When a Tennessee appraiser does an 'evaluation' for a federally regulated bank, is that evaluation also an 'appraisal' subject to USPAP standards?

Plain-English summary

The chairman of the Tennessee Real Estate Appraiser Commission asked the AG a clean construction question. Tennessee licenses appraisers and requires them to follow Uniform Standards of Professional Appraisal Practice (USPAP) under Tenn. Code Ann. § 62-39-329. But a separate provision, § 62-39-104(d), exempts a specific category of work from the entire appraisal-licensing chapter: "evaluations" of real property used as collateral or trust assets by federally regulated financial institutions, where the federal regulator does not require a state-licensed appraisal. The question was whether such an evaluation is still an "appraisal" or "appraisal report" under § 62-39-102(2) and (5) (and therefore subject to USPAP), or whether the exemption in § 62-39-104(d) takes the work entirely outside the appraisal regime.

AG Cooper said the exemption is real and complete, but only when the evaluation strictly meets all four conditions in § 62-39-104(d):

1. The applicable federal regulator does not require an appraisal by a state-licensed or state-certified appraiser for the loan or trust.
2. The evaluation is used solely by the financial institution in its records to document the collateral or asset value.
3. The evaluation is labeled on its face "this is not an appraisal."
4. Individuals performing the evaluation may be compensated.

When all four conditions are met, the chapter does not apply, and the work is not an "appraisal" or "appraisal report" within the meaning of the chapter's definitions. USPAP and other appraisal standards are inapplicable. If the evaluation steps outside any of those four conditions (for example, the bank gives the evaluation to a third party, or the appraiser fails to label it "not an appraisal"), then the work is an "opinion of value" and qualifies as an appraisal subject to all the chapter's requirements.

The two statutes (§ 62-39-104(d) and § 62-39-329) do not conflict. They work together. USPAP applies to appraisals; § 62-39-104(d) carves a specific class of work out of being an appraisal in the first place. Neither "governs" over the other. They are both read together to determine when the standards apply.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What is USPAP?
A: The Uniform Standards of Professional Appraisal Practice, promulgated by the Appraisal Standards Board of The Appraisal Foundation. It is the national standard for appraisal practice. Tenn. Code Ann. § 62-39-329 makes USPAP compliance mandatory for state-licensed and state-certified appraisers when they are doing an "appraisal."

Q: What's an "evaluation" in this context?
A: A specific bank-internal valuation product allowed under federal banking regulations for transactions where federal regulators have decided a full appraisal is not necessary. It is typically a less formal value estimate used by the bank to track collateral or trust asset value in its own records.

Q: Why does § 62-39-104(d) exist?
A: To allow Tennessee-licensed appraisers to perform federally permitted evaluations without those evaluations being recharacterized as full appraisals subject to USPAP. Without the exemption, every value-of-real-estate work product by a Tennessee appraiser would technically meet the broad statutory definition of "appraisal" and would have to comply with USPAP, which would defeat the federal banking-regulation framework for streamlined evaluations.

Q: What if the bank shares the evaluation with a third party?
A: Then the evaluation falls outside § 62-39-104(d)(1)(B), which requires the evaluation to be "used solely by the financial institutions in their records." Once the evaluation is used by anyone other than the bank itself, the exemption breaks and the work becomes an appraisal.

Q: What if the appraiser forgets to label it "this is not an appraisal"?
A: The exemption fails. § 62-39-104(d)(1)(C) is a labeling requirement: the evaluation must say on its face "this is not an appraisal." Without that label, the work is treated as an appraisal subject to all chapter requirements, including USPAP.

Q: Can a non-licensed person perform the evaluation?
A: The opinion does not directly address this. § 62-39-104(d)(2) says nothing in the chapter prevents a state-licensed or state-certified appraiser from performing the evaluation, but the exemption itself is from the chapter's licensing requirement, suggesting non-appraisers can also do evaluations under federal banking rules.

Q: How does this affect the appraiser's professional liability?
A: If the work is not an appraisal under Tennessee law, the appraiser is not subject to discipline by the Real Estate Appraiser Commission for USPAP violations on that work. But the appraiser may still face liability under contract, tort, or federal regulatory rules. The exemption removes one layer of regulatory exposure, not all of them.

Q: Is this exemption common in other states?
A: Yes. State appraiser laws across the country generally include similar exemptions for federal-bank evaluations because the federal banking regulators (OCC, FDIC, Federal Reserve, NCUA) have rules permitting evaluations for many transactions below certain thresholds. The state-law exemptions track the federal carve-outs to keep the two regimes consistent.

Q: What standards does the appraiser have to follow on a § 62-39-104(d) evaluation, then?
A: Whatever standards the federal regulator's evaluation guidelines require, plus any contractual or institutional standards imposed by the bank. The evaluation is not free-form; it is governed by federal banking regulators' interagency guidelines on evaluations. But Tennessee's USPAP-mandate statute does not apply.

