Sba

[DanBuck]

Forgive my ignorance. What does an SBA loan appraisal look like for an owner occupied commercial loan-they say no income approach. Is this a form appraisal? And how do you value commercial property without income?

-Thanks

 

[Mike Kennedy]

http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/cre.pdf Research oppty Starts bottom page 59.

also Google

OCC Bulletin 2010-42, “Sound Practices for Appraisals and Evaluations
: InteragencyAppraisal and Evaluation Guidelines,”

 

[DanBuck]

Than

http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/cre.pdf Research oppty Starts bottom page 59.

also Google

OCC Bulletin 2010-42, “Sound Practices for Appraisals and Evaluations
: InteragencyAppraisal and Evaluation Guidelines,”

Am reading..

 

[Mike Kennedy]

also
"Certified appraisals are required for loans greater than $250,000 secured by commercial real estate. The SBA may require professional appraisals of both business and personal assets, plus any necessary survey and/or feasibility study. When real estate is being used as collateral, banks and other regulated lenders are required by law to obtain third-party valuation on transactions of $50,000 or more.
Your Home or Personal Assets May Be Considered as Collateral

Owner-occupied residences generally become collateral when: .....

• The lender requires the residence as collateral
  
• The equity in the residence is substantial and other credit factors / sources of collateral are weak
• Such collateral is necessary to assure that the principal(s) remain committed to the success of the venture for which the loan is being made
• You operate the business out of the residence or other buildings located on the same parcel of land

To the extent that worthwhile assets are available, adequate collateral is required as security on all SBA loans. However, the SBA will generally not decline a loan when inadequacy of collateral is the only unfavorable factor.

For all SBA loans, personal guaranties are required from every owner of 20 percent or more of the business, as well as from other individuals who hold key management positions. Whether a guaranty will be secured by personal assets or not is based on the value of the assets already pledged and the value of the assets personally owned compared to the amount borrowed.[URL='https://www.sba.gov/loans-grants/get-ready-apply/check-your-credit/collateral']"
[/URL]
https://www.sba.gov/loans-grants/get-ready-apply/check-your-credit/collateral

 

[Mike Kennedy]

IN CONNECTICUT also see >>>

http://www.ciclending.com/startup-business-loans/enivronmental-risk-assement/

 

[Terrel L. Shields]

owner occupied commercial loan

We do SBA backed loans on poultry farms which are "owner-occupied" and I would be amiss not to include the income approach. It is not merely applicable, it could be necessary. Until I develop it and reconcile the approaches, I would not eliminate any approach in an SBA backed loan.

 

[DanBuck]

We do SBA backed loans on poultry farms which are "owner-occupied" and I would be amiss not to include the income approach. It is not merely applicable, it could be necessary. Until I develop it and reconcile the approaches, I would not eliminate any approach in an SBA backed loan.

thanks Terrell. Ye that makes sense agriculture would be a logical case for SBA loans.. Are they presented in naarative formats (I know it depends on the request)? Lender says no income approach but it's just based on comps like residential homes?

 

[Gobears81]

I've done plenty of SBA appraisals, including on owner occupied properties, but the majority include the income approach. Could it be that the engagement letter requests that you do the sales comparison and cost approaches, but that they aren't necessarily requesting the income approach? If so, that doesn't mean that you are not to do the income approach-that is your decision to make on whether it is applicable. I am always wary of when clients request that I do not do an approach-it is hard enough to come out to the right value in many cases and if you omit an approach that is applicable in your eyes, your results may be that much less credible.

 

[DanBuck]

I've done plenty of SBA appraisals, including on owner occupied properties, but the majority include the income approach. Could it be that the engagement letter requests that you do the sales comparison and cost approaches, but that they aren't necessarily requesting the income approach? If so, that doesn't mean that you are not to do the income approach-that is your decision to make on whether it is applicable. I am always wary of when clients request that I do not do an approach-it is hard enough to come out to the right value in many cases and if you omit an approach that is applicable in your eyes, your results may be that much less credible.

I completely agree. Its up to the appraisers to determine the scope of work. I was just told by lender that "the other appraisers" dont do income approaches for the specified properties. Its possible thats the case-Im just wondering which owner occupied commercial properties dont need one..

 

[Michael S]

I've done a fair amount of appraisals where the SBA is an intended user. There's really no difference from a normal (summary) report. Most times the income approach isn't that meaningful and so I may not develop it. There's not a lot of rents or investment sales of 4,000 square foot office/warehouses with an acre of fenced yard, but there's plenty of sales. If it's an industrial property I may do a cost approach. Sometimes I'll do an abbreviated income approach in the H&BU just showing that based on a reasonable range of market rents the subject would have to sell at a ridiculously low cap rate (say 4-5% when small commercial properties are probably closer to 8-10%) in order to equate to the value determined by the sales comparison approach. That and the fact that all of the comparable sales were purchased by owner/users is generally enough reason to exclude the income approach.