appraisal are involved in the lending, investment, or collection functions of the regulated institution, the regulated institution shall take appropriate steps to ensure that the appraisers exercise independent judgment. Such steps include, but are not limited to, prohibiting an individual from performing an appraisal in connection with federally related transactions in which the appraiser is otherwise involved and prohibiting directors and officers from participating in any vote or approval involving assets on which they performed an appraisal.”

“If an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the property or the transaction.”

“A regulated institution also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution, if:

(i)

The appraiser has no direct or indirect interest, financial or otherwise, in the property or the transaction; and

(ii)

The regulated institution determines that the appraisal conforms to the requirements of this subpart and is otherwise acceptable.”

For more information on these requirements and related USPAP obligations, see Advisory Opinion 25, Clarification of the Client in a Federally Related Transaction and Advisory Opinion 26, Readdressing (Transferring) a Report to Another Party.

“For federally related transactions, all appraisals shall, at a minimum:

(a)

Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless principles of safe and sound banking require compliance with stricter standards;

(b)

Be written and contain sufficient information and analysis to support the institution's decision to engage in the transaction;

(c)

Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, nonmarket lease terms, and tract developments with unsold units;

(d)

Be based upon the definition of market value as set forth in this subpart; and

(e)

Be performed by State licensed or certified appraisers in accordance with requirements set forth in this subpart.”

“Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(1)

Buyer and seller are typically motivated;

(2)

Both parties are well informed or well advised, and acting in what they consider their own best interests;

(3)

A reasonable time is allowed for exposure in the open market;

(4)

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

(5)

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”