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May outside attorneys order appraisals on a commercial loan restructure?

We are working with an outside attorney who is helping us with a commercial loan restructure. The loan will be secured by commercial real estate and equipment. The attorney has offered to order the appraisal. May the attorney order the appraisal for us?

It depends. Attorneys may order the appraisal if the bank is the client, but they may not if the bank’s client is the attorney’s client. Nevertheless, that outside attorneys working on behalf of the bank are permitted to order the appraisal does not mean that they should in all cases. It may depend in part on how the attorneys are compensated. If they are compensated on a per-loan or per job basis, then they are part of the loan production function, and their independence may be questionable.

According to the Interagency Appraisal and Evaluation Guidelines:

Because the appraisal and evaluation process is an integral component of the credit underwriting process, it should be isolated from influence by the institution's loan production process. An appraiser and an individual providing evaluation services should be independent of the loan and collection functions of the institution and have no interest, financial or otherwise, in the property or the transaction. If absolute lines of independence cannot be achieved, an institution must be able to clearly demonstrate that it has prudent safeguards to isolate its collateral evaluation process from influence or interference from the loan production process. (November 2017)

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