Background and statutory framework

Tennessee's State Licensing and Certified Real Estate Appraisers Law, Tenn. Code Ann. § 62-39-101 et seq., was enacted to implement the federal requirements for state appraiser licensing under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Section 62-39-103 requires state licensing or certification for real estate appraisers. The Real Estate Appraiser Commission (Tenn. Code Ann. §§ 62-39-201 et seq.) oversees licensing, examination (§ 62-39-301 et seq.), and discipline.

Two definitions in § 62-39-102 set the scope. An "appraisal" is "the act or process of developing an opinion of value of identified real estate." § 62-39-102(2). An "appraisal report" is "any communication, written or oral, of an opinion of value of identified real estate." § 62-39-102(5). These definitions are deliberately broad: virtually any valuation work product fits.

Section 62-39-329 imposes the USPAP requirement: "It is the intent of this chapter that real estate appraisals be performed in accordance with generally accepted appraisal standards; therefore, state licensed and/or certified real estate appraisers must comply with the Uniform Standards of Professional Appraisal Practice promulgated by the appraisal standards board of the appraisal foundation and any other duly established standards of the commission."

Section 62-39-104(d) carves an exemption: "This chapter does not apply to any evaluation of the value of real estate serving as collateral for a loan made by a federally regulated financial institution or to any evaluation of the value of the assets of a trust held by the institution," subject to the four conditions listed earlier. This exemption is the federal-banking parallel to the state's appraisal regime: federal regulators have decided that some lower-risk transactions can use streamlined evaluations rather than full appraisals, and Tennessee respects that choice by removing those evaluations from its own licensing chapter.

The construction question is straightforward. The two statutes do not conflict if you read them sequentially. § 62-39-329 governs all appraisals: USPAP and Commission standards apply. § 62-39-104(d) defines a category of work that is not an appraisal at all under the chapter. What looks like overlap is actually a layered scheme: USPAP applies to appraisals, and § 62-39-104(d) defines a non-appraisal exception, so USPAP does not reach into that exception.

The opinion's careful conditional framing matters. The exemption is defined by four affirmative criteria. If any one fails, the work is no longer an "evaluation" within the meaning of the exemption, and the chapter's full regime kicks in. The drafting is not "evaluations are exempt"; it is "evaluations meeting all four conditions are exempt." That structure pushes appraisers toward compliance with the labeling requirement (criterion 3) in particular, because the label is the visible signal that the work is intended to be exempt.

Cooper's analysis is also notable for what it does not say. It does not address what happens if a state appraiser is doing the evaluation under contract with the bank but the federal regulator independently changes its rules to require a state-licensed appraisal for that loan type. Presumably criterion (A) would no longer be met, and the work would become an appraisal, but the appraiser may not know about the federal rule change. The practical guidance to appraisers: confirm with the lender at the start of each engagement that the federal regulator does not require an appraisal for the specific transaction.

Citations and references

Statutes:

• Tenn. Code Ann. § 62-39-101 et seq. (State Licensing and Certified Real Estate Appraisers Law)
• Tenn. Code Ann. § 62-39-102(2) (definition of appraisal)
• Tenn. Code Ann. § 62-39-102(5) (definition of appraisal report)
• Tenn. Code Ann. § 62-39-103 (license/certification requirement)
• Tenn. Code Ann. § 62-39-104(d) (federally regulated lender evaluation exemption)
• Tenn. Code Ann. § 62-39-201 et seq. (Real Estate Appraiser Commission)
• Tenn. Code Ann. § 62-39-301 et seq. (license/examination requirements)
• Tenn. Code Ann. § 62-39-329 (USPAP and other appraisal standards)

External standards:

• Uniform Standards of Professional Appraisal Practice (USPAP), promulgated by the Appraisal Standards Board of The Appraisal Foundation
• Federal banking interagency guidelines on evaluations (OCC, FDIC, Federal Reserve, NCUA)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2010/op10-025.pdf

Original opinion text

March 5, 2010

Opinion No. 10-25

Whether an "Evaluation" of Real Property Constitutes an "Appraisal" and an "Appraisal Report"

QUESTIONS

1. When a state-licensed or certified appraiser performs an evaluation of real property under Tenn. Code Ann. § 62-39-104(d) and develops an opinion of collateral or asset value, is such "evaluation" also an "appraisal" and an "appraisal report," as defined in Tenn. Code Ann. § 62-39-102(2) and (5)?

2. If the answer to question 1 is yes, then does Tenn. Code Ann. § 62-39-104(d)(1), which states that "this chapter does not apply to any evaluation," conflict with Tenn. Code Ann. § 62-39-329?

3. If the answer to question 2 is yes, which provision governs: Tenn. Code Ann. § 62-39-104(d)(1) or Tenn. Code Ann. § 62-39-329?

OPINIONS

1. No. An evaluation of the value of real property performed under Tenn. Code Ann. § 62-39-104(d) is not an "appraisal" or "appraisal report" under Tenn. Code Ann. § 62-39-102(2) and (5) because it is expressly exempted from the definitions and requirements of title 62, chapter 39 by section -104(d), so long as it is used for the limited purposes of that section and is labeled as "not an appraisal" pursuant to section -104(d)(1)(C). If such an evaluation is not limited in its use to the strict confines of section -104(d), then it would constitute an "opinion of value" and qualify as an "appraisal" and "appraisal report" within the meaning of section -102(2) and (5).

