Appraisal Standards for SBA 504 Loans:

Appraiser Requirements:
a. The appraiser must be independent with no appearance of a conflict of
interest (no financial or other interest in the property or the transaction)
b. The appraiser must be either state-licensed or state-certified for projects
valued $1,000,000 and under. For projects valued over $1,000,000, the
appraiser must be state-certified

Appraisal Report Requirements:

a. The appraisal report must be either a self-contained or summary report
b. Restricted use appraisal reports are not acceptable
c. The appraisal report must use three different approaches (income, sales
and cost). If one of the methods is not applicable, there must be a valid
explanation as to why it was not used and the two other approaches are
required. SBA will not accept an appraisal that only uses one approach.

Ordering a New Appraisal:

a. The report should be requested by and prepared for the U.S. SMALL BUSINESS
ADMINISTRATION, 6501 Sylvan Road, Suite 111, Citrus Heights, CA 95610-
5017

b. However, SBA will accept a report addressed to the Third Party Lender AND
SBA

Accepting an Existing Appraisal:

a. If the existing appraisal report is not addressed to SBA, then the
appraiser would need to extend use of the report to SBA.
b. If the appraiser won’t extend use of the report to SBA, then either a new
appraisal or a review of the existing appraisal report is required (this
cost may be passed on to the borrow as an eligible project cost under
professional fees)

New Construction or Substantial Renovations:

a. The appraisal report must be prepared showing the market value of the
property upon completion of construction or major renovations
b. Upon completion of the construction or major renovations, a
certification from the appraiser is required, certifying that the
construction or renovations were completed according to
plans and specifications. This estimated cost should be
included in the estimate fee.

Purchase of an Existing Building:

 a. The appraisal report should estimate the market value on an “as-is” basis
b. Any other type of value used by the appraiser requires an explanation by the
appraiser as to why the “as-is” basis was not used

Business Enterprise Value/Going Concern Value:

a. If the appraisal report includes either a “going-concern” or “business
value” then the appraiser must allocate separate values to the land,
building, equipment and business/going-concern/goodwill/”blue sky”
value
b. SBA will deduct the business/going-concern/goodwill/”blue sky” value
from the total valuation

Special Purpose Property:

a. When the collateral for the Project is a special purpose property, the
appraiser must be experienced in the particular industry
b. See SOP Pages 240-241 for a list of limited or special purpose
properties

Appraisal date: SBA will not accept an appraisal report that is older than one year from
the date of the 504 loan application