§ 1945.175 - Options, planning, and appraisals.

(a) Optioning land. When purchasing real property an applicant is responsible for obtaining options in accordance with the provisions contained in § 1943.25 (a) of subpart A of part 1943 of this chapter.

(b) Planning. (1) Form FmHA or its successor agency under Public Law 103-354 431-2 or other planning forms that provide similar/necessary information, and Form FmHA or its successor agency under Public Law 103-354 431-4, “Business Analysis-Nonagricultural Enterprise,” when appropriate, will be completed as provided in subpart B of part 1924 of this chapter and in accordance with the FMIs. This planning process with the applicant is essential to making sound loans and, therefore, must receive careful attention in development of the loan docket. The plan will show any major items of expenditure and the reason(s) these items are needed. When preparing a plan of operation, it is usually necessary to plan for a capital expenditure reserve during interim years and the typical year. Realistically, this will reflect the depreciating value of machinery, equipment or other essential capital expenditure items, which it is prudent to expect will need to be replaced or require major repair. Also, all recurring and carry-over debts should be considered in a typical year plan. In addition, when all of the loan funds are not to be disbursed at loan closing, a Monthly Budget will be prepared showing the specific amount to be disbursed for each associated loan purpose for each month. The funds will be disbursed through use of the loan disbursement system (future advances) or, when determined necessary, through a supervised bank account.

(2) Development work will be planned and completed in accordance with subpart A of part 1924 of this chapter. Also, the provisions of subpart E of part 1901 of this chapter will be met in connection with EM loans involving recreational enterprises and the construction of buildings.

(c) Appraisals. (1) Except as provided in paragraph (c)(1)(i) of this section, real estate appraisals will be completed on forms in accordance with § 761.7 of this title, and in the case of an appraisal of residential real estate’ the appropriate Agency form (available in each Agency State Office) or other format that contains the same information, by a designated FmHA or its successor agency under Public Law 103-354 real property appraiser, or FmHA or its successor agency under Public Law 103-354 State-certified general contract real property appraiser. Appraisals are necessary when real estate is taken as primary security, as defined in § 1945.154 (a) of this subpart, for the EM loan or when loans are serviced in accordance with subpart S of part 1951 of this chapter.

(i) Other real estate appraisals completed by other State-certified general appraisers may be used providing such appraisals meet the ethics, competency, departure provisions, etc., and sections I and II of the Uniform Standards of Professional Appraisal Practices, and contain a mineral rights appraisal as set out in paragraph (c)(1)(ii) of this section. Prior to acceptance, the appraisal must have an acceptable desk review (technical) completed by an FmHA or its successor agency under Public Law 103-354 designated review appraiser.

(ii) The rights to mining products, gravel, oil, gas, coal, or other minerals will be considered a portion of the security and will be specifically included as a part of the appraised value of the real estate securing the loans using Form FmHA or its successor agency under Public Law 103-354 1922-11, “Appraisal for Mineral Rights” or other format that contains the same information.

(iii) When FLB stock is to be used in establishing the recommended market value (RMV) of the real estate being appraised, see § 1945.169 (p)(1) of this subpart.

(iv) Real estate appraisals are not required when real estate is taken as additional security, as defined in § 1945.154 (a) of this subpart. However, the County Supervisor will document in the running record the estimated market value of the additional security and the basis for the estimate.

(2) The appraised value of assets securing EM loans is established as of the day before the beginning of the incidence period of the qualifying disaster.

(3) Chattel appraisals will be completed on Form FmHA 1945-15, “Value Determination Worksheet (EM loans only),” when chattels are taken as security. The property which will serve as security will be described in sufficient detail so it can be identified. Sources such as livestock market reports and publications reflecting values of farm machinery and equipment will be used as appropriate. Chattels not owned by the applicant, and nonfarm chattel property offered as security (such as planes, house trailers, boats, etc.) will be appraised at the present market value only. Chattels that the applicant did not own on the date set forth in paragraph (c)(2) of this section will be appraised at the present market value.