Are Appraisers Killing the Banking Industry?
(TMA International Headquarters) As if the economy and tight credit markets were not enough to contend with, real estate developers are faced with a new challenge. Banks are informing real estate developers at loan maturity that their cash-flowing, debt-servicing property is now considered substandard based on the bank’s latest appraisal. The opportunity for such a developer to renew its loan is predicated on new pricing and a substantial equity contribution to pay down the existing loan balance to a “conforming” loan-to-value ratio. For many developers this is a double whammy. Their initial shock often soon gives way to anger. The developer may have a stabilized project that meets debt service coverage ratios under the “old” deal. Now, to keep the asset, not only is the developer’s cash flow negatively impacted by increased pricing, but it must also fund additional capital to meet the required pay-down to a conforming loan to value. In many cases, the developer’s capital is already st
