SBA 504 Loans –

Appraisal Guideline Clarifications

Although the OCC, Board, and FDIC recently published a final rule that increased the appraisal threshold from $250,000 to $500,000, the Small Business Act continues to state that SBA shall require appraisals for all projects with a value over $250,000.  Please note: there are plans to request a legislative update to match Federal Regulator limits.

SBA now requires the appraisal to include the U.S. Small Business Administration as an authorized user of the report. Please be sure this is
included in your appraisal engagement letter.

PLEASE NOTE: Value must be based on Fee Simple (not Leased Fee)

Appraisal Reminders: 

If building improvements are involved with a project, please provide the contractor’s bid to the appraiser, and have the appraiser provide the market value on an as-is basis for land only, the market value on an as-is basis for land & building, and the market value of land & building at the completion of improvements.

The appraiser must use at least 2 of the 3 appraisal methods (cost, sales, and income approaches). If the appraiser does not include all three approaches, the appraiser must include in the report why the other approach was not used. If cost approach is not used in the report, the appraiser must state fair market value of land.

If the project involves improvements that will be equal to or greater than 1/3 of the cost of the land & building, then please instruct the appraiser to complete a Post-Construction Certification form once the construction is finished.

SBA requires a real estate appraisal if the estimated value of the Project Property is greater than $250,000 or $250,000 or less if such appraisal is necessary for appropriate evaluation of creditworthiness.