On a small dollar real estate loan, is it acceptable to just use the tax assessed value in lieu of an appraisal or evaluation?
Unfortunately, no, you can’t just use the TAV without further analysis. While it can be used as part of the evaluation, the value assigned by the county can’t be the only data source you rely on. The interagency guidelines provide:
Tax Assessment Valuations (TAVs)
An institution may not rely solely on the data provided by local tax authorities to develop an evaluation unless the resulting evaluation is consistent with safe and sound banking practices and these Guidelines. (See the Evaluation Development and Evaluation Content sections.) Since analytical methods such as TAVs generally need additional support to meet these Guidelines, institutions should develop policies and procedures that specify the level and extent of supplemental information that should be obtained to develop an evaluation. Such policies and procedures also should require the use of an alternate valuation method when such information does not support the transaction.
An institution may use a TAV in developing an evaluation when it can demonstrate that a valid correlation exists between the tax assessment data and the market value. In using a TAV to develop an evaluation, an institution should:
Determine and document how the tax jurisdiction calculates the TAV and how frequently property revaluations occur.
Perform an analysis to determine the relationship between the TAV and the property market values for properties within a tax jurisdiction.
Test and document how closely TAVs correlate to market value based on contemporaneous sales at the time of assessment and revalidate whether the correlation remains stable as of the effective date of the evaluation.
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