For loans, the lender orders the appraisal. That’s because banks must control the process to meet federal regulations and ensure appraiser independence. For non-lending purposes, the property owner (or their attorney/CPA) typically orders the appraisal. Examples include estate planning, tax appeals, partner buyouts, divorce, portfolio valuation, and internal decision-making.
At Lloyd Real Estate Services, our New York Commercial Real Estate Appraisers recommend understanding which side initiates the appraisal early, so you don’t waste time or money on a report a lender won’t accept.
Why Lenders Usually Order the Appraisal
When a property is being financed or refinanced, the lender must manage the appraisal engagement to comply with Appraiser Independence Requirements (AIR), USPAP standards, and bank safety-and-soundness rules. In many cases, lenders use Appraisal Management Companies (AMCs) or an internal appraisal department to assign the work. This ensures:
- Independence and objectivity: The appraiser isn’t influenced by the borrower or sales agents.
- Regulatory compliance: Banks must follow strict processes (e.g., Dodd-Frank/AIR) that require them to control scope, selection, and review.
- Underwriting alignment: The appraisal must match the lender’s underwriting needs, scope of work, and intended use.
Our New York Commercial Real Estate Appraisers recommend that if you’re pursuing a loan for a commercial property in New York—whether acquisition, refinance, or construction—let the lender order the appraisal. If you order it yourself first, there’s a strong chance the lender won’t accept it, even if it’s high quality.
When Owners Should Order the Appraisal
Outside of lending, the owner is usually the one to order and initiate the appraisal. Common use cases include:
- Estate and gift tax valuations
- Property tax assessment appeals
- Eminent domain or condemnation support
- Divorce or partner/member buyout
- Financial reporting (ASC 805, ASC 820), fair market rent
- Portfolio strategy and hold/sell analysis
- Litigation support and expert witness work
In these scenarios, the appraisal’s intended use and intended users will include you (and often your advisors), not a lender. Our New York Commercial Real Estate Appraisers recommend being clear upfront about the purpose and any deadlines or standards involved (e.g., USPAP, IRS requirements, court standards), so the scope of work is tailored correctly.
Commercial vs. Residential: Important Differences
- Residential lending is typically more rigid: almost all lenders require the appraisal to be ordered through their panel or an AMC. Borrower-ordered appraisals are rarely accepted.
- Commercial lending offers more flexibility but is still lender-controlled: some banks will allow a “borrower-to-pay, lender-to-engage” model, but the engagement must still come from the lender’s credit or appraisal department.
- Direct-to-owner commercial appraisals are widely used for non-lending purposes and can be highly customized.
Our New York Commercial Real Estate Appraisers recommend clarifying the property type (office, retail, industrial, multifamily, mixed-use, development land) and the valuation scenario (as-is, as-stabilized, prospective) to avoid scope creep and ensure competitive, accurate pricing.
Who Pays for the Appraisal?
- Lender-ordered appraisals: The borrower typically pays via an appraisal fee collected by the bank, but the lender is the client and controls the report.
- Owner-ordered appraisals: The owner (or their representative) is both the client and payer.
A critical nuance: paying for an appraisal doesn’t make you the client. In lending, the lender remains the client and intended user—even if you paid the fee. That’s why a borrower-ordered appraisal is rarely transferable into a loan file. Our New York Commercial Real Estate Appraisers recommend confirming “client” and “intended users” in the engagement letter before work begins.
How the Process Works (and Why It Matters)
- For lending: You apply for financing. The lender triggers the appraisal order via their process (internal panel or AMC). The appraiser completes the report for the lender, who reviews it against underwriting requirements.
- For non-lending: You engage an appraiser directly. You define the intended use, users, and assumptions (e.g., hypothetical conditions, prospective scenarios). The report is delivered to you and any named intended users (e.g., counsel, CPA, court).
This distinction dictates the standards, formatting, and depth of analysis. An appraisal designed for estate tax, for instance, may present valuation differently than one designed for a bank’s credit committee.
Tips to Ensure Your Appraisal Will Be Accepted
Our New York Commercial Real Estate Appraisers recommend the following to save time and money:
- Ask the lender first. If financing is involved, do not order an appraisal on your own unless the lender instructs you to. Get the lender’s appraisal engagement started early to keep your closing timeline on track.
- Specify intended use and users in writing. If you’re ordering an appraisal for non-lending, make sure the engagement letter clearly lists all intended users (e.g., “Client: XYZ LLC; Intended Users: Client, Attorney Jane Doe, CPA Firm ABC”).
- Match scope to the decision. A full narrative report may be necessary for litigation or complex mixed-use assets; a restricted report may suffice for internal planning. Don’t overpay for scope you don’t need.
- Confirm credentials and competence. Ensure the appraiser is New York State Certified General for commercial properties and has direct experience with your property type and submarket.
- Provide complete documentation. Rent rolls, leases, historical operating statements, capital improvements, environmental reports, and plans help the appraiser deliver a defensible valuation quickly.
- Plan for timing. In New York, commercial appraisals often take 2–4 weeks depending on complexity; lender reviews can add another 1–2 weeks. Build this into your deal timeline.
Common Misconceptions
- “If I pay, the appraisal is mine to use anywhere.” Not for loans. Even if you paid, the lender is the client and controls reliance.
- “I can transfer my appraisal to any lender.” Transfers are limited and depend on both banks’ policies. Many lenders will not accept external reports.
- “Any appraiser can do any property.” Competency matters. A specialist who knows New York’s rent regulations, local cap rates, and DOB/land use issues can materially impact conclusions and credibility.
- “Commercial BPOs or AVMs are enough.” For most institutional lenders and legal purposes, you’ll need a USPAP-compliant appraisal—not a broker opinion or algorithmic estimate.
Our New York Commercial Real Estate Appraisers recommend verifying acceptance requirements before you order anything.
Bottom Line: Decide Based on Your Goal
- Financing or refinancing? The lender initiates and orders the appraisal. Coordinate with your loan officer and provide documents promptly.
- Non-lending decision, tax, legal, or planning need? You, the owner (or your advisor), should order the appraisal directly and define the intended use.
Lloyd Real Estate Services delivers New York-focused commercial valuation that aligns with both regulatory standards and practical business needs. Whether your next step is a bank-ordered appraisal for financing or an owner-ordered report for strategy, our New York Commercial Real Estate Appraisers recommend starting with a quick scoping call to clarify intended use, users, timeline, and property specifics.
Talk to Lloyd Real Estate Services
If you need guidance on who should initiate your appraisal or you’re ready to scope a commercial valuation in New York, Lloyd Real Estate Services can help. Share your property type, purpose, and timeline, and we’ll outline the most efficient path—so your appraisal is compliant, actionable, and accepted by the parties who matter.