Appraisal vs. Evaluation Clarification

Regulatory agencies have clarified the expectations for the use of evaluations instead of appraisals to estimate a property’s market value for certain real estate related transactions.  That being said, the evaluation preparer should be knowledgeable, competent and independent of the loan production function of the Institution.  Although there are no strict guidelines on how evaluations should be prepared, an institution should establish internal policies and procedures that specify the information that is required to prepare an evaluation. Lastly, regardless of the methodology used or approach taken in preparing the evaluation, it should contain sufficient and understandable information to support the market value and the Institution’s ultimate decision of whether or not to engage in the real estate transaction.