April 2020
Ask The Experts
SBA 504 Q&A: Appraisal Requirements

Q: When is a real estate appraisal required to be submitted to the Small Business Administration (SBA) with a 504 loan application?

Ask the SBA 504 Loan ExpertsA: Typically, an appraisal is submitted to the SBA for approval subsequent to the 504 loan being approved; however, there are situations that require an appraisal to be submitted to the SBA at the time of application, which include:

1. Equity in land owned for 2 years or more is being contributed as part of the borrower’s contribution. (Note: in this instance, the appraisal will give the as-is value, which is the land only, and subsequently the as-complete value for the land and building.)

2. The real estate is the third party lender’s Other Real Estate Owned (OREO).

3. The project is not an arms-length transaction (i.e., family members).

4. The property seller is carrying back a loan that is part of the borrower’s contribution.

A real estate appraisal may not be required under the following circumstances:

1. An equipment only loan, as there is no real estate involved in the transaction; however, if loan proceeds will be used to purchase used equipment, an equipment appraisal will be required.

2. Loans that are $500,000 or less (per SBA policy notice 5000-19007) can waive the appraisal requirement if the appraisal is not needed to determine creditworthiness and the transaction does not involve parties with a close relationship (i.e., family members).

If you have a question for our SBA 504 loan experts, email us at info@FloridaFirst.com or call 850.681.3601 or toll-free at 800.504.LOAN.