Regulators Propose Expanding Appraisal Exemption on Home Sales

Filed in Housing Finance by on November 26, 2018 3 Comments

The Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve have issued a proposed rule to raise the threshold from $250,000 to $400,000 on required appraisals for residential real estate transactions.

In a press release, the regulators stated that the proposal is “in response to concerns raised about the time and cost associated with completing residential real estate transactions.”

The appraisal threshold was last increased to $250,000 in 1994.

Last year, federal regulators increased the appraisal threshold for commercial real estate loans. NAHB sent a letter of support for this action and also asked the regulators to consider doing the same for residential transactions.

Regulators acknowledge that the proposal to raise the appraisal threshold was due in part to comments they have received which state that the current $250,000 exemption level for home purchases have not kept pace with price appreciation in the residential real estate market. Residential real estate transactions exempted by the threshold would still require an evaluation consistent with safe and sound banking practices.

The rule generally applies to loans held in a bank’s portfolio, and does not apply to loans insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs or U.S. Department of Agriculture or purchased by Fannie Mae and Freddie Mac.

Comments will be accepted for 60 days from publication in the Federal Register.

NAHB will review the proposed rule to determine the potential impact on members.

View the Federal Deposit Insurance Corp. press release.

For more information, contact Curtis Milton at 800-368-5242 x8597.

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Comments (3)

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  1. David Mainord says:

    How short is our memory. Remember the 2007-2008 recession and its causes. When regulations are loosened by the government, lenders get more than greedy in an attempt to increase profits and the taxpayer will, one again, be called upon to bail out those wreckless institutions. In small rural communities, this rural change would be devastating.

    If you support this change, I will not renew my membership.

  2. Mac Smith says:

    The free enterprise system of our economy was removed when the appraisals could NOT meet to the amount actually offered to purchase a given property!
    Sellers have discounted just to meet to the lower appraisal, based on recent recession related events, as well as probate type transactions, on previously owned homes.
    To think, that all that was needed, was to price the house above $250,000 is remarkable.
    This mandate at the lower home price level, for resale of homes, has slowed our economic recovery nationally, and regionally.
    Possibly our leaders thought that the lower income person needed more guidance than those that could afford a more expensive home. Possibly also, this was to capture the majority priced home loans.
    Either way, we have to wonder just why anyone thought a “CAP” on a property for a proper appraisal should even be applied is in itself a good question, never to be answered.
    If I offer you $100 for something, and you accept, that is the value of that item, not what an appraiser says. How the heck can any neighborhood ever “bounce back” to recoup prior recessionary losses?

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