FDIC Proposal Exempts Residential Real Estate Transactions of $400,000 or Less from Appraisal

NAWRB

Desirée Patno is the CEO and President of Women in the Housing and Real Estate Ecosystem (NAWRB) and Desirée Patno Enterprises, Inc. (DPE). With almost three decades specializing in the Housing and Real Estate Ecosystem, she leads her executive team’s expertise of championing women’s economic growth and independence.

On November 20th, the Federal Deposit Insurance Corporation (FDIC) issued a notice of proposed rulemaking that will raise the threshold for residential real estate transactions that require an appraisal to $400,000, from the current level of $250,000. This proposal is a response to concerns that the current threshold is not reflective of price appreciation and creates unnecessary time and cost burdens for residential real estate transactions. Comments on this proposal will be accepted for 60 days in the Federal Register.

The FDIC believes that this change would provide significant burden relief for residential real estate transactions “without posing a threat to the safety and soundness of financial institutions.” Instead of an appraisal, transactions worth $400,000 or less in value will obtain an evaluation consistent with sound banking practices.

These evaluations, which will estimate the market value of the real estate and have been used since the 1990s, have a number of benefits, such as not needing to be prepared by a state licensed or certified appraiser, and being less detailed and costly.

Other changes in the proposal include the incorporation of the rural residential appraisal exemption in the Economic Growth, Regulatory Relief and Consumer Protection Act to the existing list of exempt transactions that will be using evaluations in lieu of appraisals. It will also require institutions to review appraisals for compliance with stipulations in the Uniform Standards of Professional Appraisal Practice.

Read the FDIC’s full notice here.

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