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Banking Regulators Finalize CRE Appraisal Threshold Rule
Banking regulators on Monday approved a final rule raising the required appraisal thresholds for commercial real estate transactions from $250,000 to $500,000–an increase from the original proposal, which called for the appraisal threshold to increase to $400,000.
With this rule, any bank commercial real estate transaction of $500,000 or less will now only require an evaluation. The final rule takes effect when published in the Federal Register.
The rule defines commercial real estate as a real estate-related financial transaction that is not secured by a single one to four-family residential property–including construction loans. But residential construction loans secured by multiple one to four-unit residential properties would be considered commercial real estate transactions.
Mortgage Bankers Association Senior Vice President of Commercial/Multifamily Thomas Kim applauded the regulators’ decision, calling it consistent with MBA’s recommendations. “This change supports a real estate market that efficiently allocates capital while still maintaining sound risk management,” he said. “We hope to continue working with the regulators to find equitable solutions like this one that allow lenders to provide financing to their communities while still maintaining balanced regulatory regimes.”