Regulators finalize rule expanding exemption for CRE appraisals
WASHINGTON — As part of a larger regulatory relief effort, the bank regulators issued a final rule Monday that raises the dollar-amount threshold for commercial real estate transactions that require a formal appraisal by lenders.
The rule raises the threshold from $250,000 to $500,000 for commercial real estate transactions. Under the new rule, more transactions are exempt from a long-standing requirement to get an appraisal. Instead, banks can simply get an evaluation of the real property collateral.
The change to the threshold was partly in response to a larger effort by regulators to streamline regulation and reduce paperwork, a review process that concluded in March 2017. The threshold was also raised to coincide with higher property values since the last threshold was set 24 years ago.
The Economic Growth and Regulatory Paperwork Reduction Act requires the regulators, every 10 years, to conduct a review to identify outdated or otherwise unnecessary or burdensome rules.
“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,” said the regulators in a joint press release. “The agencies also determined that the increased threshold will not pose a threat to the safety and soundness of financial institutions.”
The rule was issued by the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.