Federal banking regulators are seeking public comment on a proposal to raise the threshold from $250,000 to $400,000 for residential real estate transactions requiring an appraisal.
The $250,000 threshold has been in place since 1994. The agencies said the increase to $400,000 would provide some relief without posing a threat to the safety of financial institutions. The current exemption level for residential transactions had not kept pace with price appreciation, the regulators said.
The three agencies, the Federal Reserve Board, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency, approved the proposal in November. Comments on the project will be accepted for 60 days after publication in the Federal Register.
The proposal would require the use of an evaluation, which provides an estimate of the market value of real estate. The assessments are typically less detailed and costly than appraisals. Evaluations have been required for transactions exempted from the appraisal requirement since the 1990s.
The proposal would also incorporate the appraisal exemption for rural residential properties provided by the Economic Growth, Regulatory Relief and Consumer Protection Act. It would also require evaluations for these transactions. Further, the proposal would require institutions to review all appraisals required by the agencies’ appraisal rules to ensure they comply with industry standards.