US Bank Regulators Relax Appraisal Rule For CRE
The final rule allows a financial institution to use an evaluation rather than an appraisal for commercial real estate transactions exempted by the $500,000 threshold.
WASHINGTON, DC–The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency have issued a final rule that increases the threshold for commercial real estate transactions requiring an appraisal from $250,000 to $500,000.
The agencies originally proposed to raise the threshold, which has been in place since 1994, to $400,000, but after lobbying by lenders and trade groups the regulators determined that a $500,000 threshold would “materially” reduce the regulatory burden and the number of transactions that require an appraisal.
The final rule allows a financial institution to use an evaluation rather than an appraisal for commercial real estate transactions exempted by the $500,000 threshold. Evaluations provide a market value estimate of the real estate pledged as collateral, however they do not have to comply with the Uniform Standards of Professional Appraiser Practices and do not require completion by a state licensed or certified appraiser.