Most real estate-related transactions that involve financing are above the appraisal threshold, currently $250,000, and are considered federally related transactions (“FRTs”). FRTs require an appraisal to be performed.

The interagency guidelines indicate that a person performing an evaluation “should possess the appropriate appraisal or collateral valuation education, expertise, and experience relevant to the type of property being valued. Such persons may include appraisers, real estate lending professionals, agricultural extension agents, or foresters.” Financial institutions are expected to maintain documentation regarding how the person performing the evaluation has the relevant experience and knowledge, is competent, and independent regarding the market, location and real property being valued. The financial institution is also required to establish policies and procedures for determining when to obtain an appraisal, rather than seek an evaluation.

Colorado is a mandatory licensure state for appraisers. Colorado law, specifically §12-61-702(1)(a), C.R.S. defines an appraisal as:

A written or oral analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects of, identified real estate that is transmitted to the client upon the completion of an assignment. These terms include valuation, which is an opinion of the value of real estate, and an analysis, which is a general study of real estate not specifically performed only to determine value; except that the terms include a valuation completed by an appraiser employee of a county assessor as defined in section 39-1-102(2), C.R.S.

Colorado law does accommodate the appraisal exemption in the interagency guidelines, so long as the primary federal regulator has exempted the real estate-related transaction or loan from the appraisal regulations. If the real estate-related transaction or loan is exempt, Colorado law requires that the appraisal be performed by:

  1. An officer, director, or regularly salaried employee of the financial institution or its affiliate; or
  2. A real estate broker licensed in Colorado with whom said institution or affiliate has contracted for performance of the appraisal.

Furthermore, Colorado does not allow the appraisal to be deemed or represented as “an appraisal” to anyone except the financial institution, the agencies regulating the financial institution, and any secondary markets that purchase real estate secured loans. The appraisal must contain a written notice that the preparer is not licensed or certified as an appraiser under Colorado law. If a credentialed appraiser performs an evaluation, Colorado law requires that the appraiser comply with the appraiser practice act. Therefore, an evaluation, if completed by an appraiser, must comply with USPAP and must be completed by a credentialed Colorado appraiser.

If a real estate broker is contracted to perform an evaluation, the broker needs to confirm that the real estate-related transaction or loan has been exempted by the primary federal regulator through the interagency guidelines. Colorado has an actively changing market. Even if the transaction threshold is equal or less than $250,000, it may not meet the exemption requirements. If the transaction has not been exempted, the appraiser practice act prohibits a real estate broker from providing an opinion of value that is represented as an appraisal and is used for purposes of obtaining financing. If the transaction has been exempted, Commission Rule E-42 requires a real estate broker that provides a BPO or CMA that is used for any reason other than the anticipated sale or purchase of the subject property, the real estate broker must include a notice stating: “This evaluation was prepared by a licensed real estate broker and is not an appraisal. This evaluation cannot be used for the purposes of obtaining financing.”

The federal Interagency Appraisal and Evaluation Guidelines (“interagency guidelines”) allow an evaluation to be performed in lieu of an appraisal for transactions that qualify for one of the following exemptions:
  1. Has a transaction value equal to or less than the appraisal threshold of $250,000.
  2. Is a business loan with a transaction value equal to or less than the business loan threshold of $1 million, and is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.
  3. Involves an existing extension of credit at the lending institution provided that:
    1. There has been no obvious and material change in market conditions or physical aspects of the property that threaten the adequacy of the institution’s real estate collateral protection after the transaction, even with the advancement of new monies; or
    2. There is no advancement of new monies other than funds necessary to cover reasonable closing costs.
  4. Has a commercial real estate transaction value of equal to or less than the appraisal threshold of $500,000.



Marcia Waters has been with the Colorado Division of Real Estate since August 2005. Marcia started with the Division as a Criminal Investigator for the Real Estate Commission and was promoted to Chief Investigator in 2006. In 2007, she was promoted to the position of Investigations and Compliance Director. In that capacity, she managed the investigatory and settlement programs for the Division. On October 15, 2010, she was promoted to the position of Division Director. The Division of Real Estate licenses and regulates approximately 50,000 real estate professionals. Ms. Waters serves as the administrator for the Real Estate Commission, the Board of Real Estate Appraisers, the Board of Mortgage Loan Originators, the Community Association Manager Program and the HOA Information and Resource Center. Ms. Waters manages the Division’s $6.5 million budget, oversees a staff of approximately 57 full-time employees, and establishes the direction of Division programs based on market and industry trends.