FDIC Proposes Changes to Appraisals for Commercial Real Estate Transactions

The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency issued proposed rule changes for the appraisal threshold for commercial real estate transactions.  Under the proposal, titled Real Estate Appraisals, they would increase the appraisal threshold for commercial real estate transactions from $250,000 to $400,000. The following points were taken from the summary of the proposed changes:

  • Creates a new definition of commercial real estate transactions and proposes to raise the threshold for requiring an appraisal from $250,000 to $400,000.
  • Under current thresholds, all real estate-related financial transactions with a value of $250,000 or less, as well as qualifying business loans secured by real estate that are $1 million or less, do not require appraisals. Qualifying business loans are business loans that are not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.
  • Real estate-related financial transactions at or below the applicable thresholds, the interagency appraisal regulations require financial institutions to obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices, but that does not need to be performed by a licensed or certified appraiser or meet the other Title XI appraisal standards.
  • No increase in the qualifying business loan threshold is being proposed. Also, no increase in the residential real estate transaction threshold is being proposed, but the proposal requests comment on whether other factors should be considered in evaluating this threshold.

Any comments related to this proposal should be submitted within 60 days of the publication in the Federal Register.

To view the full proposal, click here.