The Real Deal New York

Regulators mull first appraisal threshold change in two decades

Borrowers of less than $400K wouldn't be subject to the requirement
March 20, 2017 01:05PM

Donald Trump and Janet Yellen (Credit: Getty Images)

A possible change to appraisal requirements could help small-business borrowers, but hurt appraisers.

U.S. bank regulators may increase the commercial loan threshold for requiring appraisals from $250,000 to $400,000, Bloomberg reported. The change could make it easier for small-business owners to secure financing and also ease costs since appraisal fees are typically well over $2,000.

The Independent Community Bankers of America called for an even higher threshold of $500,000 last year, saying that a change was needed “to reflect the rising costs of real estate particularly in many urban markets.” The minimum for residential real estate would remain at $250,000.

President Donald Trump met with community bankers last week to discuss possible ways to clear lending obstacles. Regulators haven’t changed the appraisal threshold in more than two decades.

“It hasn’t been raised since 1994, so this adjustment really amounts to a correction,” Rod Alba, senior vice president for real estate finance at the American Bankers Association, told Bloomberg.

At the same time, the change could put a lot of appraisers out of work. Karen Mann, an appraiser who works in California, said appraisals are the best way to measure a property’s worth.

“There are a lot of things you don’t know by not having somebody go out and inspect the property,” she said. [Bloomberg]  Kathryn Brenzel