WASHINGTON – In response to concerns raised about the cost and time associated with completing commercial real estate transactions, federal banking agencies are proposing to raise the threshold to $400,000 for transactions requiring an appraisal.
The Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released a joint proposal to raise the threshold to $400,000 from $250,000.
“The agencies believe raising this threshold for commercial real estate transactions from the current $240,000 will significantly reduce the number of transactions that require an appraisal and will not pose a threat to the safety and soundness of financial institutions,” according to the group.
The proposed change would require commercial real estate transactions at, or below, the threshold would instead require an evaluation, which are less detailed than appraisals, according to a press release.
The evaluations do not require completion by a state-licensed or -certified appraiser, and provide a market-value estimate of the real estate as collateral, according to the release.
“The current commercial real estate appraisal thresholds have been in place for a long time – about 23 years – and were the subject of frequent comment during [an economic] review process,” said Martin J. Gruenberg, FDIC chairman. “Raising the commercial real estate appraisal … will be a meaningful reduction in regulatory burden, particularly for rural banks who would be expected to originate many of these smaller transactions.”
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or you can follow him on Twitter @Eli_Sherman.
