Agencies double appraisal threshold for commercial real estate transactions

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency announced Monday they 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 determined that a $500,000 threshold will materially reduce regulatory burden and the number of transactions that require an appraisal. The agencies also determined that the increased threshold will not pose a threat to the safety and soundness of financial institutions. The threshold for loans secured by one-to-four family residential properties remains unchanged at $250,000; however, residential construction loans secured by multiple one-to-four family residential properties would be considered commercial real estate transactions under the rule.

The increase was approved in response to concerns that the threshold had not changed with increasing commercial real estate values in the 24 years since it was first imposed and concerns about reducing regulatory burden. The new rule will be effective upon publication in the Federal Register.

UPDATE: Published at 83 FR 15019, and effective, on April 9, 2018.