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Was pre approved by cap one, on the condition they are sending out a appraiser of the collat. We had our own a

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The BAF Group LLC
MD

Any Bank will normally do an appraisal of any business or property, before final loan is approved. The SBA requires it above a particular loan amount - $350k, I believe. They will not honor your own appraisal because they cannot validate the legitimacy of the appraiser.

Business valuations can be somewhat subjective. We had one with (then) Wachovia Bank, where our own analysis designated a particular price. The Bank's appraiser came in about 10% HIGHER! The Bank then demanded a second appraisal, and it was obvious the appraiser had received instructions to lower the appraisal, because he just about admitted to it. In the end, I sent a three-page letter to the Bank's loan supervisors, and we got it done at the price we had originally designated. But that kind of appeal is tougher now than it was.

Appraisal of collateral is also tough. Real Estate appraisers are under tremendous pressure from the banks to keep values low. It is a serious problem and leads to a lot of the home value declines you see in the media. A reasonably valued home may now receive multiple offers, because the supply of houses is low, in some areas. Those offers may result in competition for the home that exceeds the price set by the Agent, but the bank will beat it back to the price of the last house sold. Unless the Buyer brings the additional money to settlement him/herslef, he will not get the house. What this means is that there can be no increase in home values, in the vast majority of purchases.

Work with the appraiser to understand his/her methods, if you can. Ask for a full report. You may not need any appeal, but if you do, having this information could be vital.

Aug 31, 2012

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