There are five categories of real estate related financial transactions engaged in by federally regulated financial institutions that do not require a USPAP-compliant appraisal performed by a state-licensed or state-certified appraiser:
Commercial real estate (CRE) related financial transactions with a transaction value less then $500,000
Any real estate related financial transaction with a transaction value less than $400,000
Qualified business loans with a transaction value less than $1M – These are generally owner-occupied business loans where a lien on the real estate is taken in addition to other collateral (PP&E, receivables, owners’ personal real property, etc.)
Subsequent transactions (i.e., refinances) where there is no advancement of new monies (other than for closing costs) and there has been no material change in the market conditions affecting the real property since the last transaction.
Real estate related financial transactions in rural areas with a transaction value less than $400,000 and the financial institution has made a bona-fide attempt to obtain an appraisal in a timely and cost effective manner.
In most states, a state-licensed or state-certified real estate appraiser is required to comply with USPAP when developing an opinion of the value of real estate, as is required by the IAEG. Many financial institutions do not want a USPAP-compliant appraisal when they are permitted to use non-USPAP compliant evaluations. Instead of using the most competent and qualified professional to obtain a market value opinion, financial institutions go to other non-appraiser professionals (i.e., internal bank staff, financial analysts, accountants, brokers/salespersons, etc.) to obtain real estate valuation information. This results in greater risk to the banking system and lost business for appraisers.
The Appraisal Institute (AI) will provide government relations assistance to AI Chapters seeking to change state law to allow certified and licensed appraisers to provide evaluations without complying with USPAP when such is permitted by federal law or regulation provided no such legislation prohibits appraisers to reference appraisal-related designations when performing such services. AI Professionals providing these services shall comply with the AI Standards of Professional Appraisal Practice and the Code of Professional Ethics.
Fifteen states – AL, CO, CT, FL, GA, IL, IN, LA, MN, OR, SD, TN, TX, UT, and VA - have changed their state law to allow state-licensed and state-certified appraisers to perform evaluations in accordance only with the IAEG.
State Evaluations Laws (Compilation as of October 6, 2021)
Alabama Evaluation Law
Colorado Evaluations Law * NEW Effective August 9, 2022*
Connecticut Evaluations Law - * NEW Effective September 30, 2021*
Florida Evaluation Law
Georgia Evaluation Appraisal Law
Illinois Evaluation Law
Illinois Evaluation Guidance
Indiana Evaluation Law
Louisiana Evaluation Law
Minnesota Evaluation Law * NEW Effective August 1, 2021*
Oregon Evaluation Law
South Dakota Evaluation Law
Tennessee Attorney General Advisory Opinion regarding Evaluations
Tennessee Evaluation Law
Tennessee Evaluation Law FAQs
Texas Evaluation Law * NEW Effective June 15, 2021*
Utah Evaluation Law
Virginia Evaluation Law (2017)
Virginia Evaluation Law Update (2018)