2. Tenn. Code Ann. §§ 62-39-104(d) and -329 do not conflict with each other. When read together, these two sections clarify when the USPAP and other appraisal standards are applicable to work performed by an appraiser. The standards apply to all appraisals except for section -104(d) evaluations.

3. As stated in response to the second question, Tenn. Code Ann. §§ 62-39-104(d) and -329 do not conflict with each other. Neither section "governs." Both should be read together to determine when appraisal standards are applicable.

ANALYSIS

1. Tenn. Code Ann. §§ 62-39-101 et seq. is known as the "State Licensing and Certified Real Estate Appraisers Law" (the "Act"). Tenn. Code Ann. § 62-39-101 (2009). The Act requires real estate appraisers to obtain a state license or certification, Tenn. Code Ann. § 62-39-103 (2009), establishes a real estate appraiser commission, Tenn. Code Ann. §§ 62-39-201 et seq. (2009), and sets forth certain licensing, certification, and examination requirements for appraisers. Tenn. Code Ann. §§ 62-39-301 et seq. (2009).

As defined by the Act, an "appraisal" is "the act or process of developing an opinion of value of identified real estate." Tenn. Code Ann. § 62-39-102(2) (2009). An "appraisal report" is defined as "any communication, written or oral, of an opinion of value of identified real estate." Tenn. Code Ann. § 62-39-102(5) (2009). The Act requires that "appraisals be performed in accordance with generally accepted appraisal standards; therefore, state licensed and/or certified real estate appraisers must comply with the Uniform Standards of Professional Appraisal Practice" (the "USPAP"). Tenn. Code Ann. § 62-39-329 (2009). But Tenn. Code Ann. § 62-39-104(d) (2009) exempts certain "evaluations" from the requirements of the Act.

(1) This chapter does not apply to any evaluation of the value of real estate serving as collateral for a loan made by a federally regulated financial institution or to any evaluation of the value of the assets of a trust held by the institution; provided, that:

(A) The applicable federal regulator does not require an appraisal by a state-licensed or state-certified appraiser for the loan or trust;
(B) The evaluation is used solely by the financial institutions in their records to document the collateral or asset value;
(C) The evaluation shall be labeled on its face "this is not an appraisal"; and
(D) Individuals performing these evaluations may be compensated for their services.

(2) Nothing in this chapter shall prevent a state-licensed or state-certified appraiser from performing the evaluation.

The distinction between an appraisal and a section -104(d) evaluation of real estate is not the purpose of such appraisal or evaluation but, rather, the circumstances under which one is performed. In both instances an appraiser would attempt to determine the value of certain real property. However, an evaluation that is performed under section -104(d) and satisfies the requirements of that section, including labeling the evaluation as "not an appraisal" on its face, is not an "appraisal" or an "appraisal report" under section -102(2) and (5) because it is expressly exempted from the definitions and requirements of title 62, chapter 39. If an evaluation does not fall within the strict confines of section -104(d), then it would constitute an "opinion of value" and qualify as an "appraisal" and an "appraisal report" within the meaning of section -102(2) and (5).

2. The Act requires appraisals to comply with appraisal standards such as the USPAP.

It is the intent of this chapter that real estate appraisals be performed in accordance with generally accepted appraisal standards; therefore, state licensed and/or certified real estate appraisers must comply with the Uniform Standards of Professional Appraisal Practice promulgated by the appraisal standards board of the appraisal foundation and any other duly established standards of the commission.

Tenn. Code Ann. § 62-39-329 (2009). The explicit language of section -104(d) exempts evaluations performed thereunder from the provisions of the Act.

(1) This chapter does not apply to any evaluation of the value of real estate serving as collateral for a loan made by a federally regulated financial institution or to any evaluation of the value of the assets of a trust held by the institution. . . .

Tenn. Code Ann. § 62-39-104(d)(1) (2009) (emphasis added). As discussed in response to the first question, a section -104(d) real estate evaluation is not an appraisal and appraisal report. Sections -104(d) and -329 do not conflict with each other. When read together, these two sections clarify when the USPAP and other appraisal standards are applicable to work performed by an appraiser. The standards apply to all appraisals except for section -104(d) evaluations.

3. As stated in response to the second question, Tenn. Code Ann. §§ 62-39-104(d) and -329 do not conflict with each other. Neither section "governs." Both should be read together to determine when appraisal standards are applicable.

ROBERT E. COOPER, JR.
Attorney General and Reporter

MICHAEL E. MOORE
Solicitor General

NICHOLAS G. BARCA
Assistant Attorney General

Requested by:
Herbert E. Phillips
Chairman, Tennessee Real Estate Appraiser Commission
Department of Commerce and Insurance
Office of Legal Counsel
500 James Robertson Parkway
5th Floor, Davy Crockett Tower
Nashville, Tennessee 37243-0569