Appraisal Requirements

An appraisal should serve an underwriter's needs by providing a supported opinion of a property's market value as of a specified date sufficiently current as to reduce the likelihood of material value fluctuations prior to the loan/investment decision. In addition to providing estimated market value, the appraisal should give the appraiser's opinion of the property's feasibility and marketability.

The appraisal content shall follow generally accepted and established practices as reflected in the standards of the nationally recognized appraisal organizations.

Specifically, each appraisal report must:

1. Be totally self-contained so that:

(a) It is a useful tool for prudent underwriting, or subsequent credit decisions.

(b) When read by any third party, the appraiser's logic, reasoning, judgment, and analysis in arriving at a final conclusion indicate to the reader the reasonableness of the market value reported.

(c) It demonstrates professional competence, ethics, and expertise.

2. Be of a narrative style for major loans and/or investments.

3. Contain all recognized approaches to market value unless the appraiser fully explains and documents the rationale for eliminating one or more of the approaches to value.

4. Take into consideration and make provisions for all appropriate deductions and discounts for any newly development property.

5. Address itself to the market/economic feasibility prospects for any proposed major loan/investment real estate project, in sufficient detail to support the appraiser's forecast of the probable success and the conclusion(s) of the highest and best use. If a market/economic feasibility report is prepared by other than the appraiser, the appraiser will set forth the reasoning and rationale for accepting or rejecting said report. ESPECIALLY IMPORTANT IS THE APPRAISER'S ANALYSIS OF SUPPLY AND DEMAND FACTORS RELATING TO THE PROBABILITY THAT THERE IS A CURRENT MARKET FOR THE SALE OF SUBJECT PROPERTY AT THE APPRAISER'S VALUE.

6. Contain, if for major loan/investment properties located in highly speculative market areas which have experienced dramatic price increases relative to regional norms, a sales history analysis of the subject property covering the speculative time period. This analysis should reasonably disclose and verify:

(a) Grantor(s) - Grantee(s).

(b) Sale Date(s).

(c) Sale Price(s) and terms of financing, discounting the sale to cash equivalent, where necessary.

(d) Any interrelated parties to each transaction.

7. Address itself to "Market Value" as hereby defined and qualified:

The most probable price in terms of money 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, 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:

(a) Buyer and seller are typically motivated.

(b) Both parties are well informed or well advised and each acting in what they consider their own best interests.

(c) A reasonable time is allowed for exposure in the open market.

(d) Payment is made in cash or its equivalent.

(e) Financing, if any, is on the terms generally available in the community at the specified date and typical for the property type in its location.

(f) The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

Market value as defined is applicable in all lending/investment circumstances, including special purpose properties. Under no circumstance should the appraiser further qualify or, by assumptions, erode the impact of this definition. All market data should be thoroughly analyzed and, where necessary, adjusted in terms of the above definition, as qualified.

As reflected in qualifications (d), (e), and (f) of the above definition, all valuations must be couched in terms of "cash and its equivalent" and "typical financing" for the particular property type.

Any valuations which, by assumption or qualification, utilized any form or specialized, unique and/or subsidized financing assumptions as surrogates for "typical financing" assumptions in the appraisal methodology are not considered to be acceptable. All properties, regardless of the specific nature of the particular financing arrangements then existing and/or as proposed, must be evaluated in a market value context as defined and as qualified relative to "typical financing" and "cash equivalency".

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